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General Category => Investment Ideas => Topic started by: Picasso on March 15, 2016, 12:37:52 PM

Title: FELP - Foresight Energy
Post by: Picasso on March 15, 2016, 12:37:52 PM
Not much time to get this trade on, but I'm betting they don't take this into bankruptcy.  I'm long.  Even with 50% dilution (all going to Chris Cline) it's cheap and there isn't much float for the shorts to cover.  Probably around $100 million of FCF with a pre-diluted market cap of $220 million. 

Who's with me?
Title: Re: FELP - Foresight Energy
Post by: indirect on March 15, 2016, 01:00:13 PM
Short trade seems too crowded and i don't think that debtors  want to run the Co..... dont have balls to go long.

Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 15, 2016, 01:16:01 PM
Not much time to get this trade on, but I'm betting they don't take this into bankruptcy.  I'm long.  Even with 50% dilution (all going to Chris Cline) it's cheap and there isn't much float for the shorts to cover.  Probably around $100 million of FCF with a pre-diluted market cap of $220 million. 

Who's with me?

I've got some shares already from a summer purchase at $8/share, not willing to buy more until I get confirmation they've settled with the bondholders. If they do settle, the stock is going to be worth at least $4 given the subordination agreement in place.
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 16, 2016, 11:27:25 PM
Not much time to get this trade on, but I'm betting they don't take this into bankruptcy.  I'm long.  Even with 50% dilution (all going to Chris Cline) it's cheap and there isn't much float for the shorts to cover.  Probably around $100 million of FCF with a pre-diluted market cap of $220 million. 

Who's with me?

I've got some shares already from a summer purchase at $8/share, not willing to buy more until I get confirmation they've settled with the bondholders. If they do settle, the stock is going to be worth at least $4 given the subordination agreement in place.

Why not buy more at $1.60?  I spoke with the company today and feel like there's an extremely small chance the bondholders aren't settled out of court.  The term loan is trading in the mid $80's and the unsecured notes in the mid $70's.  Why accelerate and force a bankruptcy, what's the upside/downside on that scenario with that kind of bond/term pricing?  This is a company that is still turning plenty of free cash flow with 80% of the shares in the hands of a couple die hard grinders.  The going concern issue is from the non-existent liquidity if the bondholders accelerate, not because they aren't profitable or well positioned.  There's too much mutually assured destruction that goes on in that kind of scenario. 

Chris Cline owns a bunch of unvested SXCP units plus seller financing that is at risk if he doesn't step in to resolve the issue.  Even their contracts with the Convent terminal appear to be under market at around half the pricing of the revised Cloud Peak take or pays.  They're essentially breakeven on exports so there's free optionality there as well.  Why throw in the towel now?  Market cap went from $3 billion to $200 million in a bit over a year, I don't think the intrinsic value of the business dropped *that* much.  If Cline comes in and dilutes at say 50%, the stock is still really cheap here.  At this point it's in everyone's interest to settle.

The issue (for me) is the Russian roulette. If Cline dies in a freak accident before it's resolved, this is a $0. 
Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 17, 2016, 06:15:27 AM
Picasso,

I've been debating adding more, as I agree with all of your points. However, my money was being allocated to augmenting my Terraform Global (GLBL) position instead. I did just receive some dividends from it that I'm considering using to buy some more FELP.

My question is, why haven't they managed to come to an agreement with the bondholders yet?

Also, if Cline were to come in with new equity cash and dilute existing holders by 50%, I wonder how the dividend agreements would work. Right now common shares have arrearages of $.51/share already built up. If Cline comes in buying new shares, would they be new common shares? Or perhaps he would buy some preferred shares, giving him lower dividend payments, but before anything on the common.

The other concerning issue is the multiple fires they've been dealing with in their mines. I don't understand enough about coal mining, but it really seems odd to me that it would be so difficult to manage a fire in a mine. After hundreds of years of mining, how have they not developed techniques for this yet?
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 17, 2016, 02:55:55 PM
The longer it drags on for, the more Cline will be able to dictate his terms.  Based on the last report from Bloomberg it appears that Bob Murray is okay with a wide variety of situations to resolve this.  The bondholders don't want to own a coal company and that mine fire is a great example of this.  Maybe the guy from Blue Mountain wants to put on some overalls and a hardhat and go put out the Deer Run fire.  If it gets resolved over the next month (which it probably will) it's better than going through bankruptcy, period.  Bondholders will make their 50-60% return which is better than can be said for other coal bondholders.  Throw this into bankruptcy with another leg down in coal prices or whatever potential risk seems silly.  Honestly, I feel like Bob Murray would go down the various coal mines and light them all on fire if they were forced in bankruptcy.

As far as the dividend agreements, I think you'll just see increased units to dilute the existing unit holders.  Probably not a ton because Cline needs Murray to survive a bit longer to drop down some other assets.  It's in Cline's interest to see Murray survive as well, but he's not a big Murray fan and it doesn't surprise me to see him pull out a bit of blood.

As far as the mine fires, that's just what happens.  A fire is carbon + oxygen so you have to starve out the oxygen and let it die out.  Sometimes it doesn't die out.  There's that risk but I don't think that's a game killer.  It's just another reason why it doesn't make sense for this to be a loan-to-own. 
Title: Re: FELP - Foresight Energy
Post by: indirect on March 18, 2016, 08:23:01 AM
what do guys make of filing by felp? risk of common dilution gets less? no response from Mr. Market
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 18, 2016, 09:24:06 AM
They need to resolve all the default issues before they can issue debt and units under the old shelf filing.  You can still get diluted but it'll be part of the settlement with bondholders. 
Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 18, 2016, 03:55:27 PM
Well, FELP has officially defaulted on the Bond payment. Curious to see what happens now.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on March 21, 2016, 10:22:28 AM
Mr. Market not responding kindly to 8-K from Friday.  Stock down almost 12% today.   Forbearance agreement lasts until tomorrow.  Any thoughts?
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 21, 2016, 10:42:55 AM
Nothing has changed from last week aside from not making the interest payment.  The funny thing is, SXC/SXCP should be getting hammered based on this FELP price action if the company is heading into bankruptcy.

I've bought more but there's a fairly big seller hitting all the bids and there's just no buyers (except me and a couple other clowns).  There's not a lot of investors in this company outside of Cline and Murray (maybe three) so someone wants out.  I'd be curious to find out if Fidelity has restrictions on owning stocks this deep into default but it feels like forced selling. 

The risk now is where Cline dilutes and by how much.  He can't dilute too much or he'll kill off the sponsor (Murray) but he needs to give the banks some assurance.  I don't think the various parties want to take this into bankruptcy but I can see how the defaults are nerve wracking for investors not looking at the incentives for Cline.  Cline can make a killing in various ways without overly diluting the unit holders.  I'm going to be really surprised if they file but hey anything can happen.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 22, 2016, 05:06:34 AM
I agree, it doesn't make sense to bring this to BK. The question really is how much dilution will occur. Will the stock jump up when the deal is announced, or drop due to too much dilution.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on March 22, 2016, 11:08:11 AM
Looking at the volumes it certainly feels like forced selling.  It will be interesting to see how this plays out.
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 23, 2016, 04:46:59 AM
You bring some tasty ass trades to the board Picasso. I'll be following this company for a while, can't really bring anything to the discussion though
Title: Re: FELP - Foresight Energy
Post by: roark33 on March 23, 2016, 10:08:18 AM
https://www.sec.gov/Archives/edgar/data/1540729/000156459016015070/felp-8k_20160316.htm

Another week long extension.  I think this is the third since I have been following it.  Usually means they don't file for bankruptcy, but the question is still how much the common is diluted. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 23, 2016, 10:44:17 AM
I don't think there needs to be massive dilution at current prices.  Cline already owns 20 million units.  Let's say he comes in with $600 million of new cash in the form of 8% second lien debt.  Shares could easily be back at $5-6 which is worth around $100-120 million (to Cline) plus all the distributions at $13 million per year. 

He would have $48 million coming in each year from the new bonds.  Another $13 million from the FELP distributions.  And now have FELP stock worth at least $100 million.  If things get hairy with the business in the future, he will be in a position to be the fulcrum holder without throwing good money after bad.  He also owns 4.8 million unvested units of SXCP which can easily double when this is resolved.  Those are probably worth around $80 million plus another $100 million of seller financing to SXCP plus another $11 million of distributions per year.

So in that situation he gets to put in $600 million and get back $72 million each year just in distributions from FELP, FELP debt, and SXCP.  He would still have $880 million in mark to market FELP debt, FELP equity, SXCP equity, and SXCP seller financing.

Over ten years he'll earn over $700 million just from interest and distributions without taking on a ton of risk.  He'll still own 31% of FELP and have a free call option on the cycle turn (if it ever comes, but they're still very profitable at current levels).  He can plow most or all of it into new equity but I think that's a pretty nasty scorched earth policy.  Murray can sell him some assets in the future and he won't be in a position to pick up Murray assets in bankruptcy if he throws FELP into bankruptcy as well.  The logic of letting everybody burn over a technicality so you can come back in and pick up the pieces doesn't make sense to me.

That said I think you can dilute a fair amount and still get a price above $3 or $4.  I don't think dilution will get you down to $1 of fair value.

The problem is the debt holders know this and they are probably demanding par plus.  And honestly, they're right to ask for it.  I bet it gets settled really close to par...
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 24, 2016, 01:15:10 PM
I'm asking for some education here more than anything because I'm not sure I understand the bankruptcy process and big picture here.

Are there any benefits for Cline or Murray if FELP is forced into bankruptcy? It would appear not, but I don't know the entire ownership structure of all the bonds. Murray just owns units, correct? So wouldn't he be at risk of total loss?

What is the upside for the bondholders forcing this into bankruptcy versus negotiating a settlement? What benefit would they get from taking control of the company? Would they gain control of the company at extremely low valuations with the intent to exit later with a recovery in coal prices?

Sorry if these are basic questions. Just trying to look at this from different angles.

Title: Re: FELP - Foresight Energy
Post by: Picasso on March 24, 2016, 02:44:48 PM
Murray and Cline own 80% of the units, no debt.  Murray would lose their entire $1.4 billion investment and Cline would lose his remaining 30% stake.  There were also cost savings of combining Murray with Foresight, so destroying Murray by bankrupting Foresight will also destroy a lot of the savings from having them work together.  Even if Cline thought he could pick up pieces of Foresight in bankruptcy, recreating the Foresight advantage is really hard.  He'd be starting all over again and it's unclear how much he could pick up in that kind of situation.  There's $300 million of senior bank debt in front of everyone so the recovery value for the note holders at $600 million might be tight during a fire sale.  One of the mines just caught fire for a second time, do they really want to be in this business long term without a solid management team running Foresight?  Will Murray or Cline be involved in a new Foresight if the bondholders wipe them out?  Will the market give new Foresight equity that has been swapped for notes a value well in excess of par?  I don't think the bondholders take a big win from bankruptcy unless they really, really want to be in the coal business long term and take a ton of new equity. 

If they negotiate a settlement, bondholders will make 40% or so.  If they don't, maybe some assets get sold to pay down bank debt (they can't sell Deer Run, it's on fire and they only own four key mines) and let's say this is worth half of what Murray paid back in 2015 minus some asset sales (the distribution was cut in half after all).  They might be lucky to make a similar 40%.  That's a lot of headache and work and there's obviously extra risks there.

So we have something that looks like this:

Door #1:  Cline can just come in and settle, make himself several hundreds of millions, the bond holders make their 30-40%, Murray lives to fight another day, and FELP shareholders get to see a 5 bagger from current levels.  It's not a $20 stock anymore but $5 is a lot better than $0.

Door #2:  Cline decides to take up sky diving this weekend and the parachute doesn't open on his first dive.  Bob Murray walks down into the various mines and lights them on fire.  The bond holders and banks get thrown into a nasty fight over what can be sold and what will be left and there will be no one to run Foresight during one of the most difficult environments for any coal business.

Door #3:  Nobody wants to give in and it gets thrown into bankruptcy anyway.  Cline doesn't want to make another billion dollars and thinks the billion he has is good enough.  Murray takes the last of his net worth and hires a hit man to take out Cline for being such a dick.

A lot can happen here, but door #1 seems most likely to me.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 24, 2016, 02:51:27 PM
Thanks Picasso!
Title: Re: FELP - Foresight Energy
Post by: BG2008 on March 24, 2016, 04:11:16 PM
Fascinating idea - probably worth a 20-100bps flyer allocation.  I've been peripherally tracking the coal mining space.  Something about a leveraged equity in a distressed/flaming bag of poo type of industry attracts me.  But I think this is interesting in that there are imminent catalyst here.  I look at quite a bit of distress/bankruptcy situations.  Frankly, I think reading first day pleadings of bankrupted companies is great way to learn how companies get into trouble and help you to side step investment pitfalls, i.e. Pinnacle airline, Dolan Companies etc.   

There is a theory in these types of situations that having assets is worth than having no asset.  What do I mean by this is that if FELP was some sort of a services company, i.e. law firm, I Bank, Brokerage platform etc where the value is in the people and not the physical assets, I would be more certain that debt holder will want to settle.  This is counter intuitive, but it also makes sense as possessing a bunch of phones and customer list for an asset light business leads to less recovery than taking possession of a coal business that churns out cashflow.   

Given that FELP owns the coal mines, a competitor like Alliance Resource can come in and buy up assets during a BK process.  It also makes a ton of sense as FELP is actually in a lower cost position.  But it does have a flaming coal issue that Alliance doesn't.  In terms of game theory, I can see a situation where the debt holders say "okay, let's go into BK, we'll become the fulcrum security."  This is why it's important to check who currently own the debt.  If Wilbur Ross or Baupost own the debt that just defaulted, I would be very concerned as these guys are "loan to own" guys.  If it's still the original debt holder, then I think Picasso's arguments that these guys don't want to own a coal mine makes a ton of sense.  Sub $3 natural gas prices makes coal a hard sell to power plants and makes the conversion from coal to gas go much faster.  Coal in essence is a rapidly melting ice cube.  None of this is new information.  The market knows this and it's baked into the price.

I think there' s a price where just buy some and wait to see if it files or a deal gets done.
Title: Re: FELP - Foresight Energy
Post by: BG2008 on March 24, 2016, 04:16:24 PM
Just to make this thread more entertaining, Chris Cline was dating Tiger Wood's ex wife.  We can all learn something from "Maximizing value" and "top ticking" from Elin Nordegren.  She walked away from Tiger with $100mm and she parted way with Chris Cline just as the coal market started to tank.  Smart gal! 

http://pagesix.com/2013/03/12/exclusive-tigers-ex-elin-nordegren-dating-billionaire-coal-magnate/

Title: Re: FELP - Foresight Energy
Post by: Picasso on March 24, 2016, 04:55:13 PM
Yep, I thought about the Oaktree's of the world being in the debt as an issue.  I didn't see anything there that worried me, Blue Mountain is maybe the worst of the bunch but not aggressive loan to own guys.  DDJ clearly isn't. 

About 34% of the debt is held by pension plans or vanilla funds.  See attached.
Title: Re: FELP - Foresight Energy
Post by: roark33 on March 24, 2016, 07:50:33 PM


Door #3:  Nobody wants to give in and it gets thrown into bankruptcy anyway.  Cline doesn't want to make another billion dollars and thinks the billion he has is good enough.  Murray takes the last of his net worth and hires a hit man to take out Cline for being such a dick.

A lot can happen here, but door #1 seems most likely to me.

Picasso--if this files and the equity gets wiped out, I just want to let you know that you don't have to make it back the way you lost it, in other words, don't take the call from Murray for the Door #3 option...
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 24, 2016, 10:31:35 PM


Door #3:  Nobody wants to give in and it gets thrown into bankruptcy anyway.  Cline doesn't want to make another billion dollars and thinks the billion he has is good enough.  Murray takes the last of his net worth and hires a hit man to take out Cline for being such a dick.

A lot can happen here, but door #1 seems most likely to me.

Picasso--if this files and the equity gets wiped out, I just want to let you know that you don't have to make it back the way you lost it, in other words, don't take the call from Murray for the Door #3 option...

I imagine if this files the negotiations turned out a bit like this:

https://www.youtube.com/watch?v=H9CQscwXBt0 (https://www.youtube.com/watch?v=H9CQscwXBt0)
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 25, 2016, 06:37:15 AM
Quote
Door #1:  Cline can just come in and settle, make himself several hundreds of millions, the bond holders make their 30-40%, Murray lives to fight another day, and FELP shareholders get to see a 5 bagger from current levels.  It's not a $20 stock anymore but $5 is a lot better than $0.

Door #2:  Cline decides to take up sky diving this weekend and the parachute doesn't open on his first dive.  Bob Murray walks down into the various mines and lights them on fire.  The bond holders and banks get thrown into a nasty fight over what can be sold and what will be left and there will be no one to run Foresight during one of the most difficult environments for any coal business.

Door #3:  Nobody wants to give in and it gets thrown into bankruptcy anyway.  Cline doesn't want to make another billion dollars and thinks the billion he has is good enough.  Murray takes the last of his net worth and hires a hit man to take out Cline for being such a dick.

Let me ask a couple more questions.

1. Cline has the cash to come in and settle, but is Murray in any type of similar situation? Could he come in with some type of settlement himself or is too late to raise that amount of cash? I'm not sure about his company and ability to raise cash.
2. I understand you're reasoning on the upside for Cline to settle, but what is the downside? I mean he could presumably just walk and lose his 30%, which is peanuts compared to the cash Murray just paid him. Is it worth the headache to settle? Is there a chance of losing more money if he settles? There is a lot of cash flow here, so the downside seems limited.

I look at the industry and regulations and like BG2008 says, it's a slowly melting ice cube and it would seem FELP is in a good position given it's low cost coal, but are there some political risks here as well? If a Democrat wins the White House, the EPA regulations will likely be continued or accelerated. If it's a Republican, will they try to roll back some of the coal regulations?

I realize this is coin toss, but it does seem like the coin is slightly weighted to settle.

Thanks for the interesting thread! I've learned a ton.
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 25, 2016, 09:35:05 AM
Let me ask a couple more questions.

1. Cline has the cash to come in and settle, but is Murray in any type of similar situation? Could he come in with some type of settlement himself or is too late to raise that amount of cash? I'm not sure about his company and ability to raise cash.
2. I understand you're reasoning on the upside for Cline to settle, but what is the downside? I mean he could presumably just walk and lose his 30%, which is peanuts compared to the cash Murray just paid him. Is it worth the headache to settle? Is there a chance of losing more money if he settles? There is a lot of cash flow here, so the downside seems limited.

I look at the industry and regulations and like BG2008 says, it's a slowly melting ice cube and it would seem FELP is in a good position given it's low cost coal, but are there some political risks here as well? If a Democrat wins the White House, the EPA regulations will likely be continued or accelerated. If it's a Republican, will they try to roll back some of the coal regulations?

I realize this is coin toss, but it does seem like the coin is slightly weighted to settle.

Thanks for the interesting thread! I've learned a ton.

1) I don't think Murray has a lot of options to come in and help refund payment on the $606 million.  Murray Energy bonds have collapsed to $10 and it was very difficult to get the bonds to market when they acquired FELP in the first place.  That said, Bob Murray is an interesting guy and he might be able to chip in something.  Most of this is in Chris Cline's hands because he can fund everything on his own.

2a) On the downside, he loses over $50 million per year in distributions from FELP and SXCP.  He also loses a few hundred million on FELP and SXCP.  He might only lose $90 million on current market values for FELP and SXCP but I don't think he considers $1 for FELP as the real intrinsic value.  Last year FELP generated $136 million of DCF against a current market cap of $142 million.  What multiple do you give a coal business that can still turn significant positive cash flow at depression like conditions near the bottom of the cycle?  He's going to be giving that up.

2b) If he comes in with a bunch of new equity then I think you can make the argument he has capital at risk again.  I think if he came in with second lien 10% debt he would protect himself against a loss in equity value, being fulcrum in the case it enters bankruptcy in the future anyway, and there would still be over $120 million of 2015 DCF against a $142 million market cap. 

2c) Just for arguments sake, if he thought all equity was the best couse of action from a downside risk perspective (not sure why), you would end up with around $253 million of DCF on a $748 million market cap.  That's a lot of cash generation for Cline but it would bankrupt Murray.

