Walter Energy Incorporation (NYSE:WLT) to restructure its debt
Walter Energy, Inc (NYSE:WLT), which is one of the major producer of metallurgical coal of the world steel industry. From its February high at a price of $40.60, the volatile stock declined more than 75% to a low price of $9.88 during late June. This is because the coal fell out of favor partly to the plenty natural gas reserves. However, coal may become much more attractive as the source of energy for the production of electricity in response to the increase in the prices of natural gas at multi-year.
Walter Energy has rebounded to its 2008 lows near to $11 as hitting its low. This is the pivot price level and this should be acting as a support on a month basis. This is representing the bullish divergence and a possibility of bottom price since the new lows were not corresponding with its new highs in terms of volatility. As of now, Walter Energy is making the trade for around $11.60.
In addition to the market conditions, this significant decrease in the price of Walter Energy is attributed to the company’s balance sheet which was highly leveraged. During last month, Walter Energy stepped back from a total of $1.55 billion debt re-financing plan. This announcement by the company was taken negatively by the investors and as a result, the stock price decreased.
The company is searching for modification of its debt agreements and covenants, which will also be accompanied by the additional conditions from the lenders. This search is being carried out with an effort of complying with the debt covenants. Due to the company’s ongoing concerns of liquidity and re-financing, the credit rating assigned to the company was downgraded by S&P and Moody. This can even result in the further drop of the company’s stock price due to the weak market conditions and concerns of liquidity that surrounds Walter Energy.