Peabody Energy reports improved 3Q20 results along with disclosures on surety bond resolution, cleansing materials and restructuring proposals – Analyst Snapshot

Useful Links:

 

 

Yesterday morning we got a large influx of information regarding ongoing restructuring negotiations at Peabody Energy, along with 3Q20 earnings that detailed a lessened cash burn and improved EBITDA margins due to cost savings.

 

Its 3Q20 revenues were USD 671m, down 39% YoY but up 7% sequentially. DW Adj. EBITDA came in at USD 95m, down 45% YoY but up from USD 18m in 2Q20. EBITDA margins were 14.1%, down 160bps YoY. We calculate Adjusted Levered FCF of negative USD 3m, as improved operating cashflows balanced out against a USD 29m working capital outflow, USD 31m in cash interest and USD 47m in capex.

 

 
Our Take
 
After reading through all the disclosure materials, it seems to us that the main sticking points on the proposed exchanges relate to the interest rate on the securities, mandatory amortization payments, the cash paydowns of the RemainCo term loan and RemainCo extended maturity notes, and maturity dates. So basically, both sides are far apart on key fundamental attributes of a potential out-of-court restructuring. However, with the surety bond resolution, and improving operating metrics both within Peabody and the coal pricing environment, a deal may still be reached before the end of the year.
 
Larry Feldman – Credit Analyst