Cloud Peak Energy and Coal Valleys

From Dr. Michael Burry’s School of Ick Investing today I have a one-time, exclusive offer for you… a coal miner… aptly named… Cloud Peak Energy.

Cloud Peak enjoys the privilege of being one of the only U.S. coal “pure plays” with a share price greater than $1 (as of 7/24/15).  With 61 million shares outstanding, at today’s $3 per share, it carries a market cap of roughly $183 million.

Perhaps more interesting to me though is Cloud Peak’s unsecured debt.  Its 6.375% 2024 bonds have offers near 62 (with $200 million outstanding).  And their 8.5% 2019 bonds show offers near 70 ($300 million outstanding).

So it would seem that Mr. Market values the enterprise, based on its publicly traded securities at $183mm + $124mm + $210mm = $517 million.

Based on Cloud Peak’s Q1 EBITDA, that valuation may not yet be entirely compelling.  Yet…

“As of March 31, 2015, no borrowings were outstanding under the credit facility and we were in compliance with the covenants contained in the Credit Agreement.  Our aggregate borrowing capacity under the Credit Agreement and the A/R Securitization Program was approximately $539.9 million at March 31, 2015.” (42)

So the market value of the enterprise today is less than their availability on the credit line.  A rather rare occurrence in today’s markets.  But it’s coal… ick.

Disclosure: No position.

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