NEW YORK (The Deal) -- Coal miner Walter Energy (WLT) revealed in a conference call Thursday, Aug. 1, that it would look to generate $250 million from asset sales and joint venture opportunities in the next nine months, as low metallurgical coal prices continue to weigh on its earnings.
News of the asset sales coincided with the Birmingham, Ala.-based company's second quarter earnings, where the company reported a loss of $34.5 million for the quarter ended June 30, compared with earnings of $31.9 million in the same period in 2012. Revenue dropped 35% to $441.5 million.
Walter did not reveal exactly what assets are on the block, but CFO Bill Harvey hinted in an earnings call, that its U.K. assets as well as its Blue Creek mine in Alabama would be considered for either a sale or joint ventures offers. The company also has a number of non-operated assets that could also be pegged for sale.
"Where we are in the process is we are dealing with inquiries," Harvey said. "We're not going to cover what exact assets we're talking about" but Walter has received "actual contact on more than those assets," he added.
Brandon Blossman of advisory firm Tudor, Pickering, Holt & Co. said the company is likely seeking a sale of its U.K. assets and a joint venture partner for Blue Creek and that more asset sales could come as the process takes shape.
"Management implied they were working through a process on assets in addition to
the U.K. and Blue Creek," Blossman said in an e-mail.
News of asset sales and depressed earnings came just after a report from Benzinga that Walter had hired Goldman Sachs to sell the company outright.
Blossman dismissed these rumors. The sale process "sounds like a sale of selected assets, not of the entire company," he said.
Walter's spokeswoman, Ruth Pachman at Kekst & Co. and Goldman did not respond to calls seeking comment.
When asked on the call why the company choose a target of $250 million over a period of nine months, Harvey, told analysts "it's a goal we believe is attainable."
The proposed asset sales is the most recent devlopment for struggling Walter, which had already been busily staying in survival mode through through the first half of 2013.
In April it won a proxy battle against London-based hedge fund Audley Capital Advisors LLP and in June it scrapped plans to refinance its credit facility.Just two weeks ago, on July 24, Walter elected to amend covenants related to its $2.75 billion credit facility after cancelling plans to refinance in June. The new agreement included the addition of a $225 million minimum liquidity requirement and a number of leverage ratio covenants that affect the interest rates on the debt. It was the fifth time Walter had amended the facility since it entered into it in April 2011.
Walter, which has operations in the U.S., Canada and the United Kingdom, also said Thursday that it would reduce its capital spending target to $150 million for the year. In May, it cut its capex target to $170 million from $220 million.
According to Harvey, the company could also look to issue new debt to meet liquidity requirements in addition to asset sales and a reduction of expenditures.
"I think the key message is we are action oriented and we're going to make progress and we're going to move very decisively and quickly," said Harvey on the call.
While metallurgical coal, which is used to produced steel, continues to lag due to decreased demand in Europe and slowed growth in China, some companies have had recent success selling coal assets.
On June 28, St. Louis-based
agreed to sell coal mining subsidiary
to closely held Louisville, Ky., mine operator
for $435 million in cash.
, the largest publicly traded U.S. coal company by market capitalization, is also selling various coal assets as it looks to offset recent revenue declines due to fluctuating coal prices. Consol's chief executive J. Brett Harvey told investors July 25 that the company was close to selling assets, believed to be domestic coal plays, in the third quarter.
In January, Consol said it had sold nonproducing western Canadian coal assets for $127 million in two separate transactions. Ontario's Ram River Coal Corp. paid $102.5 million to acquire all of Consol's Ram River and Scurry Ram coal properties in Ontario, while Sydney-based Riversdale Resources purchased the company's coal assets in the Grassy Mountain surface mine in Alberta for $24 million.
Walter also has assets in Canada although Tudor Pickering's Blossman said he didn't believe these assets are the target of recent sale talks.
While there are success stories in coal asset sales, the markets did not respond well to Walter's announcements.
Walter's shares were down about 4% midday Thursday at $10.76 per share. The company has a market cap of about $672 million.
-- Written by Michael D. Brown in New York