2d) So it seems worth the headache to settle.  Unless he doesn't want to be in the coal business anymore.  His public comments certainly don't appear that to be the case.

I don't know how to handicap the political risks.  I think there's going to be a certain amount of diversification among sources of energy generation for various reasons and coal will be one of them.  But that's not why the stock is at $1, although it may be something Cline is considering when investing in the debt/equity at the current stage of the coal cycle.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 25, 2016, 10:55:10 AM
Thank you for your generous time answering my questions!
Title: Re: FELP - Foresight Energy
Post by: BG2008 on March 25, 2016, 01:49:17 PM
Any idea what price the 7.875 bonds are currently trading at?  The most recent price according to the Finra website was from November 2015.  A lot could've changed since then. 
Title: Re: FELP - Foresight Energy
Post by: BG2008 on March 25, 2016, 02:16:09 PM
Picasso,

A simple clarification.  Do we know what the bond holders and FELP are currently negotiating over?  Are there rumor mills, NY Post etc articles about sticking points in negotiation etc?  You're suggesting that Cline comes in and pays cash for new equity/2nd lien debt?  I'm assuming that's what you're talking about all along.  Do we need to worry about the company being in default after the bonds are taken care of.  Put another way, does the current level of performance triggers defaults in more senior portion of the debt structure?  How do you envision that being taken care of?

Thanks
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 25, 2016, 02:55:31 PM
Any idea what price the 7.875 bonds are currently trading at?  The most recent price according to the Finra website was from November 2015.  A lot could've changed since then.

I attached the last few months.
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 25, 2016, 03:07:20 PM
Picasso,

A simple clarification.  Do we know what the bond holders and FELP are currently negotiating over?  Are there rumor mills, NY Post etc articles about sticking points in negotiation etc?  You're suggesting that Cline comes in and pays cash for new equity/2nd lien debt?  I'm assuming that's what you're talking about all along.  Do we need to worry about the company being in default after the bonds are taken care of.  Put another way, does the current level of performance triggers defaults in more senior portion of the debt structure?  How do you envision that being taken care of?

Thanks

The bondholders want $101.  Bonds are currently trading flat. 

This article from Bloomberg is the only thing I found that gave some insights into the negotiations.  http://www.bloomberg.com/news/articles/2016-03-14/two-coal-barons-one-overdue-bond-payment-and-the-end-of-an-era (http://www.bloomberg.com/news/articles/2016-03-14/two-coal-barons-one-overdue-bond-payment-and-the-end-of-an-era)

Quote
Matters have reached a point of such urgency that Murray is pushing Cline to chip in his own money, the people said. He wants the Foresight founder to either lend to the company or inject equity to help pay down some or all of Foresight’s 7.875 percent bonds maturing August 2021, said the people.
Another option is for Cline to fund a repayment of some of Murray Energy’s $3.4 billion of debt, said the people.
“I have not been involved in any negotiations respecting any aspect of Murray Energy’s capital structure and am not in a position to comment on that at all,” Cline said in the e-mail. “Foresight’s capital structure was and remains stand alone.”​

Last year they generated what I would consider a comfortable cushion above the leverage and interest coverage ratios.

Quote
Our covenants required a consolidated interest coverage ratio of greater than 2.00x and a consolidated net senior secured leverage ratio of less than 2.75x as of December 31, 2015. As of December 31, 2015, our consolidated interest coverage ratio and consolidated net senior secured leverage ratio were 3.00x and 2.50x, respectively.

Once Foresight takes care of this change of control mess, there aren't any default issues that worry me.  There is still the "going concern" issue with the 10-K, but that's due to the possibility that bondholders can accelerate repayment and they only have $20 million or so on hand.  It has very little to do with the actual operations.

I think you'll see some equity injected primarily to reduce the leverage a little and get the senior lenders comfortable with any amendments.  The company can then reduce debt fairly quickly with cash generation from operating results.  Everything comes down to settling with the noteholders.
Title: Re: FELP - Foresight Energy
Post by: indirect on March 26, 2016, 01:28:42 PM
There is a binary outcome to the negotiations with the bondholders. One way to play it is 3/4 of the position to Felp bonds and 1/4 in the equity. Either way you are buying into the lowest cost US coal producer in the country with minimum risk of loss of principal.   
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 26, 2016, 02:30:16 PM
That is potentially a good trade but the bonds are 144A. If I was BlueMountain I would be buying up the equity here and settle but does that count as inside info?  Perhaps... Perhaps not...
Title: Re: FELP - Foresight Energy
Post by: Green King on March 26, 2016, 02:42:22 PM
That is potentially a good trade but the bonds are 144A. If I was BlueMountain I would be buying up the equity here and settle but does that count as inside info?  Perhaps... Perhaps not...

This is a interesting situation. How do you view the drop in illmois Basin coal spot price and its effect on cashflow ? Since opearting leverage works both ways.
https://www.quandl.com/data/EIA/COAL-US-Coal-Prices-by-Region

TIA
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 26, 2016, 04:06:17 PM
That is potentially a good trade but the bonds are 144A. If I was BlueMountain I would be buying up the equity here and settle but does that count as inside info?  Perhaps... Perhaps not...

This is a interesting situation. How do you view the drop in illmois Basin coal spot price and its effect on cashflow ? Since opearting leverage works both ways.
https://www.quandl.com/data/EIA/COAL-US-Coal-Prices-by-Region

TIA

Current ILB coal pricing is where all their competitors are under water.  ILB coal pricing has been at these levels for half of 2015, yet they still generated substantial free cash flow and covered interest expense 3x.  I've tried to picture an environment (in the next few years) where ILB pricing sinks to a point where they're violating debt covenants.  It's really hard to get there unless their operating expenses suddenly increase by 50%. 

Here is an older WSJ article that describes the Foresight advantage pre-IPO:

http://www.wsj.com/articles/foresight-energy-bets-that-theres-gold-in-coal-1403042566 (http://www.wsj.com/articles/foresight-energy-bets-that-theres-gold-in-coal-1403042566)

Quote
Demand for Illinois Basin coal generally is expected to increase to 185 million tons in 2020 from 102 million tons last year, according to consulting firm Wood Mackenzie. The firm expects that by 2025 all coal-fired utilities will have scrubbers.

"Somebody's going to survive, and it's going to be the low-cost producers," says Wood Mackenzie analyst Matt Preston. "There's no reason to expect they're not going to be profitable for at least the next four or five years."

Foresight, whose workforce isn't unionized, controls three of the four most productive coal mines in the U.S. The company said in its filing that it sells a significant portion of its coal under long-term deals. Foresight already has sold 85% of its production for this year and 64% for next.

The company also is looking to increase exports. Foresight, one of the largest U.S. exporters of thermal coal, has exported roughly 36% of its output since 2008. The company opened a barge terminal in southern Indiana on the Ohio River to move coal to New Orleans and from there, to Europe, South America, Africa and Asia. Foresight is the biggest supplier to England's largest power plant.

I think that backdrop leaves them fairly well positioned.  They've sold 22 million tons in 2014 and 22 million tons in 2015.  Before they dropped guidance, they also seemed confident about getting close to 21 million tons in 2016.  Given they have capacity for over 30 million tons (existing capex is already built into the 30 million tons of capacity) I don't think the actual business operations is going to hurt the financial results even with the Deer Run mine fire.  But if they have to sell some assets in bankruptcy and Deer Run has no buyers/keep burning then I think costs start moving up quickly and current ILB pricing can kill any profitability.  It's part of the reason why I think the bondholders don't want to take this into bankruptcy as a loan to own.  What are they going to sell to repay the $300 million term loan without killing the rest of the company?

Most of my research indicated full cycle ILB pricing in the $40's.  There's some pressure at the moment from low nat gas and zombie coal players ignoring depreciation to keep mining for cash flow but that doesn't mean utilities will suddenly abandon coal on their roughly 250 scrubbed plants.  If a full cycle price is in the $40's then I'm not too worried about pricing in the $20's that will persist long enough to hurt FELP earnings and trip covenants.  It's possible but not very likely.

I should also note that Murray has been purchasing Columbian mines to blend with ILB coal and sell into the export markets.  They have below market contracts with the export terminal in Louisiana (that Cline used to own before selling to SunCoke Partners in exchange for cash, seller financing, and SXCP units) so if that ends up successful then the short-term ILB pricing is less of a worry.  That said, the export terminal is an option on the ability for Foresight and Murray to sell outside the domestic markets.  I just thought I would mention it in case people thought this was only a domestic coal play.  Murray and Cline are fairly savvy about looking ahead several years.  Too bad they didn't hire better lawyers at the time of the FELP change of control.

There are also some various supply cost curves out there.  This presentation from Foresight in late 2014 has a slide with various mine cash costs (slide 7).  I don't think you need to make a bet on the commodity price here, you just have to assume pricing will average "something" over the industry supply curve.  The difference in a "little something" and "a lot something" is the difference between a 5 bagger and a 10+ bagger assuming minimal dilution.  I'm certainly not trying to make a bet that coal goes up but even if pricing stays here they shouldn't be violating any covenants. 

https://coaltrade.org/wp-content/uploads/2015/09/Mike_Moran_Foresight.pdf (https://coaltrade.org/wp-content/uploads/2015/09/Mike_Moran_Foresight.pdf)
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 26, 2016, 05:00:29 PM
And just a couple more thoughts to expand on BG's question.

It's entirely possible that nat gas goes to some insanely low price in 2016, 2017 etc.  There's been a bounce in the energy markets lately but these things tend to move in big waves and if energy rolls over again, it may end up being more devastating than what we've already seen.  That's not exactly the time I would want to be selling coal assets in a bankruptcy.  Maybe you can get ARLP to buy something, but their stock has already been crushed and these partnerships have a very high cost of capital at the moment.  You're not going to create accretive acquisitions at ARLP by selling equity or debt today unless you buy up FELP assets at prices that hurt the bondholders. 

The value in FELP is in keeping the current cost and capital structure, or at least something similar.  So when someone asks me "why is it taking so long to negotiate," Chris Cline must figure something along these lines as well.  The bondholders aren't going to make a killing unless they want to suddenly be strategic owners of a coal business long term and recreate an LP out of bankruptcy with half as many assets.  Even then it's debatable how much they might make.  For that reason I think Cline/Foresight doesn't want to give "par plus" on a settlement but something less.  But the bondholders know they can refinance at "par plus" (Cline is sitting on enough cash), so why take less?  It's quite the game of chicken.
Title: Re: FELP - Foresight Energy
Post by: Green King on March 26, 2016, 07:20:48 PM
Thank you for the answers.

Title: Re: FELP - Foresight Energy
Post by: enoch01 on March 28, 2016, 08:50:54 AM
Thanks for the idea Picasso.  Nice game of chicken they have going on here.
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 28, 2016, 10:07:20 AM
Part of what I think explains the current price is this hedge fund Accipiter Capital.  I attached their holdings.

Here's a little bio:

Quote
Accipiter Capital Management, LLC is an employee owned hedge fund sponsor. The firm primarily provides its services to pooled investment vehicles. It invests in public equity markets of the United States. The firm primarily makes its investments in equity securities in the life science, biotechnology, pharmaceuticals, medical device, healthcare providers, managed care, and health care service sectors. It employs fundamental analysis to make its portfolio. The firm obtains external research to complement its in-house research. Accipiter Capital Management, LLC was founded in 2002 and is based in New York City

Now get this... They bought roughly 6.4% of all FELP shares outstanding last quarter.  They also bought $25 million worth of VRX in the $100's.  But more importantly, why the hell did they buy $50 million of FELP at $6?  It doesn't fit their circle of competence at all.  And FELP is the bulk of their equity portfolio.  The rest of their portfolio has been getting smoked so maybe they have some redemption pressures.

Assuming they're the fund selling here, there just isn't enough liquidity to get out.  Average volume is in the 100k share region, they need to unload 84x that.  So I think you have some interesting dynamics with a low float and seller that may want out of a badly timed purchase. 

Or it could be Fidelity and Accipiter is just riding out that mistake.
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 28, 2016, 11:27:35 AM
Actually it looks like Accipiter was buying as recently as Dec 31st @ $2.89.  I'm looking through all the Fidelity funds with FELP as a holding and they've been selling since the start of the year.  i.e., Fidelity Equity-Income Fund (FEQIX).  It's still a very unusual holding for Accipiter.
Title: Re: FELP - Foresight Energy
Post by: RadMan24 on March 28, 2016, 08:49:20 PM
Lowest cost producer, transportation increases costs and limits full capacity of 30 million, steadily declining output, heavy debt load, declining industry, and no positive catalysts regardless of peer bankruptcies.

Is that a fair assessment? Consol Coal currently yields near 30%, but DCF valuation has it at a earnings yield of 15%.

In order for these coal companies to receive higher valuations, coal prices and/volumes have to increase. Does anyone have any idea when that will happen? Any signs that it is or catalysts for it to happen are underway?

I've been warning against coal since 2013 after being burned in 2011. Best thing I've ever did was sell Peabody at $35 (unsplit price) after buying at $60. Adjusting for split terms, $60 translated to when Peabody was $1,100. Yet, Peabody is still "surviving."
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 28, 2016, 10:22:33 PM
Well the catalyst is a settlement with bondholders and not filing for bankruptcy. 

CNXC is trading at a 20% DCF yield right now, FELP is trading something north of 100% from 2015 figures with half the cost structure and 4x the reserves.  It will take you five years to get your investment back in CNXC from distributions, if 2016 is a trough year.  That kind of a yield once the change of control issues are resolved would put FELP back at some multiple above the current share price.  Whether it's $3 or $5 or whatever depends on how much dilution takes place.

The question is whether you think 2015/2016 is more of a trough or still halfway through a bad cycle.  As long as the debt is manageable I think you should give a full cycle "average" valuation to something like FELP because they'll make it through.  I don't know how you value something like CNXC other than a dividend discount approach declining towards zero because you don't know if there will be any free cash to distribute in five years.

But in the short-term the default issues need to be resolved... we can worry about the cyclical/secular coal stuff once it trades at a price that makes that more relevant to future returns.  Although I'm sure Cline, Murray and the bondholders are thinking about their strategy and the outlook for coal when figuring out a deal.
Title: Re: FELP - Foresight Energy
Post by: randallchsu on March 29, 2016, 12:57:19 AM
If there is any value in the commons, why wouldn't Cline and Murray called in the units at $1 or however low it might be?

"Our general partner has a call right that may require unitholders to sell their common units at an undesirable time or price.

If at any time our general partner and its affiliates own more than 80% of the common units, our general partner has the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed."

Title: Re: FELP - Foresight Energy
Post by: Picasso on March 29, 2016, 05:25:36 AM
Right now Murray's units are not common units and they won't become common units for a while.  Those subordinated units are still "out of the money" by $2 of distributions per unit.  That's why they need to resolve this mess, not dilute too hard, and focus on managing the partnership for DCF. 

The GP can call in the stock once they convert those subordinated shares and own the bulk of the common units.
Title: Re: FELP - Foresight Energy
Post by: RadMan24 on March 29, 2016, 07:30:25 PM
Didn't Murray suggest coal demand in the US will drop to 650 million tons or so? That's a long way to go.

Regardless, what are your views on Felp being a MLP rather than a C corp? In situations like this, do you believe it's a beneficial structure to its long-term health?
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on March 30, 2016, 04:16:36 AM
EFFECT filed with SEC - also another 8-K for an extension until 4/5.  Wonder if we are approaching a resolution.

https://www.sec.gov/Archives/edgar/data/1540729/999999999516004059/xslEFFECTX01/primary_doc.xml
Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 30, 2016, 09:29:12 AM
EFFECT filed with SEC - also another 8-K for an extension until 4/5.  Wonder if we are approaching a resolution.

https://www.sec.gov/Archives/edgar/data/1540729/999999999516004059/xslEFFECTX01/primary_doc.xml

What is a form EFFECT? There's no info in the filing.
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 30, 2016, 10:05:30 AM
Here are some excerpts from the court filings from last year.  It's both interesting and funny.

Quote
4. Murray Energy and Foresight are coal mining companies operating
below ground coal mines concentrated in Illinois, Ohio, and West Virginia. Even
before the acquisition of control of Foresight, Murray Energy was one of the
largest underground coal mining companies in the United States, with Foresight
being possibly the most cost efficient underground coal mining company in the
United States. Combined, the two companies mine approximately 10% of the coal
mined in the United States. Both companies employ “longwall” coal mining
technology, a highly automated method using far fewer miners than traditional
underground mining. The coal industry in general has fallen on hard times, and
Robert Murray, the chief executive officer (“CEO”), owner, and founder of Murray
Energy, has taken advantage of the downturn to go on an acquisition spree,
acquiring other mining companies to increase the market power and operating
efficiencies of Murray Energy. Mr. Murray has publicly announced that he plans
to be the “last man standing” in the coal industry, and has also stated that “coal is
all he knows,” and that he has no plans of retiring.

5. By contrast, Mr. Cline gives every appearance of wishing to move on
from a lifetime in the coal mining business and to enjoy the wealth he has created
while pursuing other interests.

6. In short, while Mr. Murray seeks to increase his investment in coal
and continue his full-time involvement in the coal mining business, Mr. Cline
wishes to reduce both his investment in coal and the amount of time he spends
running the coal company he founded.

7. Given Mr. Murray’s desire to expand his coal business and Mr.
Cline’s desire to reduce his investment in, and commitment to, Foresight, it was a
natural fit for Murray Energy to acquire a controlling interest in Foresight.
Accordingly, on March 13, 2015, Murray Energy and Foresight Reserves
announced that for an aggregate purchase price of $1.395 billion, Murray Energy
would acquire approximately 50% of the FELP equity interests, 77.5% of the
Foresight Incentive Distribution Rights (which, as described below in paragraphs
63-66, provide economic upside and align the interests of the party controlling
Foresight with the interests of FELP’s other equity holders), and an 80% interest in
FEGP (collectively, the “Proposed Transaction”).

.......

10. Recognizing that the Proposed Transaction would therefore obligate
the Issuers to make an Offer to Purchase, and not wishing to be forced to refinance
the Notes if all or a substantial portion of the holders of the Notes accepted the
Offer to Purchase (the total issuance of the Notes is $600 million), the Issuers
commenced a consent solicitation pursuant to which they agreed to pay the
consenting holders of the Notes (the “Noteholders”) a fee of 8 points (8% of the
face amount of the consenting Notes, equaling $48 million) in exchange for an
amendment of the Indenture so as to not trigger the Offer to Purchase, subject to
the closing of the Proposed Transaction (the “Consent Solicitation”).

11. On March 30, 2015, Foresight announced that it had “reached an
agreement with the holder of greater than a majority in aggregate principal amount
of the Notes, pursuant to which such holder has agreed to consent with respect to
all of its Notes.”

12. In spite of receiving this consent, Murray Energy and Foresight
Reserves did not close on the Proposed Transaction, and instead fashioned a new
transaction which gave the appearance, but not the reality, of stopping just short of
a Change of Control.

13. On April 7, 2015, Murray Energy and Foresight Reserves announced
that they had entered into a new agreement, whereby Murray Energy would
acquire, for an aggregate purchase price of $1.37 billion (a reduction of just $25
million from the original proposed purchase price of $1.395 billion),
approximately 50% of the FELP equity interests, 77.5% of the Foresight Incentive
Distribution Rights, a 34% “voting interest” in FEGP, and an option to purchase an
additional 46% of FEGP for only $25 million during a five-year period (the “New
Transaction”).

14. The Issuers thereupon withdrew their Consent Solicitation, and both
Murray Energy and Foresight announced, in a press release dated April 7, 2015,
that “[a]s a result of the new transaction terms, no change of control will result
under . . . the indenture governing FELP’s senior notes . . . which will remain in
place . . . . after the closing”.

15. However, this attempt by Murray Energy and Foresight Reserves to
escape the Issuers’ obligation to make an Offer to Purchase fails.

So they could have simply paid the $48 million (which the bondholders were okay with) and instead they altered the deal a bit (presumably to save that $48 million) and they're now at risk of losing everything. 

