Fitch: Market Conditions Point to Increased Bankruptcy Possibilities in U.S. Coal Sector
The deep commodity pricing trough and demand destruction could lead to one or more bankruptcy filings in the U.S. coal industry, according to a new Fitch Ratings report. Bond prices of two coal producers are trading at deeply distressed levels.
Fitch's 2013 outlook for the coal industry is negative, driven by a number of market, pricing, regulatory and macroeconomic conditions. Fitch believes that 2013 will be the trough year for coal pricing. Two coal producers have significant default risk based on the secondary market trading prices of their securities.
Since 1994, there have been 11 mining company defaults among producers with assets of at least $25 million as of the bankruptcy filing date. Three of these defaults occurred in 2002, driven by the effects of rising operating costs compounded by fixed-price sales contracts at the time. Patriot Coal Corp., which filed for bankruptcy in 2012, was more than 11x the size (in terms of assets) of the next largest defaulted coal company. Fitch's report provides an update of recent developments in the on-going Patriot case.
The full report 'U.S. Coal Bankruptcies: Future, Present, Past' is available at 'www.fitchratings.com.'
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: U.S. Coal Bankruptcies: Future, Present, and Past
Sharon Bonelli (Leveraged Finance)
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
Monica Bonar (Coal, Commodities)
Brian Bertsch, +1-212-908-0549 (New York)