The limited partnership units of Foresight Energy LP (OTC:FELP.U) advanced by a breathtaking 61% in October, a move sure to please long-suffering investors. But there's more here to dig into. Indeed, some of that impressive price change is attributable to a rising tide of coal prices lifting all of the boats (at least those still floating) in the coal market. However, the big advance at Foresight came largely after the middle of the month and was, relatively speaking, huge. There's more to this investing story than coal prices.
Mid-October is an interesting time period because it coincides with the addition of a new board member to the partnership. The miner highlighted this particular board member as having merger-and-acquisition experience. Foresight has been struggling under the weight of a heavy debt load, so a board member with M&A expertise could be an interesting development. But it's still only part of what happened last month.
In addition to the new board member, Foresight has been working to deal with that heavy-debt load and, perhaps more important, a technical default related to the investment that privately held Murray Energy made in the company in early 2015. The partnership has been talking to creditors to try to resolve the issue, and avoid bankruptcy, all year. That work resulted in the announcement at the end of the month that a deal had finally been inked. And it should provide the coal miner with a little extra breathing room financially, too, so it can better deal with the still difficult coal market.
October was a rewarding month for investors in Foresight Energy LP. But don't get too excited. Yes, the miner is focused on the Illinois Coal Basin, a region that has some of the most desirable coal in the country. So from a business standpoint, the miner is well located. But as the events that led to the partnership's huge price advance in the back half of the month show, there's a lot more going on here than just coal mining. Most investors would be better off on the sidelines for now.