And what has to be the most understated comment from the court in November of last year:

Quote
28. The consequences that may flow from the Court’s
Memorandum Opinion cannot negate the correctness of the Court’s reasoning and
holding. Furthermore, these consequences were entirely foreseeable, and
ultimately result from Foresight’s inexplicable failure to even try to reach an
accommodation with the Plaintiff prior to the issuance of the Court’s
Memorandum Opinion. Foresight did not attempt to contact the Plaintiff during
the entire course of this litigation, even after the November 17, 2015 argument on
the Motions, which concluded with this Court’s suggestion that:

I’d encourage you-all to talk about this. It seems to me
that this is a situation where, depending on how it plays
out, it could be disruptive to the entity. And so if there
are ways to avoid that type of disruption by working out
some type of consensual resolution, I think it’s probably
a decent idea.

Probably a decent idea indeed.
Title: Re: FELP - Foresight Energy
Post by: Picasso on March 30, 2016, 10:35:46 AM
Didn't Murray suggest coal demand in the US will drop to 650 million tons or so? That's a long way to go.

Regardless, what are your views on Felp being a MLP rather than a C corp? In situations like this, do you believe it's a beneficial structure to its long-term health?

If they pull through this change of control thing, then there's plenty of return in the LP structure until Murray's shares convert and you start losing to the IDR's.  Being an MLP no longer implies a low cost of capital (well some are still low cost capital sources but they tend not to have leverage or investment grade, giant sponsors) and this is coal related so will it ever trade similar to other "yield co's?"  Will it ever trade at a 8% DCF yield again?  I kind of doubt it.  But it isn't inconceivable that you can pull out multiples of $1 in distributions if they make it through.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 30, 2016, 05:39:36 PM
Didn't Murray suggest coal demand in the US will drop to 650 million tons or so? That's a long way to go.

Regardless, what are your views on Felp being a MLP rather than a C corp? In situations like this, do you believe it's a beneficial structure to its long-term health?

If they pull through this change of control thing, then there's plenty of return in the LP structure until Murray's shares convert and you start losing to the IDR's.  Being an MLP no longer implies a low cost of capital (well some are still low cost capital sources but they tend not to have leverage or investment grade, giant sponsors) and this is coal related so will it ever trade similar to other "yield co's?"  Will it ever trade at a 8% DCF yield again?  I kind of doubt it.  But it isn't inconceivable that you can pull out multiples of $1 in distributions if they make it through.

Given that the annual minimum distribution is $1.35, and there will be three years of subordination, thats an understatement. Still, I think its probably worth waiting to see the settlement before buying in.
Title: Re: FELP - Foresight Energy
Post by: indirect on April 01, 2016, 12:28:49 PM
Deer run mine is now closed. How will this affect CF in your models?
I think this action was part cost cutting and part hardball with bondholders.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 01, 2016, 12:39:29 PM
In the short run it's pushing costs from $22/23 to $28/ton. That leaves them with almost no free cash flow in the short-term. The timing on this fire is kind of funny because of the bondholder dispute. I'd like to think it makes it easier to settle but who really knows. Foresight should have settled this before it got to that court decision.
Title: Re: FELP - Foresight Energy
Post by: RadMan24 on April 01, 2016, 10:17:58 PM
In the short run it's pushing costs from $22/23 to $28/ton. That leaves them with almost no free cash flow in the short-term. The timing on this fire is kind of funny because of the bondholder dispute. I'd like to think it makes it easier to settle but who really knows. Foresight should have settled this before it got to that court decision.

...have they not consistently had troubles with that mine? It is not one that I was surprised to be shut down, nor should it be a surprise costs go up. But up $5 a ton? When the debt load is high and increasing, revenues dropping, it just doesn't work out well often.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 03, 2016, 12:51:00 PM
Sorry it shouldn't be up by $5/ton.  I went back through the last time they had a fire at Deer Run and even though it was only a month of downtime versus several months so far, it didn't have a material impact on the costs per ton.  They already booked about 20 million tons for 2016.  Part of the reason costs were so high in 4Q was that production was down big from the Deer Run fire, but it's getting replaced by another mine so we should see that shift by the time they announce earnings; if they make it to next earnings.  If this Deer Run things never gets fixed then I think you're looking at closer to $23-25.  Maybe $10 EBITDA margins per ton in that environment?  $200 million EBITDA minus $75 million for capex leaves $125 million for the interest payments and equity holders.  Not a ton of wiggle room but this is the point where there is a lot of operating and financial leverage.  Costs are about as high as you'll ever get, ILB coal pricing is at or below average production costs (based on what I see from numbers disclosed from other ILB producers), and the interest payments are eating up most of the free cash. 

Whereas in the bearish scenario above you're looking at only $8 million of DCF, if they can get 25 million tons out @ $15 margins, you suddenly have $183 million of DCF again.  I really don't think 25 million tons at $15 margins is that crazy of an assumption for these guys. 

If there was no change of control default nonsense going on and I looked at the units @ $1 and tried to gauge the probable future earnings potential, it looks massive.  Several multiples of the current market cap.  So these trough conditions suck, especially because of the debt expense, but the equity is insanely geared to any positive turn and that's usually when you buy these stocks.  It's generally a terrible idea to buy any commodity producer when they're earning super high returns.  It might not mean this will turn out to be a good idea but more often than not this situation works well over time.  It helps that you have a bunch of stakeholders who either need this to work out or have substantial financial incentives to make it work.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on April 05, 2016, 10:48:59 AM
I wonder why the spike up today; no news yet so I wonder if we will see a positive news release after the close.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on April 06, 2016, 05:46:58 PM
Side business in Canada: Kameron Collieries

Is Cline focusing his efforts on country that is more friendly towards coal - due to high unemployment in the energy industry?  It seems more politically acceptable right now in Canada.   
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 06, 2016, 07:28:31 PM
My best guess is he sees an opportunity to recreate in another geography what he built at Foresight.  He also bought these coal assets in Canada fairly cheap and almost like a long-term call option.  Just looking at some of the various moves since 2010, he is a decent investor in the space.  Which is sort of weird because the bondholders painted a picture of someone who wanted to get away from the coal business. 

Quote
5. By contrast, Mr. Cline gives every appearance of wishing to move on
from a lifetime in the coal mining business and to enjoy the wealth he has created
while pursuing other interests.
Title: Re: FELP - Foresight Energy
Post by: RadMan24 on April 07, 2016, 07:45:36 PM
Side business in Canada: Kameron Collieries

Is Cline focusing his efforts on country that is more friendly towards coal - due to high unemployment in the energy industry?  It seems more politically acceptable right now in Canada.

Did Canada just not release carbon controls that are designed to eliminate the use of coal? The Coal industry is no longer as valuable as it once was, at this current time to say the least. Assuming and when it does become more valuable is anyone's guess. Cline divested a good chunk of his assets at the time of the IPO, while Murray is determined to be the last man standing, Cline's interests may have diverged. Foresight was brought on the market highly levered, we've seen the result of that so far.

Even a low cost producer is not as strong as being connected to a power plant, like many of WLB's coal mines are, or mine mouths. If you have an advanced coal plant connected to your coal mine, regardless of what happens, as long as you have cost of capital rates, you should survive the brutality of this storm. Foresight relies heavily on transportation to sell more tons and to reach full capacity. In a normal market, this can work well given its low cost structure. In a declining market, it presents various risks that may take longer than normal to revert to sustainable price and volume levels.

I understand that a trade or bet can be made that either Cline or Murray will put more cash to work to settle the covenant breach and CIC event, however, beyond that fix, the upside requires a lot of things to go right to make it work out like a multi bagger. Any restructuring of debt could also have implications on the unit holders, similar to what's going on in LINN Energy I would presume as well.

But I could be wrong :)
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 07, 2016, 08:49:52 PM
Interesting points.

I'm sort of on the fence about what is better.  1) Connected coal mines at higher costs, or 2) Low cost mines with low transportation costs.  You can make the argument that #1 may not have terminal value if the plant shuts down.  There are some extra risks there to having a stranded asset.  Dealing with that on SunCoke contracts right now.  If the costs are low enough then #2 is viable long-term regardless of connected plants.  But to your point, leverage is an issue.

The LINN debt restructuring is a lot different than Foresight.  Those bonds were at $3 and yielding nearly 300%.  Restructuring out of court at less than par hits the LP's with big tax bills.  Foresight bondholders are simply exercising their rights to a change of control after Murray backed out of paying a $48 million waiver by restructuring the terms of the deal.  A settlement will likely be close to par or some 15 point fee, neither of which will hit the LP's with the kind of massive tax bill the LINN guys are getting. 
Title: Re: FELP - Foresight Energy
Post by: Green King on April 07, 2016, 10:44:25 PM
Interesting points.

I'm sort of on the fence about what is better.  1) Connected coal mines at higher costs, or 2) Low cost mines with low transportation costs.  You can make the argument that #1 may not have terminal value if the plant shuts down.  There are some extra risks there to having a stranded asset.  Dealing with that on SunCoke contracts right now.  If the costs are low enough then #2 is viable long-term regardless of connected plants.  But to your point, leverage is an issue.

The LINN debt restructuring is a lot different than Foresight.  Those bonds were at $3 and yielding nearly 300%.  Restructuring out of court at less than par hits the LP's with big tax bills.  Foresight bondholders are simply exercising their rights to a change of control after Murray backed out of paying a $48 million waiver by restructuring the terms of the deal.  A settlement will likely be close to par or some 15 point fee, neither of which will hit the LP's with the kind of massive tax bill the LINN guys are getting.

Once this problem is solved. What is your comparable for this ? IE a comparable coal stock without this type debt problems and similar cost structure.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 08, 2016, 12:29:41 AM
There's nothing very comparable here.  ARLP or CNXC might be close, but they're either have very little debt or no debt and a higher cost structure or tons are falling a lot faster. 

I think it's easiest to look at it from the point of view of Murray Energy.  FELP generated $159 million of levered distributable cash flow in 2015.  Without interest expense it would be $276 million.  The market cap is currently $153 million and 2015 wasn't a walk in the park considering that their lowest cost mine has been idled for a year and ILB prices collapsed halfway through. 

If you look at the DCF yield on CNXC it's about 20%.  And their fundamental picture is seemingly worse than FELP.  But they don't have any debt.  All things considered I think you can see a 20% yield on FELP post settlement.  Especially since Murray has the bulk of the IDR's that are far and away from the high splits, they need to pay out $2 of distributions to convert their subordinated units, and it's probably within a few years of seeing a bottom of this bad coal cycle.  At 20% you'll be able to recover most of your investment within a few years and get a cheap option on any positive turn. 

$100 million of DCF gets you to a $500 million market cap @ a 20% yield.  It's a question of how much they dilute on a settlement.  If the unit count goes from 130 million to 200 million, the upside will only be $2.50.  But you don't need that much dilution and I think $100 million of DCF is probably close to the near term economics here.  And Murray can't afford too much dilution.  The more I've played with the numbers short-term upside is probably between $4-5.  Long-term, especially when adjusted for distributions, can be a lot higher.

But like I mentioned in a previous post, it's going to be tricky owning this *after* a settlement (assuming it happens) when you can see 25 million tons shipped at $15-20 EBITDA margins per ton sometime in the future.  That would push over $300 million of DCF and the market might be willing to price it at a 10% yield.  Suddenly the market cap is $3 billion again and it's a 20 bagger.  There's some real optionality here that would seemingly make it hard for Cline or Murray to just give up.  In the meantime, a 20% yield on bottom of the market DCF seems like an okay benchmark when compared to ARLP or CNXC.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 08, 2016, 12:46:43 AM
Something else to consider are the Murray Energy bonds.  It hurts that Murray paid such a high price for FELP but the bonds they financed it with have gone from $100 to $14.  They have actually recovered a bit from $10.

The current market value of those bonds is only $168 million versus $1.4 billion at issue.  If Murray can start pulling out distributions from FELP they'll be in a good position to repurchase a lot of that debt and effectively reduce their FELP purchase price.  That's better than massively diluting and killing off their FELP IDR's.  I bet a lot of bondholders would take $25 right now.  Reducing leverage at the Murray sponsor level will put everyone in a better position.

But they may have no choice but to let Cline dictate his terms and come in with more equity than they want.  Anyway, that's just another piece to this puzzle.
Title: Re: FELP - Foresight Energy
Post by: Green King on April 11, 2016, 12:19:25 PM
I was unable to find current production numbers for the Illinois basin does anyone have that ?

TIA
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 11, 2016, 02:21:26 PM
I only have figures up to December of 2015.  But the EIA put it in the "Interior" classification if you look at this interactive chart.

https://www.eia.gov/coal/production/weekly/
 (https://www.eia.gov/coal/production/weekly/)

Average was 11 million tons per month in the ILB for 2015.  If you sort of take a trend of the average for 2016 so far, it's running 11 million monthly tons *total* between various interior production and the ILB.  It's fallen off a cliff.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 11, 2016, 02:28:50 PM
I also quickly took a 2014 running tally for the total interior (ILB + Texas etc) and it was about 73% ILB production.  So maybe take the interior figures and say around 70-80% of that is ILB.  In which case 2016 is shaping out to be around 96 million tons of production.  About a 25% drop?
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 12, 2016, 02:22:43 PM
Foresight Said to Be Close to Creditor Deal to Avert Bankruptcy

(Bloomberg) --
Struggling U.S. coal miner Foresight Energy LP and a group of bondholders are closing in on a deal in which billionaire founder Chris Cline would inject cash to repay the creditors, according to people with knowledge of the matter.

The company, which faces a deadline Tuesday for resolving the dispute with bondholders who claim they are owed more than $600 million, needs an agreement to help stave off bankruptcy amid the worst coal downturn in decades.

Under the deal being discussed, Cline would buy some or all of that debt, said the people, who asked not to be named because the discussions are private. Cline may also invest capital in Foresight’s part-owner Murray Energy Corp., the people said.

A group of the miner’s senior secured debt holders are seeking a consent fee to agree to any terms, the people said. The latest discussions between Foresight and its bondholders are still evolving and may fail, the people said.

Jason Margherio, a spokesman for Foresight, declined to comment.

Demanding Premium

Foresight’s dispute with bondholders led by DDJ Capital Management and BlueMountain Capital Management began after Murray bought a 50 percent stake in the company a year ago. The creditors argue that the acquisition amounted to a change of control, which, under Foresight’s lending contracts, would require the company to repay, at a premium, its $600 million of 7.875 percent senior unsecured notes maturing in August 2021.

Murray and Foresight said in a press release last April that no change in control would occur from the transaction. But in December, a Delaware judge ruled that it had and ordered Foresight to negotiate with bondholders.

Foresight has been trying to restructure its debt outside of court as it works to avert bankruptcy after defaulting on several fronts. Mining giants including Alpha Natural Resources Inc. and Arch Coal Inc. have already filed for bankruptcy as coal prices plunged 75 percent since 2011 amid mounting environmental regulations, weakening demand abroad and cheap natural gas.
Title: Re: FELP - Foresight Energy
Post by: Green King on April 12, 2016, 04:18:41 PM
Congrats on predicting the outcome of this this event.  :D
Thanks for the answers. kudos for having the balls to invest in these type of situations. ;D
Title: Re: FELP - Foresight Energy
Post by: RadMan24 on April 12, 2016, 07:50:07 PM
I'll second that. Definitely still watching this with interest.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 13, 2016, 09:21:04 AM
Isn't the coal space just lovely? This would be my 4th double in a month in coal alone... Picasso you suggest the best trades, I love it. Simple, no nonsense stuff. Let's make millions baby
Title: Re: FELP - Foresight Energy
Post by: awindenberger on April 13, 2016, 11:01:14 AM
Its def interesting to see that the stock popped 50% without even confirmation of the deal being complete. I'm curious to see the final deal.
Title: Re: FELP - Foresight Energy
Post by: roark33 on April 13, 2016, 11:15:02 AM
Isn't the coal space just lovely? This would be my 4th double in a month in coal alone... Picasso you suggest the best trades, I love it. Simple, no nonsense stuff. Let's make millions baby

Patmo, a little curious how you got a double out of this one:)
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 13, 2016, 01:27:59 PM
Isn't the coal space just lovely? This would be my 4th double in a month in coal alone... Picasso you suggest the best trades, I love it. Simple, no nonsense stuff. Let's make millions baby

Patmo, a little curious how you got a double out of this one:)

Sorry, I wrote my message a bit unclearly, I said "would be my 4th double" and I meant that it would be if it does end up a double. All 3 others are confirmed - TCK.B, SXC, CNX
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 13, 2016, 02:21:40 PM
Isn't the coal space just lovely? This would be my 4th double in a month in coal alone... Picasso you suggest the best trades, I love it. Simple, no nonsense stuff. Let's make millions baby

We're going to have to take our coal winnings and start lobbying against coal regulations.  Poison the air for our grandchildren and their children's children.  Meanwhile we're rocking McLaren P1's while blasting Butterfly by Crazytown. 

Anyone check the short borrow today?  I'm curious if it's still in the 90% area.  Fidelity seems like the only seller of size but after today's volume they're probably out, day trading volume aside.  That would hopefully make this one of those stocks that simply grinds higher because you've run out of dedicated selling by a large holder. 

Stock still seems quite undervalued at 1.7x 2015 DCF, even after today's rally.  The key for me was that Cline is looking to take a stake in the sponsor Murray, which if true puts Foresight in a much better position with dilution happening mostly on the sponsor level.  Even if the senior lenders want 5 pts or something, that's minimal dilution and they can probably pay it with cash on hand.

What's also key here is that Murray owns most of the IDR's.  By Cline looking to take a Murray stake he doesn't need to dilute Foresight at all to make a lot of money.  So in exchange for buying up most or all of the Foresight notes, he's taking a bigger stake in Foresight by simply taking a stake in Murray.  Which also means they're likely to find a way to get the distributions paid out, convert the subordinated shares, get FELP stock up, do drop downs, collect on the IDR's, etc.  If it's true that Cline is going to be part owner of Murray then it's a pretty big deal.

I bought a lot more today so hopefully the Bloomberg report is close to reality.  Even if it isn't, I don't think a permanent loss of capital is likely at $1.80.  And it does indicate that these guys really want to be the last coal guys standing, so there's the potential that in five or ten years it can be a complete home run.

And since FELP and Murray make up 25% of SXCP EBITDA, I've bought up even more of SXCP as well.  The market is so weird about valuing this complex.... SXC is over $468 million but if FELP files their free cash flow goes to zero with the SXCP dividend cut.  And SXC trades for 2x the value of their SXCP stake.  You can just buy some SXC puts and load up on FELP if you were worried about them filing. 
Title: Re: FELP - Foresight Energy
Post by: roark33 on April 13, 2016, 05:04:45 PM
Moral of the story: If Picasso says a toad* is a princess, pucker up....





*Potential exception being class B/C mall operators....
Title: Re: FELP - Foresight Energy
Post by: Green King on April 13, 2016, 06:23:17 PM
do you mind sharing your percentage of allocation ?
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 13, 2016, 07:14:03 PM
After what I bought today it makes up half my PA.  I was (still am) willing to take about a 35% hit if it goes tits up.  Not that it rationalizes a super large position, but even if it went to zero I'd still be up double digits in 2016 (so far) because of some other holdings.  I tend to press my bets hard when I think it has a very high probability of working out.  If anything the news today is a sign to buy more. 

And this is with my money, not OPM.  I probably shouldn't say what # top shareholder I am...
Title: Re: FELP - Foresight Energy
Post by: bonkers on April 14, 2016, 12:31:10 AM
Picasso,

wasn't it you talking about risk management some time ago on a different thread? I'm not saying that you're wrong on this, but how do you combine that with such a position in a highly levered commodity company in default, based on unconfirmed information from a Bloomberg article?

Granted, Bloomberg must receive its info from the parties involved, but there are many involved, and it might just be their internal game to put pressure on each other. I suppose the discussions may still fail on some fool resisting, but I don't know how these processes go.

So far the only facts I see from 8-K is that resolution has again been postponed, this time to Friday, 15th.
Title: Re: FELP - Foresight Energy
Post by: hswoon on April 14, 2016, 01:06:05 AM
If I understand this bet correctly...

The risk involved on this trade is whether or not Cline provides to bailout to equity holders by purchasing the bonds due. The speculation is that Cline would chip in his own net worth, and that bondholders would negotiate the principal payment with Cline instead of pushing FELP into BK; for various reasons stated in this post. The bet is not entirely weighted on the Bloomberg article. The article (that parties were close to finishing negotiations) just confirms the original idea that FELP would not be pushed in BK, and that parties would be willing to negotiate. It should be noted that the forbearance extensions were 1wk each for a month, with the recent extension being a few days (from 12th to 15th), confirming the speculations in the article that parties were close to agreement. Therefore this new information to Picasso means the probably of default went down even further.

