With Patriot Coal returning to bankruptcy Tuesday and seeking a buyer for its operations, the dire market conditions facing the coal industry are more apparent than ever.
Patriot chief executive officer Bob Bennett said in a statement:
In light of the challenging market conditions, and after a comprehensive review of our alternatives, the board and management team have determined that this process represents the best path forward for Patriot and its stakeholders.
Fitch Ratings notes Patriot’s 2018 term loan is trading at a sharp discount:
The significant discount to original par value indicates the market expects that distributions to holders will likely provide less than full recoveries.
Patriot is just the latest coal company to crater. Xinergy filed for chapter 11 last month, Alpha Natural Resources (ANR) did a distressed debt exchange April 1 that was considered a default and Winsway Enterprise Holdings missed a May 8 deadline to make an interest payment within a grace period, according to Fitch.
Fitch also noted heightened risk for Arch Coal (ACI) and Walter Energy (WLT). It said in a Tuesday release:
Fitch expects more coal producer defaults to follow the current crop of defaults based on the results of a screen of high yield bonds in the coal mining sector with deeply discounted trading prices.