Tuesday, March 8, 2016

Debt And Equity Markets Really, Really Disagree On Energy

From Bronte Capital:
It is no secret that US coal companies are financially stretched.

But Peabody Energy is particularly stretched.

Here - courtesy Thomson Reuters - is a price chart for the 6% coupon Peabody debt due November 2018. Its a large issue with almost 2 billion at face value outstanding.

The price is 3. That is 3 cents in the dollar.

The yield to maturity is 266 percent.

If Peabody survives without a restructure this piece of debt will make you over thirty times your money.

Obviously the debt market thinks that Peabody is dead. Dead parrot dead.

Go tell that to the equity market.

This is Peabody stock yesterday courtesy Yahoo Finance.
Yes the stock was up 40 percent....MORE