As for operational/industry factors debt/coal and what not that only matters if you intend on holding the position past the events in the near future. The play is that the event (not BK or BK) will work out as speculated, the market will pop, 50%-200%, whatever, and you also have the option of a rebound in the coal industry (if you wish to long that by holding the position longer). But these issues are not highly relevant in the short term if you are making the event driven play. You're either going bust if Cline doesn't bail out, or making a few times your money if FELP survives (this is also another assumption).

tl;dr neither parties have interest in a BK, Cline personally will negotiate out of BK, market will react to event. Bloomberg article confirmed Picasso's original idea.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 14, 2016, 05:01:04 AM
That's right hswoon.  If the extension was for another week then I would not have bought more but simply waited to see what would happen.

Risk management is everything.  I'm fine risking a little over 30% on this "trade."  If it goes tits up I'll just walk away from it and move on to other ideas and probably still have a good year. 

Also, just think of where the stock was at.  About 1x 2015 DCF.  During some of the worst coal conditions you can imagine.  Everyone is going bankrupt, production is falling off a cliff, and these guys are still very profitable.  Now add in that it's at 1x earnings because investors think it will file for bankruptcy over a bond dispute that could have been avoided for only $48 million.  If you know the personalities of Cline or Murray, why would they simply walk away and destroy billions over $48 million?  That doesn't make any sense.  And they have the capital and incentives to do the right thing for the FELP unit holders. 

I don't see a lot of opportunities like this, so I'll naturally buy a lot of it when it comes up.  It's a well calculated bet from a sizing standpoint and when I'm having a good year I always push harder into my best conviction trades.  It's harder to do that when you're flat or down because you can't really risk 30-50% on a trade.  I'm sort of reminded of a Druckenmiller quote from his time at the Quantum Fund but I need to go dig it up.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 14, 2016, 05:21:11 AM
In terms of my previous risk management comments on say ZINC or whatever it was (VRX?), at a certain point they lacked any reasonable upside and were exposed to a lot of risk.  Instead of cutting a large position a lot of investors just decided to ride it out and see what happens.  You need a lot of really good conditions to hold onto a large position and I don't see those conditions where a lot of guys on this board concentrate. 

Part of that is the psychology aspect.  When a large position moves against you, there is some rationalization that starts happening and you look at the loss and decide the damage is done and you'll just wait a bit.  If you don't have the right temperament, making a critical decision with concentration is dangerous.  That's either something you have or lack. 

I'm also not thinking too much about the upside here.  It's hard to lose buying at 1x near trough earnings if you think there's a high probability of some settlement coming in a couple days.
Title: Re: FELP - Foresight Energy
Post by: bonkers on April 14, 2016, 06:25:45 AM
There may be upside, but I just think about the downside. It's not about the valuation of last year's cash flow.

I'm just thinking the legal process, that does not care about fundamentals, and definitely not about valuations. I would hate to lose a large position due to some technicality in default / reorganization process, which to me is invisible.

Hence perhaps only a smaller position...
Title: Re: FELP - Foresight Energy
Post by: sampr01 on April 14, 2016, 06:35:09 AM
Thanks Picasso for the Idea. I just want to remind everyone that "when he recommended FELP on March 15th, price was between 1.62-1.52". Now you have more information than before. I think its a good idea to buy now. :)
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 14, 2016, 06:56:15 AM
There may be upside, but I just think about the downside. It's not about the valuation of last year's cash flow.

I'm just thinking the legal process, that does not care about fundamentals, and definitely not about valuations. I would hate to lose a large position due to some technicality in default / reorganization process, which to me is invisible.

Hence perhaps only a smaller position...

2015 cash flow isn't too far from a trough earnings picture.  Like I mentioned elsewhere in the thread it makes more sense to value it on a full cycle basis and you're not getting peak cycle earnings here.

I totally get the rest of your sentiment, but I'd say 9 times out of 10 this situation pans out.  I.e., every party benefits in settlement, limited dilution, lots of extensions indicating they're working through it, all the other coal guys are going bust, and I could go on.  Added up together you have really good odds.  But for most investors yeah don't concentrate in this idea.  The "stress" of owning such a large position doesn't really impair my thinking or bother me.  If it doesn't work out I'm not too worried about finding other good investments. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 15, 2016, 07:59:31 AM
Now that it's down to the wire, I think we can officially reference Lose Yourself.  I was hoping Jurgis would do it for me but he's apparently out of town.

https://www.youtube.com/watch?v=_Yhyp-_hX2s (https://www.youtube.com/watch?v=_Yhyp-_hX2s)

By the way, which one of you jokers altered Bob Murray's wiki page to make him out to be Batman?

https://en.wikipedia.org/wiki/Robert_E._Murray (https://en.wikipedia.org/wiki/Robert_E._Murray)

Quote
Robert E. Murray was born in 1940. His father was paralyzed in a mining accident when Murray was 9 years old. As a miner himself, Murray experienced two accidents on the job. Meanwhile, Murray lied about his age so he could work in a coal mine at the age of 16 and provide for his family. Murray says that he suffered through several mining accidents, including on one occasion being hit in the head with an 18-foot (5.5 m) beam made of steel.[2] Murray says he has one scar running from his head down his back from a separate accident and at one time was trapped in a dark mine for 12 hours before being rescued.[2] After his father died tragically, his mother was then shot so he tried becoming a vigilante but that didn't work out.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 15, 2016, 08:51:45 AM
I can do it for him

Mom's spaghetti
Title: Re: FELP - Foresight Energy
Post by: mountboney on April 15, 2016, 08:55:27 AM
If Cline were to walk he'd face a Murray lawsuit for his part in botching the change of control deal. Merit or not, why deal with that plus the losses when you don't have to.  Hard to see how this doesn't work out but of course anything can happen.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on April 15, 2016, 09:14:30 AM
Fascinating to watch this play out in slow motion week after week and now today.

Assuming this doesn't go belly up today, here's another article about the demise of the coal industry:

http://www.slate.com/articles/business/the_juice/2016/04/the_u_k_is_quitting_coal_poorer_countries_aren_t.html

According to this article, as of January, coal is still 31% of electricity production. It's not going to zero overnight, so some companies will continue to produce. Why not FELP?

Good luck to all those taking the bet on FELP.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 15, 2016, 09:34:34 AM
This was another interesting article from last year, including comments from FELP and CLD.

http://www.bloomberg.com/news/articles/2015-08-02/coal-left-fighting-over-america-s-last-plants-as-rules-mount (http://www.bloomberg.com/news/articles/2015-08-02/coal-left-fighting-over-america-s-last-plants-as-rules-mount)

Quote
Details of the plan show deep emissions cuts will be required, by curbing the country’s use of coal and natural gas. By 2030, coal’s share of power generation will have fallen to 27 percent, the Environmental Protection Agency said. That’d be down from 33 percent for coal in May.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on April 15, 2016, 01:28:56 PM
Another extension...
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on April 15, 2016, 01:41:11 PM
So Picasso - any more thoughts here with another week extension?

Who's in the driver's seat?

Or is the resolution so complicated that they just need more time to iron out all the details?

Still interesting to watch this play out.
Title: Re: FELP - Foresight Energy
Post by: roark33 on April 15, 2016, 02:35:01 PM
Picasso, I think you need to bring more seriousness to this topic.  I shifted my grandmother's and all of her assisted living, denture-wearing friends into FELP on Wednesday.  If this thing doesn't work out, I am going to have to outrun a lot of motorized scooters......
Title: Re: FELP - Foresight Energy
Post by: Green King on April 15, 2016, 03:04:50 PM
It's a bet on probability nothing more. 
Title: Re: FELP - Foresight Energy
Post by: alertmeipp on April 15, 2016, 03:11:06 PM
what's the upside?
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 15, 2016, 04:49:29 PM
Hmm, interesting.  It's a bit weird that it went from weekly extensions to a couple days and back to a week.  My question is what the sticking points might be at this point.

1) The unsecured notes aren't too complicated to cure.  But each point is a $6 million cost and what are the legal fees looking like here?  I suppose tendering at $95 could save Cline $36 million?  It's possible that dragging this on justifies the added expenses of taking it down into double overtime. Murray and Cline already own 85% of the equity so they probably don't care if FELP goes up in the next week or month.  Not like they're sellers.  And Cline coming into the notes is like he simply provided seller financing to Murray to begin with, and he's done that before with SXCP.  Plus he'd be fulcrum on some 8% notes and I'd think the market would like that.  Easier to survive the cycle when your only unsecured lender is not going to play super hardball when they also own 85% of the equity.

2) Do the senior lenders want too much from FELP?  I can't imagine the senior lenders want a fee that they don't currently have on hand.  This has dragged on for so long that they're building up cash on the balance sheet, especially since they stopped paying on the notes.  If Cline tenders at $101, he'll have notes that are still holding accrued interest of $24 million.  Unless the note holders want him to tender at $106 and he simply gets that accrued back from FELP at some point. 

If you add back in the USN interest expense in 2015 DCF, there was $184 million of cash coming in.  Contracted volume is down 10% for 2016 versus 2015.  Not catastrophic, so I'd have to think they are building up enough cash to easily pay that fee.  The longer this drags on the less potential dilution comes into play.  They burned a couple million in the 4Q so maybe that's part of what's making this take some time.  The $300 million in senior lenders look pretty protected without $24 million going out the door in interest payments to the note holders in March.  Really no reason to accelerate there.  Just a question of what fee they want...

3) Maybe Cline and Murray are having a hard time coming to an agreement on how much of Murray Cline will own.  He is de facto coming into more FELP by buying into Murray and doing it pretty cheap.  Or maybe there's something going on with the senior lender level at Murray that I'm missing and it's not working at the valuation Cline is going into Murray.  It could be taking some time for Cline and Murray to come to an agreement of what a sponsor level capital injection will look like.

Some positives here are that everyone appears willing to continue negotiating and cash is building on the balance sheet which implies less potential dilution.  But a negative is the difficulty in trying to figure out what the real sticking point is....

I'll have to think about this one some more over the weekend.  Don't think anything has changed but a bit of a head scratcher. 

Hopefully this doesn't turn out like that FNMA thread.  200 pages later and just a bunch of circle jerking and no real outcome.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 15, 2016, 05:28:32 PM
Something I also thought of was the complexity of assets held by these ultra high net worth individuals.  For example, in 2015 Cline bought the rest of the GP from an early FELP investor:

http://investor.foresight.com/file/Index?KeyFile=27401090
 (http://investor.foresight.com/file/Index?KeyFile=27401090)
Quote
Mr. Jones’s resignation from the Board follows the sale by Riverstone and its affiliates of all their ownership interest in Foresight Reserves LP (“FRLP”), FELP’s parent, to the remaining partners of FRLP, which are all Chris Cline controlled companies and trusts for the benefit of Cline family members.

Cline has a bunch of these controlled entities and trusts, like Raven is one that holds his interest in SXCP.  He has the capital but it's very likely across a lot of different trusts and corporations and I wonder how that might affect his decision making and any legal/fiduciary duties.  Even taxes can play a pretty big part with these ultra high net worth guys.

I don't think it prevents him from doing a deal that's ultimately beneficial but it would seemingly make this a pain in the ass to just suddenly pony up several hundreds of millions across all kinds of entities.  Just something to consider.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 15, 2016, 08:31:45 PM
I don't want to spam this thread too much, but I was looking at the 8-K on mobile and missed the rest of the filing.  The senior lenders have made their extension out to July 15th which is the first time that has happened.  So I think that Bloomberg report was probably right in that you're getting some terms worked out where the senior lenders are willing to extend three months while the note holders work out their deal fairly shortly.  I can imagine it was probably difficult in the past to work simultaneous deadlines with both groups of creditors so this would seem to take some leverage away from the note holders? 

And it reminds me of a comment Foresight made in one of the court documents

Quote
This issue could not be more critical, as the Partnership’s secured lenders have now begun noticing events of cross-default based upon the Court’s Opinion, and if they decide to accelerate, bankruptcy could follow.

That comment was made back on December 10th, so the fact the senior lenders have loosened up seems like a big deal to me.  It ties into my idea that Foresight's efforts so far have made the senior lenders much more comfortable.  So no full deal yet but I still think the probabilities of a deal are higher than they were a week ago.

Happy to hear others thoughts on this.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 15, 2016, 08:33:47 PM
Picasso, I think you need to bring more seriousness to this topic.  I shifted my grandmother's and all of her assisted living, denture-wearing friends into FELP on Wednesday.  If this thing doesn't work out, I am going to have to outrun a lot of motorized scooters......

You know those scooters only go about 10 miles on a full charge, so some light marathon training and I think you can escape their clutches...
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 03:09:08 PM
There are a few other things I wanted to highlight which I didn't go into before (I was hoping this would work out before hitting 10 pages, but oh well) so I'll go into that a little bit.  Maybe someone will find it helpful.

Aside from all the debt negotiations, I find the market dynamics pretty interesting here.  FELP, Murray bonds, SXC, SXCP are all interconnected but they can sometimes be so mispriced relative to each other.  It wasn't long ago that SXC was giving you SXCP at a discount plus other assets for free.  Now it's trading for 2x the value of SXCP with the big FELP worries still lingering at 25% of SXCP EBITDA.  I think it's different shareholder bases and not a lot of guys really paying attention to the different parts of these capital structures.

Here's one example: why has FELP traded like death the past few months?  Yeah you have these bad headlines like auditor going concerns, $1.4 billion of debt that can be accelerated with only $17 million cash on hand, talks of bankruptcy if a deal can't get done, coal sucks, etc.  In all fairness that sounds freaking terrible.  But more than anything look at who the shareholders are here. 

Out of 130 million units, only about 20 million are in the float.  Just one hedge fund (Accipiter) and one institution (Fidelity) owned 12.6 million units at the end of 2015.  Accipiter hasn't sold any because they would need to notify quickly with a form 4, but Fidelity owned over 20% of the float with 4.2 million units; average daily volume has been less than 100k shares at times. 

If you look at the last 13F, they bought more shares in the 4Q.  But if you look at the updated monthly holdings of their mutual funds, they've been selling since the start of the year.  (I'm attaching these screenshots by the way)  Not only that but on their largest $10 billion fund, FELP is the 4th smallest position out of over 100 holdings.  At this point it may even be the smallest if they aren't completely out.

Can you imagine working at this $10 billion Fidelity fund and there's a $200 million market cap coal stock apparently about to file bankruptcy?  Adding to that position is dead in the water.  It won't even move the needle and it's not worth the headache or the work for someone at Fidelity to stick their neck out on that position. 

There's always talk in various write ups about forced selling from institutions with spinoffs, but you can clearly see that to be the case here because 1) we have evidence of selling from the monthly mutual fund reports, 2) out of the million plus shares I've bought, there's no one else big enough to have sold me those shares and keep hitting the bid, and 3) there are no other institutional holders of the stock.

So now it gets me to the second part of my "market inefficiency" evidence.

Murray bonds, which are at risk as anything else in this story, fell to a low of under $10 this year but have rallied back to $20.  They are now positive on the year while FELP is still down over 50%.  If a deal is done and FELP is heavily diluted, those bonds are toast.  If Cline leaves Murray out to dry, those bonds are toast.  That bond appears to have recognized the likelihood of capital coming into the sponsor versus the LP and/or Cline/Murray structuring a beneficial deal for FELP. 

Now look at Foresight notes.  One day before the Bloomberg report last week, someone sold a couple million notes at $61 *and they were trading flat* so you're looking a price of say $57.  Even if a deal isn't made, why would someone sell those bonds at $57?  That's a margin of safety trade if I ever saw one.  Who knows, in the next week or two a deal might get done to get those out at par; nearly a double in less than a month on some bonds because of bad headlines or something.  Even in bankruptcy you probably get a lot more than $57 or $61.

Anyway I just thought I would highlight these more market related qualities.  They help explain why the opportunity exists despite the high probability of a deal getting done.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 03:35:16 PM
Also something I found useful was a recent Bloomberg report on the state of the coal industry.  I sent it to a couple guys during the SXC saga but I'll attach it in case anyone wants to read it.  I'll highlight some of the more interesting points below.

Quote
So the domestic market share battle will heat up. Will PRB miner cede share to ILB competitors? So what's interesting
is that you have close to 60 million metric ton or 60, I keep saying metric, 60 million short tons of potential demand
could be grabbed by ILB miners. But that's capital letters for the word could. The Southeast may represent hunting
grounds for the ILB, an obvious risk to PRB, ILB miners supply only 14% of their home states coal consumption. And
then close to 30 million tons of PRB coal are expected to roll off contracts through 2017.
And what this kind of gives you from left to right are the coal deliveries to Alabama, Georgia, Tennessee, Arkansas,
Louisiana from the ILB. And then correspondingly coal deliveries from the PRB into those states and you can see the
difference is about 50 million metric tons, with the remainder of that original 60 stemming from Illinois. And then you
can see Illinois State Power Plant demand. Where it's coming from? Obviously, some very big PRB mines in there,
small sliver for the entire Illinois Basin. And then you can see the PRB coal contracts rolling off on the right hand side
for Peabody, Arch, Cloud Peak, various mines throughout each of those.

This will be one of the more interesting trends over the next few years.  Utilities are already relying more on the spot market and you can see this by looking at the massive drops in contracted volumes.  Yet FELP has had the smallest declines in YoY contracted volume at around 10% versus this time in 2015.  Some of these others are down 15-30%.  I'll try and post my spreadsheet on this later.  I don't see why Cline or Murray would walk away when they have an upcoming opportunity to steal share from the PRB coal miners. 

Another interesting opinion directly related to these FELP credit issues, which sort of fits along what I've been thinking:

Quote
There was also a question along those lines that came in on Foresight, that people aren't aware, so Murray Energy, of
course, took a significant position in Foresight last year. It's been determined that that triggered a change of control on
the Foresight Energy bonds with 600 million of bonds, which then allows the bondholders to force the company or to
have to repurchase those bonds at 101% of par. Foresight of course doesn't have liquidity to repurchases bond or at par
or even a slight premium to par. So what's going to happen here. They signed a forbearance agreement, which at this
point expires January 18th I believe. So they're working with their lenders, this is of course also triggered a default on
the credit agreement. So what does this mean?
Looking at the bonds, they're trading around $0.84 on the dollar, that to me doesn't imply that there is an imminent
bankruptcy or an imminent major loss there. That said, any negotiation like this is of course going to be complicated
and complex and lots of moving parts and pieces.
One question is how much support could Murray provide or could this also pull Murray in? Problem is Murray is a
private company, so it's kind of hard from where we sit to get a lot of insight into what may happen there. But I think
the take away with Foresight is, it looks like they're in some pretty heavy negotiations with their creditors. They are,
keep in mind, one of the few North American coal companies that seems to be holding together fairly well in the
current environment, at least relatively speaking. And forcing a company into bankruptcy doesn't necessarily solve
everybody's problems or anybody's problems, particularly the creditors.
So there may not necessarily be an incentive for the creditors to try to push the company over. They may be more
incentivized to try to work something out, maybe get themselves a better position from a collateral or a security ranking
standpoint and use this as an opportunity sort of rework the company's capital structure. But we'll see, it's going to be
an interesting process.
Title: Re: FELP - Foresight Energy
Post by: Green King on April 17, 2016, 04:15:43 PM
where did you find the contacted coal numbers ? I could not find that.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 04:42:32 PM
10-K's of their respective producers.

For example FELP:

2015 10-K:

Quote
For 2016, we have 18.4 million tons of our projected production contractually committed with 23 separate customers.

2014 10-K:

Quote
For 2015, we have 20.2 million tons of our projected production under contract with 26 separate customers.

Another example ARLP:

2015 10-K:

Quote
As of February 22, 2016, our nominal commitment under long-term contracts was approximately 34.3 million tons in 2016, 19.1 million tons in 2017, 14.5 million tons in 2018 and 7.1 million tons in 2019.

2014 10-K:

Quote
As of February 13, 2015, our nominal commitment under long-term contracts was approximately 39.3 million tons in 2015, 28.9 million tons in 2016, 12.8 million tons in 2017 and 9.6 million tons in 2018. 

