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SunCoke Energy Prices Senior Notes
SXC NRP GE
SunCoke Energy Inc.’s ( SXC - Snapshot Report) subsidiaries SunCoke Energy Partners, L.P. and SunCoke Energy Partners Finance Corp. have priced $150 million of 7.375% senior unsecured notes due in 2020. The company primarily intends to issue notes only to the qualified institutional buyers (“QIPs”) and the non-residential Americans. This note offering will close on Jan 24, 2013.
SunCoke Energy earlier also issued senior notes to accumulate funds for repaying its existing debts and utilizing it for several other activities. On Jul 21, 2011, the company issued a total of $400 million of 7.625% senior notes due in 2019. SunCoke Energy mainly used the net proceeds of the issue for general corporate purposes and repayment of some inter-company debts.
As of Sep 30, 2012, SunCoke Energy’s long term debt to capitalization ratio was 57%. With the issuance of these new notes, the company’s long term debt to capitalization will increase by 500 basis points. In third-quarter 2012, SunCoke Energy paid $12.3 million as interest costs, which was nearly 40% higher than the year-ago figure. However, the company’s stable cash flow will enables it to service existing debt.
Further, this external funding will not only enable the company to fund its internal projects but also continue with its inorganic growth strategy as it did earlier with the acquisition of 19% interest at the Indiana Harbor facility from an affiliate of GE Capital, a unit of General Electric Company ( GE - Analyst Report) .
In spite of having higher production level in 2012 and steady organic as well as inorganic growth strategy, a tough road lies ahead for SunCoke Energy in 2013 due to increasing competition from natural gas in the domestic market and softening demand in overseas market for lower steel production and electricity generation. It is evident from the company’s recent disclosure that its coke making fleet will do moderate business owing to the continued weak coal price fundamentals.
Considering these negative near-term factors, SunCoke Energy currently has a short-term Zacks Rank #5 (Strong Sell).
Another coal company Natural Resource Partners L.P. ( NRP - Analyst Report) is currently performing well and carries a short-term Zacks Rank #1 (Strong Buy). Arch Coal Inc. , a peer of the company, currently has a short-term Zacks Rank #3 (Hold).
Lisle, Illinois-based SunCoke Energy Inc. engages in mining and producing coal in the Americas. The company offers metallurgical and thermal coal used in steelmaking facilities. With a market capitalization of $1.13 billion, the company currently has total full-time 1,160 employees.