Cloud Peak Energy's (NYSE:CLD) stock price advanced by nearly a third last month. The interesting thing about that impressive rise, though, is that it all came in the back half of the month. And it wasn't in line with industry competitors. For example, Alliance Resource Partners (NASDAQ:ARLP) was up just 8% or so, and Foresight Energy (OTC:FELP) was down around 6%. So, there was something different going on at Cloud Peak, and it took place mid-month.
That "something different" was on the balance sheet, where Cloud Peak made two notable financing moves that helped to shore up its financial position. The first was a reworking of its revolving credit agreement that reduced the value of the revolver by 20% but gave the company the flexibility to make other moves -- which leads directly to the next piece of price-moving news.
The second big announcement, and ultimately the more important one, was a tender offer for two notes, one due in 2019 and another in 2024. In exchange for those notes, bond holders would receive a new note due in 2021 with a higher coupon. Why is that good? Because the new notes offer Cloud Peak more financial flexibility to deal with what has been a long and painful coal industry downturn.
The shares moved notably higher in the last days of September after the company announced that it had received enough support from bond holders that the tender offer was indeed going to take place.
Cloud Peak, which is the largest pure-play coal miner operating in the Powder River Basin coal region, has bought itself some flexibility. That's very good news as it and its peers grapple with a difficult coal market. While this makes the miner's future look brighter, it certainly doesn't change the fact that Cloud Peak is facing significant challenges today, including the fact that it's operating in the red through the first half of the year. In other words, unless you see a bright future ahead for coal, Cloud Peak's debt exchange alone shouldn't be enough to entice you to buy, here.