So on a one year basis, ARLP is down 13% versus 9% for FELP.  FELP doesn't disclose past one year, but ARLP is down from 90.6 to 75 million tons of contracted volume over the next four years.

I've been building a spreadsheet across PRB vs. ILB miner contracts but it fits into what that Bloomberg analyst was saying.  I think FELP has an advantage because of their cost structure, so they can go for market share at the expense of some margins if it makes sense to do so.  But that market is shrinking...
Title: Re: FELP - Foresight Energy
Post by: Green King on April 17, 2016, 05:11:01 PM
Thanks for the a key info I passed it over since there is no price. Cloud Peak Energy disclose both volume and price. It felt like a red flag to me since they are hiding key information. Since both price and volume is needed to get a understanding of the true quality and pricing power of their product.
Title: Re: FELP - Foresight Energy
Post by: Green King on April 17, 2016, 05:14:36 PM
What do you view as the key drivers in determining the economics of a coal fired power plant ?

So far i have

Price per BTU
Transportation cost
Operations (scrubbers for regulation)
BTU conversion efficiency
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 05:15:00 PM
FELP is easy to get price because you just back in guidance or past years sales against contracted volume. Especially since contracts are 95% of sales or around there.
Title: Re: FELP - Foresight Energy
Post by: Green King on April 17, 2016, 05:22:41 PM
FELP is easy to get price because you just back in guidance or past years sales against contracted volume. Especially since contracts are 95% of sales or around there.
Thanks for that.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 05:32:55 PM
I think that's it, but I've been reading through all kinds of utility conference calls (especially AEP) to get a sense of how they view those coal plants.  In the short-term nat gas looks better but it's a volatile commodity and these plants have to take a really long-term diversified view on pricing across various reliable sources.  I'm not bullish nat gas (at all) and I bet it stays depressed for a while.  So with that said how can you get bullish on coal?  I guess my answer is you don't need to be bullish on coal to make a lot of money in FELP because it's not trading on those economics.  And they're lowest cost in that advantaged region (but disadvantaged in that they're also where there's a ton of nat gas...) so I think you'll see profitable economics for FELP regardless.  But it's something I need to think about more when/if a deal gets done because I may want to own this for a while.  In the meantime I'm just reading through a lot of utility calls and how they're explaining their thought process to their own investors and analysts. 
Title: Re: FELP - Foresight Energy
Post by: sampr01 on April 17, 2016, 07:26:13 PM
Thanks for more details. I hope it works for you like :) SXC.
Title: Re: FELP - Foresight Energy
Post by: Rasputin on April 17, 2016, 07:46:41 PM
Picasso,

Thank you for all the details you have provided.

With Hillsboro mine sealed indefinitely, I think FELP fcf/dcf is negative (was negative $3 million in Q4 2015, likely worse now). 

How do you get comfortable around this issue? 
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 08:02:29 PM
It's been idled since March of 2015 and they still managed to produce 2015 DCF of $136 million and there's enough capacity at other mines to meet 2016 contracted volumes.  Direct and indirect costs brought that down about $30 million in 2015, so by indefinitely sealing the mine while they build out the second long wall you'll probably see some short-term cash usage with the second mine but you get some of that $30 million from 2015 "back."  It sucks to lose their best asset in the short-term but at the same time puts pressure on the noteholders to get to some sort of agreement. 

One thing that worries me would be running through some of the financial covenants later in 2017 if they can't keep costs down.  That's a risk to track for sure...
Title: Re: FELP - Foresight Energy
Post by: Rasputin on April 17, 2016, 08:11:29 PM
Didnt they restart it in July 2015? 

So going forward, even with Hillsboro shut down, do you expect adjusted EBITDA to go back to the $90-$100 million quarterly run rate Q1-Q3 2015 vs $42 million in Q4 2015?  Why did Q4 2015 adj ebitda dropped around 50%+?

They did call out $20 million costs with Hillsboro and $11 million salary/ovhd without production for Q4 2015.  They laid off 100 workers in early 2016, but that's probably $2.5 million salary/quarter. 

Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 08:15:14 PM
And I guess in terms of quantifying how I get comfortable with the risk, I looked at the last time they had to temporarily shut down Hillsboro because of another fire incident and costs went up a bit but nothing dramatic.  I think it brings down margins to worst case $10 per ton, from closer to $15, which on ~19 million tons is $190 million of EBITDA.  If you assume that never gets fixed and costs stay high then DCF is around $0. 

More than likely Hillsboro gets fixed (this isn't a complicated zinc plant..) and costs go back down.  But there is a balancing act here because of the debt burden.  Costs per ton used to be under $20/ton in 2014 and the 4Q that you're using as a small couple million cash burn was up to $28/ton.  I don't think $28/ton is going to be the normalized cost here.

Edit: by last time they shut down and restarted Hillsboro, I mean 2014.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 08:24:13 PM
That's what I thought at first too, the press releases are a little bit confusing.  I had to clarify with IR a couple months ago but it's in the 10-K.

Quote
We own four mining complexes where we operate four longwall mines and one continuous miner operation. Our four mining complexes can collectively support up to nine longwalls, with a portion of the existing surface infrastructure available to be shared among most of our potential future longwalls. Mining operations at our Hillsboro complex have been idled since March 2015 due to a combustion event.

4Q adjusted EBITDA fell because production fell substantially YoY with a somewhat fixed cost structure.  They didn't take analyst questions in the last earnings call as I was hoping they'd talk about that a little bit.  But if you annualize 4Q tons produced, you only get 15.6 million tons versus about 19 contracted.  So costs per ton in the 4Q weren't normal.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 08:33:01 PM
And to double check what IR clarified as Hillsboro being idled since March, they talk about it in various conference calls before they went dark this quarter.

Q3 2015

Quote
Cash cost per ton sold in the third quarter was $22.94 per ton compared to $20.56 in the prior year period. The increasewas driven primarily by the continued production outage at Hillsboro and higher operating costs at Williamsonresulting from lower clean coal recovery. Partially offset increases were synergies from the transaction with MurrayEnergy.

Q2 2015

Quote
During the second quarter, we sold a total of 5.6 million tons, compared with 5.4 million tons in the same quarter lastyear. In addition to the weaker market demand, our production volumes were affected by the temporary closure sinceMarch of our Hillsboro mine due to a combustion event. In the second quarter of 2014, Hillsboro produced 1.6 milliontons.Earlier this week, we resumed longwall operations at the Hillsboro mine and the mine is operating today. Our plan asapproved by the Mine Safety and Health Administration is to operate the longwall in the current panel until we reach apoint in that panel where the longwall equipment can be safely recovered.

So it was operational in July but didn't produce anything.  That's what makes those press releases and 8-K's on Hillsboro kind of confusing.
Title: Re: FELP - Foresight Energy
Post by: Rasputin on April 17, 2016, 08:33:33 PM
The cash cost that they publish is per ton sold. 

Total tons sold in Q4 2015 was 5506 which is in-line with previous quarters.  Yes production was much lower in Q4 2015 vs previous quarters, but all their metrics are based on ton sold not produced.   

Yeah too bad there is no q4 cc.  I want to know what causes margin per ton sold to go down to $7 per ton sold in q4 2015 vs $15 in q1 through q3 2015.  I'm not sure it's due to mainly hillsboro.

I just re-read q4 2015 press release.  You are right that $20 million indirect cost + $11 million ovhd/salary is for the whole 2015, at first i thought it was only for q4 2015. 
Title: Re: FELP - Foresight Energy
Post by: Rasputin on April 17, 2016, 08:39:33 PM
oh ok yeah probably just a few days in July Hillsboro was operating :)

I'm also worried because during Q3 cc they were still guiding to $375 million ebitda (low end) for 2015, $10 million lower than previous guidance due to Hillsboro shutdown per CFO.  This means guided Q4 2015 would be around $80 million (low end). 

It ended up being $42 million ebitda for Q4 2015.  This is with complete knowledge of Hillsboro complete shutdown. 

hmm...i got 500 shares but i want to buy more but i'm stuck with this issue. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 08:51:13 PM
You're right it's per produced tons sold or $148 million into 5,229 tons versus $127 million into 5,775 in 4Q 2014.  So it's really just nailing down the extra $20 million of costs and knowing whether that's the new normal.  I'll need to think about that a bit more, but I really think it's mostly Hillsboro issues.  They didn't see the Hillsboro issues getting this bad back in the 3Q call, but it happened at the back end of the 4Q so maybe there is something else increasing the cost.  Losing tons sold is going to increase the cost per ton no matter what.  It would have been helpful to get some questions on the last earnings call because those new cash costs were eye popping. 

Which makes me think what's going to happen to the likes of ARLP, given their tons sold are falling faster and they're starting from a higher cost structure.  Yet it still trades at 5x DCF.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 09:00:14 PM
Also something I thought about was that produced tons sold dropped 10%, but all of 2015 and 2014 tons sold are nearly identical.  So there might be some timing differences between a different customer mix in 4Q 2015 versus 4Q 2014.  So some other quarter in 2015 was lower in exchange for 4Q being higher.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 09:15:09 PM
Actually, I just went back through all the 2015 press releases and that customer timing explanation makes a lot of sense.

These are YoY comparisons

1Q 5101 vs 4706
2Q 5589 vs 5413
3Q 5588 vs 6008
4Q 5229 vs 5775

They both add up to about the same, but the mix of different timing + Hillsboro is a good explanation in my opinion. If you add in say $10 million from Hillsboro you're explaining 70-80% of that delta.  And I agree with you that there might be some other cost in there for the 4Q we don't know about yet.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 17, 2016, 09:19:49 PM
oh ok yeah probably just a few days in July Hillsboro was operating :)

I think (and I need to clarify this, but just reading through the transcripts) that operational means that regulators allow them to go back in and get equipment and try to restart production.  Operational doesn't mean that actual production is going on.  I would need to find some other public coal stock with a mine fire and see how they phrase that, I don't know if Moore was being misleading or it's typical coal phrasing and anyone familiar with the sector realizes you can't immediately restart production after a fire breaks outs.
Title: Re: FELP - Foresight Energy
Post by: bonkers on April 18, 2016, 06:16:18 AM
Utilities are already relying more on the spot market and you can see this by looking at the massive drops in contracted volumes.  Yet FELP has had the smallest declines in YoY contracted volume at around 10% versus this time in 2015.  Some of these others are down 15-30%.  I'll try and post my spreadsheet on this later. 

One thought that still came to my mind is the cost of debt, which for FELP is substantial. So far the lower drop in volumes is an encouraging sign, even though the time period 2014-2015 may be too short to draw definite conclusions. Nonetheless, if this continues, it should force the already-higher-cost competitors out even faster, as their cost/ton increases even more quickly, and when they can't make positive cash contribution margin they shouldn't make new sales.

However, assuming that others still continue to make some positive contribution, wiping out the debt of bankrupt competitors allows these "zombies" to keep pushing the coal prices even lower. Considering that debt with FELP is not nullified, how do you see FELP's competitiveness and viability in such a situation? They might soon have difficulties servicing their own debts as well, even if they are the most efficient producer, because suddenly their balance sheet is relatively weaker.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 18, 2016, 07:09:02 AM
That's something I'll need to keep an eye on in 2016/2017.  They aren't going to have issues servicing the debt in the short term, even if DCF for unit holders grinds towards $0 in that kind of situation.  As long as they can manage the debt during this part of cycle then I think it can come out the other side.  In theory they could sell an asset if it gets really bad, but that would put them in a worse competitive position. 

I mentioned this early in the thread but in 2015 they covered the debt pretty easily.

Quote
Our covenants required a consolidated interest coverage ratio of greater than 2.00x and a consolidated net senior secured leverage ratio of less than 2.75x as of December 31, 2015. As of December 31, 2015, our consolidated interest coverage ratio and consolidated net senior secured leverage ratio were 3.00x and 2.50x, respectively.

Now 2016, 2017, 2018 will look a lot different than 2015 but I also previously highlighted how badly ILB production has fallen so far in 2016.  https://www.eia.gov/coal/production/weekly/ (https://www.eia.gov/coal/production/weekly/) It wasn't long ago that ILB coal production was supposed to actually grow (I think people still thought that halfway through 2015) so we may be a lot closer to some kind of inflection point there, at the same time we're supposed to start seeing ILB producers take market share.  I don't know how successful those trends turn but you can kind of monitor them throughout the next couple years and get an idea of how that will look. 

Also Cline is likely going to own most or all of FELP unsecured debt and an equity stake in Murray.  I don't think Cline has a master plan of taking control of FELP from other unit holders and Murray (otherwise why bother going into Murray equity?) so having the 85% owners also control the debt kind of makes me feel better about them being able to service it.  Cline will accrue some 8%+ on the notes, it looks fairly well protected, and they're going to try to generate returns for the unit holders because for all intents and purposes, they are the unit holders.  Ultimately I think there are ways of working out any debt servicing issues without Cline being a source of charity.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 18, 2016, 08:12:16 AM
And then to add a couple more points to the debt worry.  Murray has repeatedly said that he wants to be the last coal guy standing.  Cline is looking to come in and buy up most or all of the Foresight debt.  Isn't Cline's action going to signal that they will do whatever is in their power to get to the other side?  It's different than owning a low cost, high leverage miner with almost no insider ownership or investors willing and able to put up that kind of support.  If they can work through this super nasty CoC issue then I think they can work through future leverage issues even if it may eat up short-term DCF.

It reminds me of a quote in a Bloomberg article from a month ago.

Quote
“Both of them have been fighters,” Ted O’Brien at Doyle Trading Consultants, an independent coal research firm, said of Cline and Murray. “It would be foolish to count them out. But the entire sector has been fighting an uphill battle against cheap natural gas, tightening regulations and a capital market they never had to worry about before.”

It's going to be a rough ride regardless of what happens, but I can't think of anyone else I would rather bet with in the coal sector.  Which is why I'm debating holding this position for a while if/when the note deal is done.
Title: Re: FELP - Foresight Energy
Post by: Josh4580 on April 18, 2016, 03:44:09 PM
https://biz.yahoo.com/e/160418/felp8-k.html

On April 18, 2016, Foresight Energy LLC ("FELLC") and Foresight Energy LP
(together with FELLC and certain subsidiaries of FELLC, the "Partnership")
entered into a Transaction Support Agreement (the "Support Agreement"), with certain of the lenders (the "Consenting Lenders") under the Partnership's Second Amended and Restated Credit Agreement dated as of August 23, 2013 (the "Credit Agreement"), pursuant to which the Consenting Lenders have agreed (subject to the terms and conditions set forth therein) to support a proposed global restructuring of the Partnership's indebtedness (the "Restructuring"), including a proposed amendment and restatement (the "Amendment") of the Credit Agreement.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on April 18, 2016, 03:47:19 PM
Picasso,

I'm very curious on your reading of the support agreement FELP came out with today. I skimmed it but wasn't able to fully grasp what is going to occur.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 18, 2016, 05:58:57 PM
My wife is super sick with the flu and I need to watch my son tonight, so I can't really go into it too much. 

But in general I think the deal structure is a really good outcome.  The dilution will be minimal as long as this company continues as a going concern with another year to refi the PIK debt.  I haven't gone into the actual change in interest costs before the one year term, but I bet it's lower on a cash basis than FELP currently pays, which helps pay for things they would otherwise dilute unit holders with.  They can also dilute at a higher share price if need be, they don't have to do it under $2 (yet).

If FELP is a $0.50 stock in a year, Cline dies and can't refi that $300 million, then you'll see a permanent loss of capital with the 75% dilution. 

Looks like a very good and complicated deal, but I wouldn't be surprised if the market doesn't fully appreciate the details tomorrow.  My second largest holding SXCP was up big today (maybe someone caught word?); that's another good second derivative off this FELP deal. 

Now we can focus on the longer-term picture...
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 18, 2016, 10:49:14 PM
Okay some more details now that the little guy fell asleep.

Right off the bat, units are going from 130 million to 140 million under this proposal.  As suspected, the senior lenders are comfortable with this agreement so we need to look at whether 67% of the note holders will take the terms. 

For every $101 owed, note holders are getting the following:

$16 of cash
$50 of 9% 2nd lien notes
$50 of 15% 2nd lien convertible PIK notes

Question is where those two notes should trade because that obviously adds up to $116.  My guess is near par (say $45) for the 9% cash pays and maybe $40 for the PIK's.  That would actually get you a total of $101.  How cool...

Plus Cline is taking the bulk of the 15% PIK's which lets the other noteholders take primarily more liquid 9% cash pays.  The cash pays are slightly senior to the cash pays (if they can't refi the debt in a year, it gets swapped for a bunch of new units plus it will be the only 2nd liens when the bridge PIK's get refinanced). 

So there are now two stages to this short-term trade.

One is the market reaction to the senior lender/FELP term sheet.  That in itself is a big positive and the terms look attractive to this bystander.  It makes the idiot who sold the notes last week at $61 look even more silly...  Anyway.  I think it's enough to push the units up to $3.

Then you have to get the bulk of the note holders to approve it, and that can probably send the units up another leg to say $4.  At $4 you have a newly diluted market cap of $560 million or 4x 2015 DCF. 

My guess is dividends can get back to maybe $0.10 now that there's a sweep option to reduce leverage on 50% of DCF.  It would still yield around 10% at $4 in that situation.  Is that too low a yield for these units?  Maybe, I don't know.  Plus you might see some new stock issuance in the future ahead of the bridge PIK.

There are some other interesting parts to this but that's a good summary for now. 
Title: Re: FELP - Foresight Energy
Post by: awindenberger on April 19, 2016, 06:10:22 AM
Thanks for the additional color Picasso, I hope your wife gets better fast.

Whats interesting to me is the dividend situation. As you mentioned, they could probably start a $.10/quarter dividend again after this. However, due to the fact that the Minimum Quarterly Dividend (MQD) is $.3375, each quarter they don't pay that amount puts them further into arrearage on the dividends. Clearly, Murray would like to fix that situation as quickly as possible, given that they need to pay at least the MQD for 3 years straight in order for Murray to get paid on their subordinated shares.

Right now they have arrearages of about $.50/share built up. If they don't pay anything in May, that will be boosted to $.83/share.

How do you see the dividend situation will play out?
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 19, 2016, 06:28:08 AM
I'm not sure the MQD's mean anything at this point.  They need to survive and come out the other side before Murray can even start thinking about getting paid.  He might be dead by then?  And the cash sweep limits the distribution for a couple years.  Plus coal is going to be tough for at least a couple years so they should be paying down debt with excess free cash just in case.

I do wonder if this stays cheap because half the free cash is used for debt repayment and investors will value it on the dividend. 
Title: Re: FELP - Foresight Energy
Post by: awindenberger on April 19, 2016, 06:46:52 AM
I managed to double my position at $2 on the open, looks like your prediction of $3/share might even happen today Picasso.

I imagine you were taking some profits as it hit over $2.50 given the size of your position?
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 19, 2016, 06:49:13 AM
Not selling yet, there are still some upcoming catalysts and it isn't an expensive stock even at $2.50.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on April 19, 2016, 06:56:25 AM
Also, I found it interesting that Murray Energy needs to exercise their option to buy the 46% additional stake in Foresight GP in order to be able to take out the convertible notes. This seems to imply that Murray is likely to make a stock offer to take out FELP common stakeholders at some point this year.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on April 19, 2016, 07:22:52 AM
I'm still holding so maybe too soon to say thank you, but last Friday I also started a position @$1.60 (a normal sized one as my knowledge on the situation is not on par with yours, it just seems to make a lot of sense). Thanks for sharing Picasso!
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on April 19, 2016, 12:33:38 PM
Interesting that it's back down to $2.

Fidelity blowing out of it's position maybe.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 19, 2016, 01:10:07 PM
Darn you Fidelity! You and your diabolical plans to limit my gains on this beautiful morning.  Have you no decency or manners?  Have you not had ample opportunity to sell your shares before?  Does staring at the FELP position in your crappy mutual fund bother you that badly? 

The nerve of those guys  :)
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on April 20, 2016, 08:51:10 AM
I added to my position this morning at $2.06.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 20, 2016, 09:02:48 AM
I am surprised the market response has been so muted... Teck is up just as much today based on no news as far as I am aware ...

