PE-backed Foresight Energy debt revamp prompts S&P to lift outlook

  • Foresight is major holder of U.S. coal reserves
  • Debt revamp will defer payments on principal
  • S&P sees improved debt-to-EBITDA multiple, lifts outlook

Foresight Energy LP’s debt revamp and an equity infusion prompted S&P Global Ratings to upgrade the St. Louis coal producer’s outlook.

Foresight, one of the largest holders of coal reserves in the U.S., is backed by Carlyle Group and Riverstone.

A $60 million cash equity infusion is coming from Murray Energy Corp, the U.S.’s largest underground coal miner, S&P analyst Vania Dimova wrote in a March 1 report.

Murray Energy, St. Clairsville, Ohio, also has an option to put in another $15 million. An exercise of the option, which S&P expects, would give Murray an 80 percent holding in Foresight Energy GP LLC, which is responsible for management of the LP.

Dimova affirmed her B- corporate-credit rating on Foresight and revised the outlook to stable from negative.

Driving that outlook: “an improved maturity profile,” meaning that payments on the debt principal are deferred to later, the analyst wrote.

Foresight plans to issue a new $170 million revolving-credit facility due in 2021, a $750 million first-lien secured term loan due in 2022, and $500 million of second-lien notes due in 2024.

The proceeds will refinance $1.4 billion of existing debt, Dimova wrote.

In addition, S&P expects Foresight to operate at an adjusted debt-to-EBITDA multiple of a bit under 5x in the next year, with that number declining beyond 2017, Dimova wrote.

And Foresight should increase EBITDA through export sales, Dimova wrote.

The analyst assigned a B rating to the new first-lien term loan due 2022 and to the $170 million revolver. The rating is CCC on the second-lien notes due 2024.

Murray Energy declined comment. Carlyle referred questions to Riverstone, which couldn’t immediately be reached. Foresight couldn’t immediately be reached for comment.

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Bucket wheel of a bucket wheel excavator in a coal mine. Photo courtesy baranozdemir/iStock/Getty Images