Audley Capital Comments on Glass Lewis Report Regarding Walter Energy Urges Stockholders to Vote “FOR” ALL of Audley Capital’s Highly-Qualified Director Nominees on the GOLD Proxy Card Business Wire NEW YORK -- April 12, 2013 Audley Capital Advisors LLP (including certain related funds and investment vehicles, “Audley Capital”) today issued the following statement regarding the report on Walter Energy, Inc. (NYSE: WLT) (TSX: WLT) (“Walter Energy” or “the Company”) issued by Glass Lewis & Co. (“Glass Lewis”) on April 11, 2013. Audley Capital urges shareholders to vote FOR its five nominees for election to the Board of Directors at the Company’s upcoming 2013 Annual Meeting of Stockholders on April 25, 2013. “Glass Lewis recognized the very same issues and concerns at Walter Energy that motivated Audley Capital to propose new, experienced director nominees to strengthen the Board. Our nominees are proven executives and are committed to improving the Company and its balance sheet – even in the face of volatile coal pricing. However, we believe Glass Lewis failed to judge Walter Energy against appropriate industry peers and fell into the same flawed analysis the Company has advanced by focusing on thermal coal producers, rather than the Company’s metallurgical coal peers – hiding much greater levels of risk and concern.” said Julian Treger, Managing Partner of Audley Capital Advisors. Added Treger, “Walter Energy has the promise of being the premier met coal producer in the world. For years, we believe the current Board has mismanaged the Company and its balance sheet. While the Company makes every effort to justify its significant underperformance and attack Audley Capital’s nominees, we have continued to advocate for change and the implementation of new initiatives that will benefit all stockholders. Audley Capital’s nominees have a tremendous record of value creation and they are committed to helping Walter Energy realize its true potential. We look forward to the support of our fellow stockholders at the Annual Meeting, where we will have the opportunity to reverse what we see as repeated missteps by the current Board by electing new directors who will bring a fresh, dynamic and creative approach to the Walter Energy Board.” Audley Capital believes that Glass Lewis’s analysis is also significantly flawed because it tracks the Company’s stock performance only through February 19, 2013 – following Walter Energy’s self-selected reference point. However, between February 19^th, 2013, and April 11^th, 2013, the Company’s stock price has decreased a dramatic 40% – erasing almost $1 billion in market capitalization. We believe this massive destruction of shareholder value and share underperformance against peers was exacerbated by the higher interest burden voluntarily taken on by the Company. This is a critical point when judging the actions of the current Board, which in our view should have been taken into account by Glass Lewis in its report. In its report, Glass Lewis does acknowledge numerous areas of concern at Walter Energy which have also been raised by independent third parties, notably: Glass Lewis View Third Party Support Audley Capital Analysis “…we see that the “We remain cautious on Company’s total return shares of Walter Walter Energy’s stock over this period [April Energy, Inc. performance since Western 1, 2011 – February 19, (WLT-NYSE). The Coal deal close in April 2013] (-70.24%) falls Company's levered 2011: -82%. Additionally, below that of the peer balance sheet in the tracking performance only group and the Dow Jones midst of weakened met through February 19^th is U.S. Coal Index coal pricing and misleading, given that the (-63.25% and -67.10%, demand is likely to Company’s stock lost 40% respectively) and well become a growing of its value between below the return on the source of equity February 19 and April 11, Russell 3000 Index investor risk.” – 2013. (+14.34%).” KeyBanc; March 28, 2013 “We agree with Audley that Walter entered the current downturn with excessive debt levels following the 2011 acquisition of Western Coal. In retrospect, Walter Walter Energy has a net “Overall, we recognize would have been better debt to book value of that the Company’s debt served by using equity equity ratio of 228%, level is on the high rather than debt to while the Company’s peers’ side relative to peers fund the majority of net debt/stockholders’ and that deleveraging the transaction, which equity ratios range from should be a priority.” was the approach taken 47% to 144%. by top met coal competitor Alpha Natural Resources (ANR – Hold - $9.50) in its acquisition of Massey Energy in 2011.” – Stifel; February 20, 2013 “As noted by the “We estimate Walter’s Dissident, we see that SG&A expense to be SG&A costs at the Company the Company’s SG&A $131 million, or 5.0% are higher than Walter costs relative to sales of revenues in 2013. Energy’s U.S. peer group are on the high side This compares with a and we believe savings of compared to peers and peer group average of at least $10.0 million per we agree a disciplined 3.0% of revenues for quarter and $40.0 million review of the Company’s Walter’s four largest per year should be cost structure could U.S. peers.” – Stifel; targeted. benefit shareholders.” February 20, 2013 “Regarding executive management, we agree that the considerable CEO turnover at the Company over the past five years is There have been four CEOs troubling, particularly “We agree with Audley over the past five years with regard to Mr. that the high turnover (including the current CEO Calder who was at Walter’s CEO and an “interim” CEO who appointed CEO if the position over the past served for more than a Company in April 2011 five years has been year). We believe this is in connection with the unsettling.” – Stifel; not healthy corporate acquisition of Western February 20, 2013 governance and is Coal only to resign inarguably an issue of three months later, high concern. citing differences of opinion between himself and the board on matters of strategic direction.” “We believe the Audley Capital’s director Dissident presents a nominees include talented roster of “Recent news of individuals with extensive director nominees who potential board experience in the collectively possess challenges are metallurgical coal significant executive rekindling thoughts of industry on an and board level potential moves to international basis and experience at public stimulate value.” – possess the skills mining companies and on Sterne Agee; February required to manage other areas that could 22, 2013 multi-jurisdictional coal benefit shareholders, operations and their in our view.” financing. *Audley Capital has not requested or obtained the consent of any third party quoted Audley Capital urges stockholders to vote FOR its five director nominees by immediately completing and returning their GOLD proxy card or by submitting proxies by telephone or through the Internet. Investors that need assistance or have any questions or need assistance voting your shares, please call our proxy solicitor, Okapi Partners LLC, at (877) 208-8903. Additional Information Further information regarding the director nominees and other persons who may be deemed participants, and other matters, are set forth in a definitive proxy statement filed with the Securities and Exchange Commission (“SEC”). SHAREHOLDERS OF THE COMPANY ARE STRONGLY ADVISED TO READ THAT PROXY STATEMENT, BECAUSE IT INCLUDES IMPORTANT INFORMATION. THE PROXY STATEMENT IS BEING SENT TO SHAREHOLDERS BY OR ON BEHALF OF PARTICIPANTS, AND IS ALSO AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT http://www.sec.gov. Contact: Investors: Audley Capital Advisors LLP Julian Treger, Managing Partner +44 20 7529 6900 or Okapi Partners LLC Bruce Goldfarb/Charles Garske/Patrick McHugh 212-297-0720 or Media: Sard Verbinnen & Co Dan Gagnier/Brian Shiver 212-687-8080
Audley Capital Comments on Glass Lewis Report Regarding Walter Energy
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