Not a big whoop, I was expecting stupider action though, like a jump to 5 then back down to 2 over 3 days... Market playing it safe imo, taking its time to digest the news correctly before making big decisions
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 20, 2016, 09:27:04 AM
The note holders still need to take the offer so I think the market could be waiting to see if that happens.  The senior lenders agreed to those terms (which is why we saw that 3-month extension before the weekend) but it's still to be seen whether the note holders take that cash and debt swap.  I sort of estimated pricing on the pieces and don't think they would say no.  The test will be where the notes trade.  I'd like to see something around $95.  So far no activity on the notes.

The other cue I'm looking for is spot ILB coal pricing.  It should start moving up soon from $31.70 if my thoughts on the supply/demand picture are right.  Just something to monitor besides production numbers which are down anywhere between 20-30%.

And earnings are May 5th so we can get an idea for how much cash they generated (if any) and what costs look like.  It's not quite over yet even though this senior lender agreement is probably half the battle.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 20, 2016, 09:33:31 AM
I took some recent JPM sell-side estimates on FELP EBITDA and they have about $75 million of distributable cash flow for 2016.  That's down from about $100 million in their estimates from late last year.  If you add in the newly diluted shares on those estimates, it's already trading for 4x DCF with DCF down by nearly half over the past year.  And maybe 6.5x EV/EBITDA.  My whole thing is, I don't think valuing this on 2015/2016 DCF is appropriate and so maybe it just takes time to work its way out.  It's already doubled from the lows and I'm seeing 5-6x DCF multiples on the likes of CNXC or ARLP.  IMO, FELP is better than CNXC or ARLP but maybe the market wants to see whether that is true before giving it a higher multiple.

And the JPM estimates used about $13 margins per ton if I take volumes that are already contracted in 2016.  We need to see whether those margins will hold up or if costs can't be held under $23/24 per ton.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 20, 2016, 09:51:05 AM
Sorry one last thing.

This is a generally more difficult investment in the sense that there are really two investment ideas built into one.  The first is, the debt issue needs to be settled.  The stock was trading around $1 because people thought it was going into bankruptcy.  The second is, this is probably the best publicly traded coal company.  So if it has a 50% chance at being one of the bigger coal players in several years, getting it for say $200 million in an equity stub was a steal.  I don't know if I'm right on the second part of the thesis but if they were willing to work this hard to get the debt deal done (aside from Cline wanting to avoid lawsuits or Murray wanting to survive a bit longer) then it fits with the idea that it is something worth saving.  You don't go through this much effort if it's some garbage asset. 

I may end up selling it if I don't see enough evidence for this being a good long-term coal stock, but it's something that I think I have time to consider...  I bought LVS at $3/4 and sold it at $8 thinking I was a smart guy, but it made a lot more sense to just hold it.  It would be fun to see this ratchet higher very quickly but I think I'm getting about a 40% yield on my cost near the bottom of the cycle.

Anyway just some of my thoughts.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 21, 2016, 06:02:13 AM
What are your thoughts on supply/demand?
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on April 21, 2016, 06:36:43 AM
I found an article about coal plant shutdowns. Interesting article, but at the end of the article, it talks about how pressure on coal lessens after 2020:

Quote
At the end of 2012, there were 1,308 coal-fired power generating units spread across 557 power plant sites in the U.S. with the total capacity to generate 310 gigawatts of electricity. That year, 10.2 gigawatts of coal-fired capacity were retired, or 3.2 percent of 2011 capacity. Most of the plants that were taken offline in 2010, 2011 and 2012 were small, averaging 97 megawatts each, EIA data show.

The agency expects long-term pressure on coal plants to ease after 2020.

“Post-2020, demand for electricity in our projections increases as well as natural gas prices,” EIA analyst Michael Leff said. “Therefore, there is less long-term economic pressure on coal post-2020, barring no future regulations.”

http://www.climatecentral.org/news/flurry-of-coal-power-plant-shutdowns-expected-by-2016-17086

Of course this article was from 2014 and they were probably expecting ng prices to recover.


Here's a Jan 2016 update by the EIA:

https://www.eia.gov/electricity/monthly/update/resource_use.cfm

Quote
For the thirteenth consecutive month, the price of natural gas at Henry Hub was below the price of Central Appalachian coal on a $/MWh basis. However, the spread between the two prices decreased significantly, mainly due to the large increase in the price of natural gas at Henry Hub. The price of natural gas at New York City on a $/MWh basis was above the price of Central Appalachian coal for the first time since March 2015, due to the large increase in the price of natural gas at New York City.

The conversion shown in this chart is done for illustrative purposes only. The competition between coal and natural gas to produce electricity is more complex. It involves delivered prices and emission costs, the terms of fuel supply contracts, and the workings of fuel markets.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 21, 2016, 06:57:08 AM
This was also an interesting presentation from 2012/2013.

http://www.howardweil.com/docs/reports/otherreports/ilbprimer-10-08-13.pdf
 (http://www.howardweil.com/docs/reports/otherreports/ilbprimer-10-08-13.pdf)

Obviously some changes since then, but you can see the cash costs across various players, who owns the big reserves, etc. When you look at that and compare it to the now falling production and falling prices, I don't see how ILB spot prices stay at 31.70. Foresight would be one of the few that could actually earn some free cash at these prices but most of that would be eaten up in interest expense.
Title: Re: FELP - Foresight Energy
Post by: Green King on April 21, 2016, 07:56:10 AM
Thanks for the info. I found a more current one after i saw yours. http://www.halladorenergy.com/Cache/1500079886.PDF?O=PDF&T=&Y=&D=&FID=1500079886&iid=4187964
they don't say the names but on page 5 they give production and cash cost of the players. Foresight energy should be #1 on the chart.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 21, 2016, 05:02:12 PM
Hmm, this is a bit odd.  The notes finally traded today ($250k piece) at $65.  I would have expected pricing much better than that.  The market still waiting to see if it gets approval?  I don't see how the two new 2nd lien notes would only add up to $49 of par when you take out the cash consideration.  Especially when half of them could convert to equity in a dire outcome.  Could be the market being inefficient yet again but I don't know.  I'll have to go into the market and pretend like I'm a buyer to see where they are being offered.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on April 22, 2016, 05:58:29 AM
I'm def curious to hear your results Picasso.
Title: Re: FELP - Foresight Energy
Post by: odin on April 22, 2016, 06:12:10 AM
I'm covered by the firm that traded the 500k yesterday. They are looking for more but no indication on size. Two days ago a different shop had a seller of 1-2mm indicated around 70.

FWIW, the loan is bid at 82.5 for size
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 22, 2016, 06:25:01 AM
I'm hearing 69-70 on 1mm as well.  Not sure what to make of that but that's really cheap if this debt swap and partial tender go through. 

Are you a buyer of those notes Odin or any thoughts?
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 22, 2016, 06:39:06 AM
I forgot that Cline was taking 180 million of the one year PIK's, so those notes will get the following:

$16 of cash
$20 of 1 year PIK
$80 of 2021 9% 2nd liens

The PIK should be worth close to face because it's 15% on one year with a deep in the money equity conversion if it doesn't get refinanced.  That would leave $34 of value (for a note buyer today at $70) for the $80 of 2021 2nd liens.  Why would those 2nd lien notes be trading at an implied price of $42.5? 
Title: Re: FELP - Foresight Energy
Post by: odin on April 22, 2016, 07:20:49 AM
Great point Picasso on the implied price. 

It's clearly a complicated situation - maybe not worth the time when so many E&P bonds (among other sectors) were super distressed a few weeks ago? 

I haven't had the time to look at it closely myself, but it looks really interesting.  Thanks for bringing the idea to the board.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 22, 2016, 07:41:58 AM
I've seen some weird pricing inefficiency in some more complicated situations, like a Sears rights offering for a note/warrant combination that effectively gave you the notes for free if you matched up the warrants to the implied volatility of the listed options, so maybe that's the case here too.  I don't see how having notes senior to Cline with the potential for $300 million of debt reduction in a year should warrant a price of $42 or so.  There are also provisions so that any debt refinance of the 1 year PIK can't fall inside 2021 or bear any cash coupons.  Those $300 million of 2nd liens would seem to be very well protected.
Title: Re: FELP - Foresight Energy
Post by: BG2008 on April 22, 2016, 08:29:29 AM
Doesn't seem like any of the Foresight bonds are trade able via IB
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 22, 2016, 08:34:38 AM
They're 144A.  I could be wrong on this, but based on the reporting codes these $60 handle trades are being done off some dealers inventory, not some asset manager holder that's selling into the market.  The last real seller was in the $76 area.  I attached the history going back to February.

Odin, do you know which dealer had them in inventory and is actually selling them down here?  I'm going to ask my trader but I thought I would see if you knew off hand.

Edit: Under the RPS tab "B's" are customers selling (or a dealer buying from a customer) and "S's" are dealers selling to a customer.
Title: Re: FELP - Foresight Energy
Post by: odin on April 22, 2016, 08:43:11 AM
Seeing a buyer of 5mm now at 65
Title: Re: FELP - Foresight Energy
Post by: ragu on April 22, 2016, 08:44:16 AM

[...] but I can see how the defaults are nerve wracking for investors not looking at the incentives for Cline.[...]

Picasso,

Your note about the Market not looking at the incentives for Cline caused me to dig deeper into this.

The fact that Cline elected to forego the the distribution on the common units in October (and waive any rights to receive them in arrears) made it likely that there would be a resolution with the bond holders and that remaining unit holders would be treated fairly in any such. So, I ended up buying.

It's not done yet (a Murray buy-out of the rest is a non-trivial possibility), but thanks for bringing this idea to the board!

Best,
Ragu
Title: Re: FELP - Foresight Energy
Post by: odin on April 22, 2016, 08:50:18 AM
Looks like the "street" (the dealer's dealers for those not familiar) could have owned these and sold to a dealer at 65, who then sold to customer at 65.5.  The counterparty column is relatively new, but i believe this is what is indicated by the "D" code on the 65 trade.  I also saw another dealer offering 500 bonds in the last few days, which means this dealer could have seen the 500 offer in the street as well.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 22, 2016, 08:58:16 AM
Correct, C denotes customer and D denotes dealer.  So someone bought at $61.50 the day before the Bloomberg settlement talks article and the buyer yesterday at $65.50.  And then last customer buy was at $76.375 on March 2nd.  I've always tracked it by looking at which gets a small mark up, but that CPT column breaks out the actual customer end transactions.
Title: Re: FELP - Foresight Energy
Post by: FreeOption on April 22, 2016, 12:25:23 PM
Can you point me to the document that indicates the $16 cash pay is pro-rata across all note holders?  My read of the term sheet is that the purchase at par is a secondary transaction from existing noteholders independent of the debt exchange.  Just want to make sure I fully understand because it changes the story quite a bit.

Thanks,



For every $101 owed, note holders are getting the following:

$16 of cash
$50 of 9% 2nd lien notes
$50 of 15% 2nd lien convertible PIK notes

Title: Re: FELP - Foresight Energy
Post by: Picasso on April 22, 2016, 12:48:14 PM
I did that as short hand but I can break it down into each part.

Cline Group owns $74MM of notes already, his tender for $106MM will only apply to the other $526MM of note holders.  Any cash tender will be pro rata.  So 20% of the $526MM will be tendered for cash.  Cline Group will then have $180MM of notes which will go into the PIK's.  That will leave $120MM of PIKS and $300MM of 9% 2nd liens for everyone else, plus their $106MM of cash (adds up to $526MM). 

If someone owns $1MM of notes at a price of $65, they're paying $650k (obviously but just want to spell out this example).

(These are all in face amounts)
They would get back $200k in cash.
They would also get the 1 year PIK, likely worth par, but only $120MM/$600MM allocated, so $200k there.  (Forgot there are 20% less bonds outstanding eligible for swap) So that goes down to $160M.
That leaves the value of the $640k of 9% 2nd liens. 

The cash and PIK is worth $360k so if you're paying $650k for 1MM face, you're only paying $290k for the 2nd liens but they have a face value of $640k.  290/640 = an implied price of around $45.

Edit: As far as the pro rata tender document, I don't think there is one? Not everyone will tender (that happens) but at a minimum you would get $106 million distributed to the notes that accept the tender, so it's a question of how many of the $526 million note holders accept.  I'd assume everyone but then it will just get allocated pro rata.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 22, 2016, 01:18:40 PM
Hmm, but now I've realized I made a mistake with my shorthand.  If the 9% notes trade at 90% of par that would give $936 thousand of value to $1MM face.  If they're at 80% of par, that's $872 thousand of value.  So it's looking like somewhere between $87-94 of par value?  But interest jumps up which adds $11 thousand over the next year, so $88-95 of par?

Still a lot more than $65 but I wonder if they can get 67% to say yes to $88-95. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 22, 2016, 01:41:44 PM
Here's a simplified version and probably more correct version:

There are only $526 million of notes that will be eligible for tender.  That brings you down to $420 million that will get swapped into $120 million of PIK's and $300 million of 9% 2nd liens. 

$106/526 = 20% cash
$120/526 = 23% PIK's
$300/526 = 57% 9% 2nd liens

So on a million face it's really $430k in cash and PIK's with the other $570k in 9% 2nd liens.  Which means 39% of face?  (Using $65 trades or $650k-430k = $220k... $220k/$570k = 39?)

Alright I'm going to go have a drink this is melting my brain.  Cline owning notes and only $524 million getting tendered and swapped with less PIK's made me mess up a couple figures.
Title: Re: FELP - Foresight Energy
Post by: FreeOption on April 22, 2016, 01:55:11 PM
Ha.  Glad I'm not the only one.  That matches my new understanding.  Thanks for the help.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 25, 2016, 08:44:41 AM
Couple updates here.

The forbearance was extended out to May 6th, which is the same deadline as the proposed support agreement.  That's probably a big day to put on the calendar.  Hopefully it doesn't go down to the final hour.

Second, JPM put out a coal report showing ILB production is down from 30 to 24 million tons from 4Q 2015 to 1Q 2016.  Despite that, FELP production is up 10% over the past quarter even with Hillsboro offline.  So I think you can get a sense for what the downside production/free cash flow looks like.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on April 25, 2016, 09:02:44 AM
Couple updates here.

The forbearance was extended out to May 6th, which is the same deadline as the proposed support agreement.  That's probably a big day to put on the calendar.  Hopefully it doesn't go down to the final hour.

Second, JPM put out a coal report showing ILB production is down from 30 to 24 million tons from 4Q 2015 to 1Q 2016.  Despite that, FELP production is up 10% over the past quarter even with Hillsboro offline.  So I think you can get a sense for what the downside production/free cash flow looks like.

Thanks for the update. Do you have any additional thoughts on bond pricing?. Please can you share with us the JPM report if possible.

Title: Re: FELP - Foresight Energy
Post by: Picasso on April 25, 2016, 09:11:00 AM
Sure I'm on mobile right now but basically Foresight is approaching the note holders to get the 67% support, Cline is obviously giving his 12% support with the 74 million he owns. So they need 55% support. There is no corporate action item on the notes yet (I checked) so I don't think investors are too aware of the proposal or willing to risk going long ahead of it.  I'd expect once you get an agreement from the note holders, we'll see a corporate action event for a tender and then swap. Until then I can see how the market doesn't seem to care and there's still the opportunity to buy the notes at $65. And I'd guess that any potential counter proposal from the note holders would only be better than what is already proposed. Unless it's so far apart that the whole deal falls apart.

If someone wants the JPM report, just send me a message since it has a watermark.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on April 25, 2016, 10:44:42 AM
If someone wants the JPM report, just send me a message since it has a watermark.
[/quote]

Thanks. I sent a PM
Title: Re: FELP - Foresight Energy
Post by: Green King on April 25, 2016, 11:23:16 AM
yes, please send me the report.
TIA
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 25, 2016, 12:32:08 PM
And here was the link to 1Q production at FELP.

https://www.snl.com/Interactivex/article.aspx?CdId=A-36226571-11570
 (https://www.snl.com/Interactivex/article.aspx?CdId=A-36226571-11570)

And to more than just FELP from earlier in the month.

https://www.snl.com/InteractiveX/Article.aspx?cdid=A-36049767-11560 (https://www.snl.com/InteractiveX/Article.aspx?cdid=A-36049767-11560)
Title: Re: FELP - Foresight Energy
Post by: Green King on April 25, 2016, 12:43:33 PM
"ILB coal also has advantages given its relatively low carbon emissions."

Thanks for the report.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 25, 2016, 12:44:32 PM
This is an excerpt from the JPM report:

Quote
Foresight’s efforts to douse the combustion within the longwall at Hillsboro’s low
cost Deer Run Mine haven’t been successful and the company plans to temporarily
seal the mine. On a positive note, FELP strengthened its sales book this quarter
contracting 3Mt of coal for a price range of $38.95/t- $42.35/t to Louisville Gas and
Electric Co. and Kentucky Utilities Co. through 2019.

I'm not sure where they got that 3Mt contract through 2019?  I haven't seen it mentioned in any filings.

Also they have some super lower EBITDA of $204 million in 2018.  That's a bit confusing to me in terms of how they bridge to those levels of $10 margins per ton (since they estimate 20 million tons of production).  I'd think that if they got down to $10/ton of margin they would simply be taking a lot of additional volume as they take market share.  There's too much contracted volume rolling off into 2018 for it to be flat production plus falling margins.  Especially when you look at how badly production has fallen in the 1Q.  Maybe I'm missing something here.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 25, 2016, 12:51:32 PM
And to expand on the contracts rolling off into 2018, they made a comment about it last year but I'm hesitant to fully believe the comments about pricing without understanding why they don't have to cut into margins.

Quote
Pavan Hoskote, Analyst
So in the past you've talked about potential for some plants to switch from PRB to IB. I wanted to dig a little deeper into this. At a high level, how many plants do you see the opportunity for switching from PRB to IB and what are the volumes associated with these plants? And if you can also discuss what are the costs that the plant needs to incur to switch from PRB to IB?

Robert Dean Moore, President and Chief Executive Officer
So we continue to look at all of our opportunities with respect to taking PRB market share. We have already started to take market share, if you look at the regions that we're shipping into today. In particular, in the Southeast region and even in what I'll call the Eastern region, we started to displace PRB coal.  Now looking at Illinois specifically, we think there's about 60 million tons of PRB market. Realistically, I think that we could probably capitalize on somewhere between 8 million to 15 million of those tons. Certain of the plants have some limitations in terms of sulfur, that would keep us out of certain plants, just based on consent orders that utilities have signed in the past, what I'll call legacy consent orders, where they've struck arrangements with US EPA or Illinois EPA.  So there are just some targets we're not going to be able to enter into.  Then on the last part of your question, I don't think I picked it all up in terms of the pricing, Pavan. I didn't catch that back half of your question.

Pavan Hoskote, Analyst
I'm really looking for what are the costs that the plant needs to incur to switch from PRB to IB, in terms of capitalcosts?

Robert Dean Moore, President and Chief Executive Officer
I think you've got to look plant by plant at that. The one thing I will say is that the plants here in Illinois were designed to burn the Illinois Basin coal. So, the retrofitting on those plants would not be as significant as others. So it's really --it's a plant by plant issue and the capital is going to vary across those plants.

Pavan Hoskote, Analyst
Got it. And then to understand the economics of this a little better, if you take the cost of coal, as well as the transportation costs into account, can you walk us through, at least at a high level, the cost of generation when using PRB and then compare that with the cost of generation when using IB coal for these plants that you're targeting? Really what I'm trying to get is a sense if you can capture this incremental demand without cutting pricing.

Robert Dean Moore, President and Chief Executive Officer
I will answer the question as follows; we can deliver in on a cents per million BTU basis, much cheaper than PRB. The only thing, in my opinion, that prevents us from penetrating into those markets are those plants that for compliance reasons, are not able to take the Illinois Basin coal. And we are working diligently with those plants to try to demonstrate to them how they can accept the coals and still comply with any consent orders or any permit constraints that they may have. We will deliver on a cents per million BTU basis cheaper than PRB, every day of the week of ourlow-cost operations in the Illinois Basin.

Pavan Hoskote, Analyst
Got it. And would that be at your current price realizations or does that assume some lower pricing where you're still profitable but you cut prices from current levels?

