Probably means that BK if not this week, then 4/15
I do not think you understand what the recent reports and filings mean. Shorts are not in any trouble and just need to wait a few more weeks.
1: BTU laid off 235 workers because of a lack of demand for coal. This hurts BTU since in order to avoid BK, they need every dollar of revenue possible, but instead are making less in the weeks just gone by and will make even less without those 235 workers. While some people can do the job of another worker, there is no way production will stay the same with 235 less people on the job.
2: The A/R borrowing was reduced. It means that either the receivables are not there to borrow against or something else caused the borrowing base to get reduced from $275 million to $180 million. That is less cash that BTU can get or access. This is not a positive development.
3: The Bowie deal being extended. While the deal is not dead yet, there was mention of allowing non-cash items as part of the deal, implying that the Bowie deal will not be all cash, which is what BTU needs.
The buyer had months to get financing and has been unable to do so or does not want to do so. With demand down there is no incentive for anyone to finish the deal, plus it looks like it would be harder to get financing. If no one would finance the deal when coal demand and prices were a little higher a few months ago, why would anyone finance the purchase now, especially since it looks like BTU will go bankruptcy shortly and may have to sell off more assets in a Chap 11 reorg plan?
My answer would be no one.
4: There still is no word on what is going on with the 90 day deadline on the 'going concern' language. I am expecting that BTU must have or will be getting a waiver in a matter of hours since to not do so will trigger cross defaults on a number of borrowings.
In early March when BTU ran to to $5 or $6, I thought that they made a chance to survive and was not even really following the company much. It was only when they didn't make the March 15 bond payment that I started to look more at BTU.
Louis J. Desy Jr.
Disclosure: I own put options on BTU.
