Patriot Coal Corporation (fka PCXCQ)

[10452km2]

Patriot Coal legacy bondholders sell as market awaits fate of refi


Chunks of Patriot Coal’s normally illiquid 8.25% notes have been trading in the secondary as the legacy holders have been selling off their existing positions, according to sources.

The $250 million issue, placed in 2010 for corporate purposes, is quoted in the 37/40 context today, according to sources. The top 5 or 6 holders in the name held 20% of the outstanding bonds, sources said, and multiple other institutional holders have been selling smaller positions.

At least one of the top holders is not yet looking to sell off its position at this distressed a price, according to a source, as the market awaits the fate of a refinancing the company had lined up in early May.

Meanwhile, financial advisors have been pitching the bondholders in the case that the financing does not go through and the company has to explore other options, but have yet to identify any current majority holders mobilizing.

Round-lot trades have occurred at progressively lower levels in the 40s over the past two weeks, from 48 on May 22, according to trade data. The name had recovered to that level after a series of adverse news had driven the bonds down more than 30% in May: Citi, Barclays and Natixis were about to launch the new revolving credit facility and new term loan facility in May for a total of $625 million, comprising a new $250 million revolving credit line due 2016 and a $375 million second-lien term loan due 2017. Proceeds were to be used to refinance existing debt and a $200 million issue of 3.25% convertible notes due next year, the filings show. Sources say the convertible notes are well out of the money right now and are subordinate to the 8.25% notes.

The bank meeting was scheduled for the May 15, but Patriot announced that same day a “key” customer was defaulting on a contract that would have an impact on Patriot's numbers going forward. There is still debate over whether this will be enough of an impact to derail the financing.

News emerged shortly thereafter that the company hired Blackstone Advisors while trying to culminate a recently announced refinancing. The bonds plummeted 25 points in the span of 24 hours May 21 and May 22 to the 40s.

Trying to stop the rapid decline in both the bond and the share price of its publicly traded equity PCX, Patriot gave what it called an “update” that day on the financing, along with a letter from its then CEO, saying it continued to work with these lenders to strengthen its finances, including the replacement of its current credit facilities before certain of its debt obligations become due in March 2013.

In addition to hiring Blackstone, the company said it hired Davis Polk & Wardwell LLP, to help “achieve an optimal financing package.”

The company then announced a new leadership team May 29, including inserting the board chairman Irl Engelhardt as CEO to take over for Richard Whiting, who had headed the company since 2007.

Later on June 1, Patriot Coal turned around and sued Keystone Industries, claiming it broke a purchase contract. In the lawsuit filed in the U.S. District Court for the Southern District of West Virginia, Patriot said “Keystone failed to take or pay for a single ton of coal as it is obligated to do…despite having contracted to take and pay for hundreds of thousands of tons of coal,” according to court documents.

Patriot is suing for the value of the lost sales to Keystone plus interest, but hasn’t put a dollar value in the price, as it is trying to put the contract as a sealed exhibit, according to court documents. The judge, however, has denied Patriot’s motion to submit a sealed exhibit, something the company has asked the court to reconsider because Patriot has a “business interest in avoiding public disclosure of the terms upon which it is willing to contract.”

St. Louis, Mo.-based Patriot produces thermal coal and has operations and coal reserves in Appalachia and the Illinois Basin. – Max Frumes

https://www.lcdcomps.com/lcd/n/article.html?rid=10&aid=12339398


Finance news will really give everyone confidence in PCX... Its just a matter of time that they will announce this news.