Robert Dean Moore, President and Chief Executive Officer
We would not have to cut from current levels in order to do that.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on April 25, 2016, 05:56:58 PM
JPM report indicating that steep decline in future DCF for FELP compared to other miners. What was the basis for their conclusions on FELP? >:(
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 25, 2016, 06:40:04 PM
Not sure, I don't pay too much attention to sell-side models unless I'm trying to figure out what they might be missing or how they'll change their views going forward.  In the case of this report they have some helpful industry wide data.

What's funny is looking at their November estimates, which I attached.  I don't think the business has changed that quickly from November of 2015 when they were expecting $393 million of EBITDA and $203 million of DCF.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 27, 2016, 03:07:48 PM
A lot of volume on the notes today at $69.
Title: Re: FELP - Foresight Energy
Post by: Elah_Cix on April 27, 2016, 04:24:04 PM
Is that inter-dealer or real money?
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 27, 2016, 04:25:55 PM
Real money, denoted C under CPT column.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on April 28, 2016, 09:55:12 AM
Real money, denoted C under CPT column.

Hi Picasso

Is there a way for an individual investor to buy these bonds?

Thanks for all the info.
Title: Re: FELP - Foresight Energy
Post by: TedKord on April 28, 2016, 10:09:37 AM
Just being Joe Compliance here. The bonds are registered under exemption  144A, for QIBs - Qualified Institutional Buyers. Roughly defined as investors who have greater than 100mm in assets under management.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 28, 2016, 08:07:18 PM
Another 1MM+ trade at 69.625, but this time it looks like a customer selling.  So probably offered just around 70...
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 30, 2016, 10:06:26 AM
Monthly report on Fidelity holdings are out.


Fund      March 31st; February 29th
FNKLX   743k;           1021k
FEQIX   633k;            795k
FDESX  457k;            565k
VIPS     459k;            566k
FLMLX   110k;            155k
FEIRX    160k;            211k
FSESX   0;                  20k

So they started the year at 4.2 million shares, down to 3.3 million at end of February and down to 2.6 million at the end of March.  By my calculations they've just been sitting on 10% of trading volume and it's now their smallest position and they're the only large institutional owner.  They've gone from owning 22% of the float to 13% over those three months.  I think any stock with a 22% owner dumping down to 13% during a period of no liquidity and possible bankruptcy would kill the market price, which it obviously had/has.  We'll see where they end up at the end of April.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on April 30, 2016, 12:40:13 PM
So Fidelity could be close to out of their position assuming they took advantage of the recent trading volumes.

Have you looked at the calls on FELP? or SXCP? I allocate a tiny percentage to some toxic waste. Probably not worth the risk when the common could provide a nice gain.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 30, 2016, 01:01:59 PM
I personally don't invest in options anymore.  Too much of a brain drain trying to add an extra dimension of getting the timing and path right. 

But generally I think the volatility on SXCP and FELP are so high (plus they pay out massive distributions) that it makes it really hard to get any value on the options even though you have a high likelihood of seeing the stock prices move upwards.  Plus you could drive a truck through the bid/ask spread.

In the past I felt like my best options trades (when I wasted time on that kind of thing) were a combination of low volatility and severe under/overvaluation.  This is severe over/undervaluation but the options are expensive so it's not that great in my opinion...  Plus in the case of FELP there might be a rights offering over the next year and I'm not sure how that can affect your options trade.  A bit cleaner for SXCP.

Assuming about $75 million of DCF for 2016, there are only about 75 million common units when you include the PIK warrants.  So at least by owning FELP units I know that there's about $1 of DCF per common unit and it trades for $2.  I don't know if the market will reprice FELP to $5 immediately but as a unitholder I know that $1 of DCF is my piece of the earnings even though some of it might go towards debt repayment in the short term.

Anyway just my thoughts on that matter.  If you could get better pricing on FELP/SXCP options then it might make sense but I think it adds difficulty to an already messy investment...
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 30, 2016, 01:11:12 PM
As far as Fidelity goes, 12 million shares traded in April.  I also made a mistake.  Total trading volume was actually 4 million shares in March so Fidelity represented about 20% of average daily volume.  If they were still selling at 20%, then they are really close to being out.  Which is funny because it's coming up on the resolution fairly shortly.

Hopefully the resolution is a good one because it also coincides with the end of that big seller.  It will be pretty hard to buy a lot of shares without paying up at this point.  For that reason it could be one of those super orphaned securities that never really attracts institutional interest until the float expands.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on April 30, 2016, 01:46:19 PM
Thanks for your advice on the options.

This is a naive question, but regarding your comment about the possibility of this being an orphaned stock until the float expands, do you think a good resolution would still drive up the stock much? Are there enough small buyers to drive it to $3-5?

Title: Re: FELP - Foresight Energy
Post by: Picasso on April 30, 2016, 02:32:17 PM
I would think so, but that's going to be fairly unpredictable.  We've already seen two 50% upswings on a rumor and the senior lender agreement so I'd think getting the notes closer to par and 67% approval would provide further upside.  But I can't imagine working at a mutual fund and pitching the idea to go long FELP, even after the resolution.  It doesn't seem worth the reputational risk especially when you can't build up a large liquid stake.  I'm sure other participants in the market will start to price in the value of their cash flows.  It doesn't make a ton of sense for a stock to trade for $2 when it's earning $1.  At some point earnings get split into the subordinated shares but by then you've made more than your cost basis in distributions.  Maybe the market will miss that, who knows...
Title: Re: FELP - Foresight Energy
Post by: awindenberger on April 30, 2016, 03:18:16 PM
I would think so, but that's going to be fairly unpredictable.  We've already seen two 50% upswings on a rumor and the senior lender agreement so I'd think getting the notes closer to par and 67% approval would provide further upside.  But I can't imagine working at a mutual fund and pitching the idea to go long FELP, even after the resolution.  It doesn't seem worth the reputational risk especially when you can't build up a large liquid stake.  I'm sure other participants in the market will start to price in the value of their cash flows.  It doesn't make a ton of sense for a stock to trade for $2 when it's earning $1.  At some point earnings get split into the subordinated shares but by then you've made more than your cost basis in distributions.  Maybe the market will miss that, who knows...

The question for me is how long it will take for those distributions to kick in again. People may wait to really bid up the shares until once there is more clarity on that point.
Title: Re: FELP - Foresight Energy
Post by: Picasso on April 30, 2016, 05:01:05 PM
ARLP reacted well to a distribution cut and it only yields about 11%. So I don't think the market will completely ignore total DCF even if it isn't being fully paid out.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 02, 2016, 07:20:54 AM
Picasso,

Do you know when Fidelity will update it's April month end holdings?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 02, 2016, 07:25:20 AM
At the end of this month.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 02, 2016, 08:33:02 AM
I had to calculate the Fidelity reduction by hand this weekend, but Bloomberg just updated it on their holders page as well. 
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 02, 2016, 08:41:17 AM
Maybe I'm reading it wrong, but this looks like through the end of March?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 02, 2016, 09:58:00 AM
Yeah we get the end of April holdings at the end of May.  It's delayed by 30 days.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on May 05, 2016, 09:53:49 AM
I am trying to find the scheduled earnings release.  I see it was on 5/8 last year but can't find any release for Q1 2016.  Any ideas on expected date for results?

Also, the daily trading volume from 7/1/2014 - 5/4/2016 averaged around 173k shares.  If you exclude 7 trading days from 4/13/16 - 4/21/16 when Fidelity was likely liquidating, it drops to 149k as there were several >1MM days in that 7 day period.  So far, this week we are dropping back closer to average daily trading volumes for last two years.  I personally hope that Fidelity is close to finished.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 05, 2016, 10:58:51 AM
I think they will announce earnings after the note holder negotiations are done this Friday. So sometime next week? 
Title: Re: FELP - Foresight Energy
Post by: Elah_Cix on May 05, 2016, 05:09:18 PM
Shouldn't earnings be fairly easy to triangulate around?
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 06, 2016, 07:40:57 AM
Always down to the wire with this company.

Picasso - Are you concerned about the partnership failing to get the 67% of the note holders by today?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 06, 2016, 09:06:40 AM
My understanding is that the actual note holder transaction agreement needs to be done by today, so they very likely already had the 67% but you need to create the legal agreement and such. So going down to the wire doesn't surprise me too much.

Also if you look at the jpegs from the support agreement, they were dated weeks before.  I don't think this is something where they didn't know they had 67% (i.e. slapped together last minute without negotiating with noteholders) especially when the last forebearance was for two weeks instead of one.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 06, 2016, 04:08:24 PM
https://www.youtube.com/watch?v=O5zGkqAWsWE (https://www.youtube.com/watch?v=O5zGkqAWsWE)
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 06, 2016, 04:47:04 PM
https://www.youtube.com/watch?v=O5zGkqAWsWE (https://www.youtube.com/watch?v=O5zGkqAWsWE)

But we can't jump. did you hear any news?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 06, 2016, 04:54:07 PM
I'm probably dating myself with the corny jokes  :)

Sorry no news yet.  I was hoping they would announce it tonight so I can dig through it over the weekend.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 06, 2016, 05:02:43 PM
I'm probably dating myself with the corny jokes  :)

Sorry no news yet.  I was hoping they would announce it tonight so I can dig through it over the weekend.

No worries. Thanks for all info.

Sri
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 06, 2016, 06:59:35 PM
No news is bad news?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 06, 2016, 08:18:11 PM
I don't think so, but I'm so close to the situation that I could be off. If you remember the last time we had that two day extension, then another two week extension which threw us off, but the next business day was the support agreement. My inclination is they announce the note holder transaction agreement on Monday and it's not neccesary to announce another extension today. They could have announced the note holder agreement today, but the deadline runs through the end of today and when I looked at past filings from the 2015 consent they announced it the following business day. So not unusual.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 06, 2016, 08:28:56 PM
Thanks. Not unusual, but definitely uncomfortable.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 06, 2016, 08:36:53 PM
I think that uncomfortable nature of this stock is why it's still debatably really cheap and the notes were still trading at $65 or $70. I was asking myself before why it's still this low when half the share count isn't entitled to earnings for a while, and then I put myself in a prospective shareholders shoes and it makes more sense. This is a super hairy situation but ultimately I think it gets worked out nicely.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on May 09, 2016, 04:29:41 AM
8-k out
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on May 09, 2016, 04:43:08 AM
Another extension.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 09, 2016, 05:12:05 AM
So now it changed from a two week extension to a one week extension, and they did an amendment to the support agreement to give them another week.  I need to call someone to figure out how long it takes to put together one of these transaction support agreements.  My guess is a few days so a weekly extension isn't about negotiating deal points but mostly more time to create the agreement.  If it's still about negotiating deal points then we're back to weekly waterboardings, but I'd think they would have done a two week extension if that were the case.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 09, 2016, 06:18:28 AM
I'm more pessimistic and assume it's a negotiation issue. Are these agreements hundreds of pages long? I would think similar agreements would be done in the past and it's just a matter of changing the language specific to the parties.
Title: Re: FELP - Foresight Energy
Post by: hswoon on May 09, 2016, 06:25:55 AM
felp holders' money right now:
http://i.imgur.com/wEcx2Jj.gifv
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 09, 2016, 07:04:44 AM
I'm more pessimistic and assume it's a negotiation issue. Are these agreements hundreds of pages long? I would think similar agreements would be done in the past and it's just a matter of changing the language specific to the parties.

You might be right.  I'm kind of leaning in your direction that they might want to get a bit more out of the swap.  Maybe Cline tenders for more than $106 million or he takes some of the 2021 2nd liens as well.  Another 5 pts on the deal is $30 million which doesn't sound like a difficult gap to bridge.  But I'll find out how long it might take to draft this up considering there are several parties involved.
Title: Re: FELP - Foresight Energy
Post by: roark33 on May 09, 2016, 07:09:17 AM
Picasso,
None of these documents take long to draft.  I am not saying it is a negative, but if FELP's lawyers draft the documents to their liking and send them around for execution, this stuff can be done by an army of associate lawyers in one weekend.  What's most likely happening is that each of the 15 different parties (or however many there are) are asking for their own specific deal points and with a MFN-type agreement, you need uniformity. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 10, 2016, 10:35:36 AM
FWIW, I've been speaking to some restructuring lawyers about FELP over the last day.

I've heard the following:

FELP lost money in 2015, sales are down, the industry isn't going to turn, and refinancing the notes will be too difficult. One brought up how they worked on some deals where they simply had to give away the coal asset in some kind of a restructuring. I've already seen SXC pay someone to take their coal business, but that's not really relevant to FELP's assets.

I can see how that market perception has shaped the price here. I wish I had talked to some of these guys before because the fear is quite palpable. The investment makes sense to me but less so to others.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 10, 2016, 11:09:08 AM
Quote
...the industry isn't going to turn.

Is this realistic or just short-term thinking? Utilities can't shut off coal overnight.

Quote
I wish I had talked to some of these guys before because the fear is quite palpable.

You would have changed your decision?

Regardless of the long-term survive-ability of FELP, wasn't this always just a bet on working out some agreement with the bond holders and lenders?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 10, 2016, 11:36:01 AM
No, I would have bought even more in the lower $1's.  But I think it's a better risk reward now because we have the senior lender agreement and I have a better idea of what the outcome will be.  In many ways it's a better buy at $1.70 than it was at $1.10.  I see it like money just sitting there waiting to be picked up and hardly anyone wants to grab it.... I could be totally wrong but I don't think I am.  I've also decided that this will be a longer term holding and I probably won't sell any shares once the deal is completely done.  Unless it overshoots on the upside because of the small float or whatever.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 10, 2016, 11:44:28 AM
By the way, I don't think I posted this article on the thread.  It's from 2010 but sort of amazing to see what has changed since then. 

http://www.bloomberg.com/news/articles/2010-10-12/cline-talking-clean-as-coal-mines-supply-most-energy-since-1970 (http://www.bloomberg.com/news/articles/2010-10-12/cline-talking-clean-as-coal-mines-supply-most-energy-since-1970)

A few cool excerpts:

Quote
“I never had a problem going ‘all in’ in a card game,” says Cline, 52, who is tieless in a blue shirt and chinos as he recalls his gamble on this June morning at his Pond Creek mine outside Marion, Illinois, 320 miles (515 kilometers) southwest of Chicago.

Quote
“Chris knows how to mine coal,” says Nick Carter, president of Natural Resource Partners LP, a Houston-based owner of coal reserves, who has provided Cline with $315 million in financing since 2005 and has promised $205 million more. “I want him gambling with my money.”
Cline says he aspires to run the safest, most efficient and most environmentally friendly U.S. coal company. If he achieves those goals, he says, profits will follow.

Quote
Illinois was still a big bet when Cline went “all in” in
2002. An EPA crackdown to limit acid rain, starting with the Clean Air Act of 1990, had cut the state’s coal output to its lowest level since the Great Depression. Exxon Mobil Corp., which mined coal in addition to drilling oil, was closing mines from West Virginia to the Rocky Mountains and joining Chevron Corp. and others in abandoning Illinois.
“Chris was willing to take more risk than we were,” says Robb Turner, co-founder of Boston hedge fund ArcLight Capital Partners LLC. Turner purchased West Virginia mines from Cline but declined to invest in Illinois because he expected meager profits.

But the whole thing is worth a read.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 10, 2016, 12:21:06 PM
Thanks for sharing the Cline article from 2010.

Quote
Unless it overshoots on the upside because of the small float or whatever.

What would be overshooting in your opinion? $4? $5?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 10, 2016, 12:46:25 PM
Their impression was that this is a super crappy situation and it can easily fall apart. 

I might sell some if it jumped over $5.  There will be a rights offering in the near future so there's some limitation as to how much it can move in the short-term.  Because of the subordinated share class, Murray will be better off by doing a rights offering at the highest price possible.  But that can weigh on the units in the short term.  It's reflexive in that the better the units perform, the better the outcome in a year for repaying those PIK's.  So expect super volatility.  Half the dilution will go to the subordinated units but I've seen some investors reference the 75% dilution on the PIK conversion feature.  There's just no way we see 75% dilution unless Murray really wants to destroy his investment.  He'll just need to come up with about $150 million to save his big investment.

And as an example, if they do a rights offering at $4 for $300 million you'll add 75 million units.  But half will be subordinated.  So you take the current 65 million + 37.5 million + 9.5 million (warrants as part of PIK redemption) to get 112 million potential common units.  Interest expense will drop by around $20 million so if they were doing $75 million of trough DCF with the $600 million of debt, maybe it's now $95 million.  That would imply about 0.85 of DCF per common unit.  Murray is a bit away from his MQD's in that situation but they're within earshot.  If you see a rights offering at $2 then the math doesn't work that well and Murray is screwed.  The common unit holders basically take control of all the DCF and Murray has a $1.4 billion deep OTM call option on coal. 
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 10, 2016, 01:19:40 PM
Again thanks for your thoughts and analysis! You're probably sick of my questions.

Quote
Their impression was that this is a super crappy situation and it can easily fall apart.

I bought shares in late March, so I keep debating whether to take some/all my profits and run. Just trying to handicap this situation.

Let's say the lawyers' impressions are correct and things fall apart. Who benefits? As you said once, there's too much mutually assured destruction, I would think.

Anyway, I appreciate your analysis.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 10, 2016, 01:33:45 PM
Yeah so cash costs in the 1Q were under $24 per ton with a $13 margin.  Costs have really come down from the 4Q when Rasputin mentioned the $28 of costs per ton.  And the 1Q of 2015 had Hillsboro running so not a huge shift in the operating costs (up from $22).  But it's pretty good to see such a low produced tons sold and yet cash costs are still incredibly low.

Close to $10 million of legal fees on this bond restructuring.  Those guys are getting Murray coming (screwed up change of control) and going (credit restructuring).

If you take the contracted volume for 2016, 19 million tons @ $13 margins then 2016 adjusted EBITDA is around $250 million.  Maybe $50 million of DCF under the current cost structure, and $70 million of DCF under the proposed cost structure with dilution to repay the PIK's.
Title: Re: FELP - Foresight Energy
Post by: Elah_Cix on May 10, 2016, 05:28:50 PM
Didn't the cash cost get impacted by the MVC payment?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 10, 2016, 05:52:26 PM
I believe it adds about $1 per ton on current shortfalls. Hedges run off the next year so that may stay elevated. You're referring to the Convent terminal correct?
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 11, 2016, 07:31:46 AM
I believe it adds about $1 per ton on current shortfalls. Hedges run off the next year so that may stay elevated. You're referring to the Convent terminal correct?

Hi Picasso

Are you worried about this on 8-K?

The negotiations between the Partnership and its affiliates and the creditors, equityholders and other stakeholders of the Partnership concerning the terms of the proposed Restructuring transactions are ongoing and have not been  finalized. The Partnership is in active negotiations with the holders of the 2021 Senior Notes but has not reached an agreement with them on the terms of the restructuring, including the terms of the Lender TSA. There can be no assurance that the Partnership will reach an agreement with the noteholders by May 17, 2016 nor can there be any assurance that any of the foregoing parties to whom such Restructuring transactions have been proposed will agree to the terms of any such transactions in accordance with the terms described herein, or if at all. The other creditors and stakeholders of the Partnership and its affiliates who are not party to the Lender  TSA have not approved or agreed (either implicitly   or explicitly) to the terms of the Restructuring   and are not bound to take (or refrain  from taking) any actions as a result of the execution of the Lender TSA.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 11, 2016, 07:55:09 AM
Nope, that's what we've known all along. 
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on May 11, 2016, 08:29:00 AM
This is slowly getting a larger position for me. This morning I picked some more up at $1.35.
Title: Re: FELP - Foresight Energy
Post by: gadfly on May 11, 2016, 04:26:21 PM
Anyone have an opinion on the revenue miss? The 10Q named the usual suspects (nat gas prices and mild weather). They did say international sales were down.. anyone know roughly how much they sell internationally?   

19 million contracted for 2016 and only 3,737 sold this quarter. Could the 19 million number go materially lower because of customer renegotiations?

Did the recent 10Q and continued rough performance affect what's going on behind the scenes with regards to the debt restructuring?

Thanks! I joined the board just for the FELP discussion.
Title: Re: FELP - Foresight Energy
Post by: hswoon on May 11, 2016, 08:22:33 PM
Anyone have an opinion on the revenue miss? The 10Q named the usual suspects (nat gas prices and mild weather). They did say international sales were down.. anyone know roughly how much they sell internationally?   

