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Peabody Energy plans new term debt, bonds for Excel purchase
By Sara Rosenberg
New York, July 6 - Peabody Energy Corp. plans to use new term loan debt and some bond debt to help fund its acquisition of Excel Coal Ltd., company officials said in a conference call Thursday.
"We're going to want to have a large component of whatever debt we borrow to be pre-payable without penalty, so we're going to put in a good mix of pre-payable term debt," officials said in the call.
"We'll probably have a bit of longer dated bonds, obviously, because the difference in the yield curve is so small."
The actual mix of term loan versus bonds has not yet been decided, but the main concern reiterated by the company throughout the call is that the debt be pre-payable since the intention is to "pay the debt down rapidly using free cash flows."
Peabody has historically maintained a debt to capital ratio in the range of 35% to 40%. With this transaction, debt to capital is expected to move up into the 45% to 47% range, but with paydowns, the company is anticipating getting the ratio back down to historical levels quickly.
Under the acquisition agreement, Peabody will purchase Excel for A$8.50 per share in cash per share, representing a total acquisition price of $1.34 billion plus assumed debt of about $190 million.
Currently, the company is using the assumption that the acquisition will be financed in an all debt fashion.
The transaction, which is targeted to close in the fourth quarter, is subject to Excel shareholders approval, court approval, regulatory approval and other conditions.
Peabody is a St. Louis-based private-sector coal company. Excel Coal is an independent coal company in Australia.
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