Walter Energy Inc.’s stock lost almost a quarter of its market value after the coal producer said there’s “substantial doubt” about its ability to continue as a going concern and raised the possibility of a bankruptcy filing.
That warning, made in Walter’s quarterly 10-Q filing on Tuesday, comes 10 days before a deadline for a $62.4 million interest payment due to bondholders. If it’s unable to make the payment or restructure its debt, it “may consider filing voluntary petitions for reorganization under Chapter 11,” Birmingham, Alabama-based Walter said in the filing.
The shares fell 24 percent to 35 cents at 9:41 a.m. in New York, the biggest decline since March 13. The stock has dropped 75 percent this year.
Walter had more than $3 billion of debt as of March 31, according to the filing. If it seeks bankruptcy protection, it would join U.S. producers Patriot Coal Corp. and James River Coal Co. which have filed since the start of 2012 after coal prices slumped.
Producers have struggled from a slowdown in demand for metallurgical coal in China, the world’s largest maker of steel. Walter scrapped its dividend in January, and last month delayed an interest payment on the bonds by taking a 30-day “grace period.”
Metallurgical coal used in steelmaking fell to a record low of $85.40 a metric ton in April and may remain subdued in the months ahead, Andrew Cosgrove, a Bloomberg Intelligence analyst, said in a note. Prices have been driven by a declining Australian dollar, which has hovered near a six-year low, and a 16 percent drop in Chinese imports through the first quarter.