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Walter Energy in Lender Talks to Alter Covenants, Increase Rates

Walter Energy Inc. is negotiating an amendment to a credit pact that may result in its dividend being cut, according to a regulatory filing.

The coal-mining company is in talks with lenders to change debt covenants, increase the interest rate and require the reduction of the company’s dividend to a nominal amount, according to the filing. The miner has disbursed 12.5 cents per share each quarter since 2010, according to data compiled by Bloomberg.

The Birmingham, Alabama-based company’s net senior secured leverage will rise to more than 5.5 times this quarter, the level required to remain in compliance with the debt agreement, Moody’s Investors Service analyst Benjamin Nelson wrote in a June 19 report.

The company’s $500 million of 9.875 percent notes due December 2020 rose 3.25 cents today to trade at 92.75 cents on the dollar, according to prices compiled by Bloomberg. Its $975 million loan climbed 1.75 cents to 99.81 cents on the dollar, Bloomberg data show.

Walter Energy’s bonds have lost 12 percent this year, the second-worst performer among speculative-grade coal companies, Bank of America Merrill Lynch index data show.

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