Coal news and updates

Glencore floats $2b refinance plan for Wiggins Island Coal Terminal

The Wiggins Island Coal Export Terminal has received a potential financial lifeline as its largest stakeholder, multinational miner Glencore, works with Morgan Stanley and ANZ Banking Group on a potential debt restructuring deal.

Street Talk understands the proposed deal would be valued at more than $2 billion and involve a senior Australian dollar loan tranche led by ANZ and an unsecured US raising, underwritten by Morgan Stanley. The two legs would together recapitalise WICET, which was funded with some $3 billion of debt in a deal arranged by ANZ in 2012 .

WICET, which is owned by eight coal miners, has been at risk of defaulting on its future debt payments as low coal prices make it difficult for some miners to meet financial obligations on take-or-pay agreements.

WICET's coal producers are obliged to meet the terminal's costs, whether they ship coal or not.

One owner, Cockatoo Coal, was forced to undertake a $125 million equity raising in February after falling coal prices prevented it getting the necessary finance to expand its Baralaba coal mine. Another owner, Bandanna Energy, went into administration in September.

Sources said Glencore, which owns 40.4 per cent of the port's class A shares, would need to support any recapitalisation through some form of guarantee, potentially using its Queensland coal assets.

It's understood the proposed deal was put to the WICET board, which is led by independent chairman John Massey, a month ago.

Some banks that lent money to the terminal have been trying to get rid of their exposure, with Lloyds going to so far as to butter up distressed debt funds in search of an 85¢ to 90¢ in the dollar bid. However, the banks are understood to be sitting tight to see whether a potential deal can be struck with Glencore.

WICET started shipping coal in September with the aim of exporting about 27 million tonnes annually.

Thermal coal prices are trading at around $US60 a tonne, down from $US150 a tonne in 2011.

Credit ratings agency Moody's Investors Service warned this week that the ongoing fall in thermal coal prices was weakening the financial strength of Australia's thermal coal mining and mining services companies at a time when miners are already struggling with low prices across major commodities.

Glencore said in February that it would slash Australian coal production by 15 per cent, or 15 million tonnes, this year to avoid selling tonnes at a discount into an oversupplied market and is on track to meet this target.

source: http://www.afr.com