19 million contracted for 2016 and only 3,737 sold this quarter. Could the 19 million number go materially lower because of customer renegotiations?

Did the recent 10Q and continued rough performance affect what's going on behind the scenes with regards to the debt restructuring?

Thanks! I joined the board just for the FELP discussion.

In 2014 10-k they had 20.2 contracted (18.2 priced and 2.0 unpriced) with total sales that year being 21.9. I would presume these contracts are locked in, as Foresight would need to purchase coal if they under produce, so perhaps it works the other way if they some how they end up needing less coal.

From 10k:
Certain of our customers may seek to defer contracted shipments of coal which could affect our results of operations and liquidity.
From time to time, certain customers have sought and others may seek to delay shipments or request deferrals under existing agreements.
There is no assurance that we will be able to resolve existing and potential deferrals on favorable terms, or at all. Any such deferrals may have an
adverse effect on our business, results of operations and financial condition, as well as our ability to meet our debt obligations and resume payment
of distributions to our unitholders.

I couldn't find anything on renegotations to lower volumes.

Title: Re: FELP - Foresight Energy
Post by: Picasso on May 11, 2016, 10:49:16 PM
In my opinion there is no revenue miss, especially since analyst coverage is basically gone. Quarter to quarter production tons sold will depend on what's going on with a warmer winter or stockpiles and delivery timing, but it's contracted in 2016 regardless. What happens is that it ends up being back end loaded when you tally up the contracted volumes for 2016. If you look at any previous quarters, it's going to be all over the place and not too predictable other than knowing what they produce from EIA figures, but produced tons sold is unknowable over a particular quarter. I think I had a post on this before. Try looking at various quarters in 2014 and 2015 and comparing to total volume
over the entire years. It's just choppy but it adds up to contracted volumes.

If anything you can extrapolate margins in 2016 by looking at what it cost them to produce very low volumes in the 1Q.  A base case of $13 margins on 19.5 million tons minus capex and interest expense is a fairly easy calculation.  I'd be worried if costs were staying at those 4Q levels.

Not sure how the 10Q affects noteholder consent. I don't think noteholders are in a great position to demand much more than has already been proposed. They'll get far less in bankruptcy and a few percent more at max. It would be silly not to come to terms with the senior lender support agreement.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 14, 2016, 09:22:03 AM
http://www.bloomberg.com/gadfly/articles/2016-05-10/coal-s-stranded-assets (http://www.bloomberg.com/gadfly/articles/2016-05-10/coal-s-stranded-assets)

A few interesting things there.  1) FELP is able to cover interest expense so not sure why they have it as grouped into the others.  2) SXC isn't a coal company.... 3) Alliance also covers their interest expense. 

It does cite the Moody's report that talks about the ILB.

Quote
Coal ``has undergone a long-term structural decline, with little prospect for near-term recovery,'' Moody's analysts led by Anna Zubets-Anderson wrote in a note last week. Of the four major U.S. coal regions, only the Illinois basin has good long-term prospects, they said. Central Appalachia will ``cease to be a major coal producing region,'' while the Northern Appalachian and Powder River basins will decline too because of competition from gas.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 14, 2016, 11:34:18 AM
Picasso,  thanks for this interesting idea! You mentioned that (if they survive) there will be rights offering in the near future. But given the current environment and outlook for coal, do you think there will be buyers for the rights?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 14, 2016, 11:50:20 AM
85% of the equity injection would come from Murray and Cline.  Most of that would be Murray going into more of FEGP.  So you really only have 15% of the injection coming from non-affiliates of the GP.  I wonder if Accipiter would be willing to inject more capital in through a rights offering?  Maybe not.  So I could see there being some undersubscription which would be a cool thing for the common unit holders who oversubscribe.

Say $300 million gets split into $150 million subordinated and $150 million of new common.  Only $45 million of that would come from the public unit holders.  My guess is that Cline would pick up any units that the rest of the market didn't want. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 14, 2016, 12:19:24 PM
Maybe someone could poke a hole in this idea.

So Hillsboro obviously has some issues with the fire.  Here's the description:

Quote
Hillsboro Energy’s mining complex, located in Montgomery County, in central Illinois, is designed to support up to 3 separate longwall mines producing up to 24 million tons per year. We currently operate one longwall mine called Deer Run Mine. Because its average coal seam is over 7 feet thick, Deer Run has been one of our most productive mines since we began operating the longwall in August of 2012.

Deer Run Mine
Operated by Patton Mining LLC
MSHA ID: 1103182

One longwall mine
Two continuous miner units
2,000 tons per hour preparation plant
Productive Capacity: 9 million tons per year
Coal Production: 5.6 million tons in 2014
Coal Reserves: 870.6 million tons (total for the complex)
Heat Content: 10,800 Btu/lb
Transportation: Rail (Norfolk Southern and Union Pacific), barge on the Ohio River and Mississippi River (via truck or railroad)

Just some finger in the air estimates here... This isn't producing anything at the moment so selling it wouldn't hurt their EBITDA since they already have 23 million tons of capacity on their other mines.  Say 6 million tons x $15 margins = $90 million EBITDA x 5 = $450 million.  The btu is a bit low on Deer Run but they have a lot of reserves so why couldn't they sell it to maybe ARLP for $450 million?  Yeah Deer Run is on fire, but it will probably be fixed up soon and there is room to add more longwalls and close up Deer Run.  Is there a reason why ARLP wouldn't want to buy this asset for around $450 million?

Because it seems like, if things were just still super crappy and Murray couldn't come up with cash by the one year mark (or didn't want to dilute), they could sell Hillsboro (better to sell a crown jewel than get taken into bankruptcy?), repay the PIK's and pay down the senior lenders, easily have over $100 million of DCF and quickly begin to rebuild value for the subordinated units.  It would suck to sell an asset but wouldn't that be the logical trump card that unit holders such as Cline or Murray would prefer versus taking this into bankruptcy or massive diluting?  Or the Cline Group could buy it off Foresight themselves?

Anyway, curious on others thoughts on this possibility.  I haven't given it too much thought but it came to mind since this is a non-EBITDA producing asset so it's not like they're selling off cash flows to delever.  There's plenty of capacity on their other assets.  Hillsboro should still be a very valuable asset that can be sold without impacting earnings.  From the perspective of Cline or Murray, it seems like it would be much better to sell off the assets themselves than let it be taken into bankruptcy, should that become the last option.  That seems like an option they would want to retain?
Title: Re: FELP - Foresight Energy
Post by: gadfly on May 14, 2016, 03:27:50 PM
Interesting thought on a sale. It seems like FELP will never get credit for their reserves (over 3 billion tons) because the narrative in the market is, "coal is dead and the market is oversupplied so who cares if you have 100 years of max production in reserves". So why not sell and get some cash upfront in order to get back to distributions. That's what Murray wants and that's what target MLP investors want.

I know you've posted a few articles about how gritty Murray and Cline are and I wonder if a bottom of the market sale of a crown jewel asset goes against their "last man standing" ethos of Cline and Murray.

Have there been any recent ILB sales?

Thanks for the post.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 14, 2016, 04:03:13 PM
Every coal article keeps sounding worse.

Perhaps if gas makes some kind of recovery, coal will rebound off cycle bottom.

Maybe one political candidate would help coal as well.

Lots of ifs. We really need the debt issue resolved so we can then discuss the survivability of of FELP.

The 17th can't come soon enough.

Of course maybe they'll extend again and continue to torture us

The coal outlook for FELP doesn't look bad. 

I've started doing this thing where I ask people what percentage of U.S. electricity comes from coal.  I know, I'm real fun at parties.  No one says 30%.  Or ask people about solar as a percentage of U.S. electricity production.  Most people seem to think it's like 20% solar and 10% coal or something.  It's still more like 28% coal and 1% solar.  You just can't run coal down to zero that quickly, and even as it declines ILB coal is in the best position to benefit from that.  What is uneconomical for PRB coal has to be economical for ILB coal, up to a certain extent (ignoring debt for a minute).  Obviously weak nat gas and warm winters isn't great short-term, but you can't expect utilities to act like airlines and "unhedge" when nat gas is cheap to take on all the future volatility.  How many massive spikes has nat gas seen over the past ten years?  For utility diversification purposes alone it doesn't seem like the long-term picture for ILB coal is terrible. 

There was this funny article on Seeking Alpha not too long ago:  http://seekingalpha.com/article/3968182-coal-industrys-catastrophic-collapse-continues (http://seekingalpha.com/article/3968182-coal-industrys-catastrophic-collapse-continues)

Quote
Despite the fact that coal still accounts for approximately one-third of the United States' electricity consumption, US coal companies are now being valued at far less than even US solar companies. To put some perspective on this, solar accounts for approximately 1% of the United States' electricity consumption.

His/her conclusion is that coal is bad and solar is good.  Maybe I'm just a value investing weirdo, but when something generates 30% of electricity and it's valued at less than something which only generates 1%, I think there might be some mispricing.  That's just me...

FELP had three really unlucky things happen all that once.  A mine fire, the change of control default, and nat gas falling under $3.  But contracted volumes are only down 11% in 2016 versus 2015.  And 2015 was the same as 2014.  I'm no super miner expert, but it seems like a coal fire isn't a game killer for these guys given remaining capacity.  The senior lenders probably have the most incentives to accelerate (they look super well protected in bankruptcy and why not get coal stuff off the books) but they already supported a reasonable restructuring to solve the change of control default, so that's not a game killer either.  Nat gas is a question of when, not if, it spikes again.  Traders don't call nat gas the widow maker for nothing.... Maybe we just need a super cold winter or something, who knows.  But they have 23 million tons of capacity at less than $24 costs per ton and they should be able to place almost all of that without spending additional capex.  When you compare that to ILB coal demand over the next several years, you don't *need* higher nat gas.  But any extra tailwind would be cool at this point. 

And if they can't place more than 20 million tons of capacity, then they *should* sell one of their assets to bring down leverage.  It's not like ZINC or these other single trick ponies that 1) need higher commodity prices, or 2) need to risk new capex in a crappy environment, or 3) is morphing into some new low cost structure like a BXE with no free cash flow.  Now if management was crappy it would be a different story, but Chris Cline is still in the picture and he's obviously trying to protect his investment. 

But it does seem like these coal articles are getting worse and worse.  It just makes me feel better and better about getting this asset at super depressed levels.  I think the common units are valued at about $100 million here?  You don't need to run crazy scenarios to see DCF over $100 million to those common units in the very near future.  Or I might be out of my mind.... That's a possibility.  :)
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 14, 2016, 04:23:25 PM
Interesting thought on a sale. It seems like FELP will never get credit for their reserves (over 3 billion tons) because the narrative in the market is, "coal is dead and the market is oversupplied so who cares if you have 100 years of max production in reserves". So why not sell and get some cash upfront in order to get back to distributions. That's what Murray wants and that's what target MLP investors want.

I know you've posted a few articles about how gritty Murray and Cline are and I wonder if a bottom of the market sale of a crown jewel asset goes against their "last man standing" ethos of Cline and Murray.

Have there been any recent ILB sales?

Thanks for the post.

There was this comment on the last ARLP call:

Quote
<Q - Matt Niblack>: Got it. And in terms of opportunities for acquiring companies or properties, given your relative
strength, given that after this move that your relative strength is only going to improve, do you see an opportunity or
perhaps more opportunities than there were earlier in the cycle to go out and acquire some assets, expand the footprint?
<A - Joseph W. Craft>: There are opportunities, as we mentioned on the last call, there was some discussion about
that. We continue to look at that. I think financing a transaction for acquisitions is a little bit more challenging than
financing – just extending our current debt level. So the actual opportunities to add to our footprint in a material way
would require the current debt holders with the existing sellers to participate and try to be flexible and come up with
some creative solutions to support the transaction.

Also interesting was their comment about positioning...

Quote
<A - Joseph W. Craft>: I think to answer your first part, as to why the level? I think the level was established really
driven off of what we think could be sustainable through 2017. And we do believe that we will see even better results.
As we look further out, I'm sorry, that I've got this throat today. But as we look further out to 2018, we do believe that
this will be a foundation to grow, because we believe prices will strengthen and tonnages and volumes will be able to
be returned back to where we were a year ago plus. So really our focus is how do you get through the current, really the
2017 time period. And we wanted to make the reduction to a level that we felt comfortable that it was sustainable based
on what we know today. And so that's how we got to the amount.

So it would seem like this would be the ideal time for someone like ARLP to buy an asset from FELP.  If they truly believe what they are saying.

It would fly in the face of what Cline and Murray have stated in the past, but why have so much capacity if you can't place it?  Especially if you're at risk of losing your whole investment and future optionality?  I'd like to think they would be rational about that decision.  They would just have to start spending capex on the remaining assets once their capital structure started to trade more normal and they had access to credit again.  They could still double capacity with minimal capex even by doing that asset sale so I don't think it kills the end game here.  It would make their competitor a bit stronger, raise their cost structure (but we've already dealt with that for a full year), and negates some of the Murray/Foresight teamwork.  I guess it would shift the picture from last man standing to "one of the last..." 

I need to look at comps for any ILB asset sales.  I'm not aware of any recently.  I know there were some in 2014/2015 that were going for 8x EBITDA but it's obviously a different world now.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 17, 2016, 08:41:17 AM
Down to the wire again. This is getting old.

Accipitor didn't sell any.

Tick tock, tick tock.

Is there another extension? I haven't seen any SEC filing today or news yet.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 17, 2016, 08:57:02 AM
Pull, you don't like getting water boarded on a weekly basis?

It's sort of funny because I'm 99% sure that Fidelity has finished selling their entire stake.  But now there are no buyers!  I started buying when Fidelity was taking a machete to the stock price with no end in sight, there was no senior lender deal, and there weren't any hints towards what the resolution would look like.  It's maybe 90% to the goal post and there is just as little market interest as before.  What a stock.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 17, 2016, 09:36:34 AM
The weekly water boardings are getting old.

Definitely little interest here right now.

Let's just get to the goal line!
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 17, 2016, 01:57:11 PM
No filings yet :-[, last time we had spike before filing.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 17, 2016, 02:01:20 PM
Does anyone have access to the FBR report on FELP?  I'm curious why they think it's only worth $1.50.  I'm assuming some kind of dividend discount model?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 17, 2016, 07:13:35 PM
No luck yet.  I'm almost certain FBR did a dividend discount model since they may not pay distributions until sometime in 2017/2018. 

It seems likely that we get another extension in the morning.   If so, it's becoming more likely that extra value is going to be extracted from the equity holders.  Hopefully just something they can refinance in the future versus giving away more equity.  Those FELP notes at $70 ish look pretty attractive right now.

Can you believe it's already May?  This has been going on since December.... Yeesh
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 17, 2016, 07:32:13 PM
FELP saga reminds me of ROIQW nightmare, where they extended 3-5 times and then BIG FAT EGG. I am expecting something different this time :)
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 17, 2016, 07:34:27 PM
There are interesting videos on long wall coal mining. The auger is crazy. I can't imagine the maintenance to keep this equipment up and running in these underground conditions.

https://www.youtube.com/watch?v=WmwEB4DY_jc

https://www.youtube.com/watch?v=flePGEGtIAQ

Just think of all these stranded assets if coal is forced out of electrical production.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 17, 2016, 07:57:46 PM
What's funny is that FELP shares Murray facilities to reduce that maintenance capex.

Quote
Additionally, access to the Murray Energy manufacturing facilities will allow us to significantly reduce our repair cost and maintenance capital expenditures on critical equipment. We continue to expect capital synergies to be $10 million annually, which allows to keep average maintenance capital expenditures at approximately $70 million per year. With respect to SG&A cost, we've largely realized the significant cost reductions laid out when the Murray Energy transaction was announced and expect to see annual SG&A savings of $16 million versus 2014 spending levels.

I wonder what would happen if Cline simply let it go into bankruptcy.  I doubt they'd let Foresight continue to use their facilities.

What exactly happened with ROIQW?  It didn't seem that compelling to me (maybe 50/50 odds) but I'm not entirely aware of what made it fail.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on May 18, 2016, 03:41:33 AM
Extension to May 20
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 18, 2016, 04:05:54 AM
Of course and we'll see the next extension on Monday after.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 18, 2016, 05:14:21 AM
Or we'll see the global support agreement on Monday like we saw the senior lender agreement after the last two day extension.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on May 18, 2016, 05:48:35 AM
Maybe I am misinterpreting the details but...

The First Amendment to the Transaction Support Agreement (senior lenders) expired yesterday - 5/17/16.  As per the 8-K filed on 5/9/16 - "The Support Agreement may be terminated automatically after three business days upon the Partnership failing to enter into such agreement on or before May 17, 2016."  They have three more days for the support agreement terms with the senior lenders - until May 20th.  The language of today's 8-K makes no mention of extending the senior lender support agreement.  Today's 8-K only extends the 7.875% lender's forbearance period until 5/20/16.  This is different than the last 8-K filed on 5/9/16 that extended both the senior and 7.875% lenders.

It has been one month since the original senior lender support agreement dated 4/18/16.  I wonder if the senior lenders have seen enough - tiring of this waiting game.  Is it really time to poop or get off the pot this Friday?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 18, 2016, 06:00:55 AM
Yeah that's my read as well.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on May 18, 2016, 06:42:00 AM
Both mention the possibility of a further extension:

https://biz.yahoo.com/e/160518/felp8-k.html

https://biz.yahoo.com/e/160422/felp8-k.html

Quote
FELLC and Foresight Energy Finance Corporation (together, the "Issuers"), together with the Partnership, again extended the term of the existing forbearance agreement that was entered into on December 18, 2015 with certain holders (the "Consenting Noteholders") of the Issuers' 7.875% Senior Notes due 2021 (the "Notes"). As a result of the extension, the forbearance period runs through May 20, 2016, unless further extended by the Consenting Noteholders in their sole discretion or unless earlier terminated in accordance with its terms.

The extension is intended to provide additional opportunity to engage in discussions and negotiations with the holders of the Notes and our secured lenders.

(emphasis mine)
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 18, 2016, 06:52:45 AM
The difference here is that we're in the three day grace period. The last time they amended the agreement before going into the grace period.
Title: Re: FELP - Foresight Energy
Post by: Patmo on May 18, 2016, 09:13:34 AM
Damn, lots of shriveled balls in here... Let the boys work it out, complex big $ negotiations don't always resolve overnight. The outcome at the end of the wait is what matters. If we're going to fuss over a few weeks of wait time, might as well rebrand this the daytrading forum....
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 18, 2016, 02:44:20 PM
Damn, lots of shriveled balls in here... Let the boys work it out, complex big $ negotiations don't always resolve overnight. The outcome at the end of the wait is what matters. If we're going to fuss over a few weeks of wait time, might as well rebrand this the daytrading forum....

Indeed
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 18, 2016, 04:15:17 PM
I'm concerned that the longer this drags on, the higher probability of bankruptcy.

Maybe I have it backwards.
Title: Re: FELP - Foresight Energy
Post by: mateo999 on May 18, 2016, 07:36:06 PM
As per his picture, Picasso's appear to be made of brass and low hanging.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 18, 2016, 08:17:56 PM
I think the more time that passes, you are simply looking at more value that is being extracted from the equity holders to the note holders.  But there's a limitation to that since higher cost debt can be refinanced later, or maybe Cline tenders for more than $104 million and takes some of the 2021 2nd liens.  I don't think these extensions increase the odds of bankruptcy by very much.  Unless Cline gets hit by a bus before it's done.  He does spend some time on his yacht...

On $100 par, this senior lender agreement is $20 of cash tender, $23 of 1-year notes, and $57 of 5-year notes.  Depending on where you think those 5-year notes will be discounted in the market (90% of par, 80% of par) that's a close to par deal.  Plus the 15% PIK coupon, step up in 5-year coupon payments, the 7.5% equity warrants, and mandatory redemption of $300 million after a year.  Those 5-year notes will be 2nd lien, well protected, rolling down the yield curve with half the non-senior debt outstanding and a 10% coupon.  I thought from the start that the deal would be close to par, but there's also unpaid interest of about $4 per bond.  Bridging $4 per bond shouldn't be hard considering they seem to be capitalizing it with an extra PIK coupon on the 5-year notes.  Maybe a bit more of an equity warrant if it comes down to it.

Several million of the notes traded today between $70-71 and when I dug through the institutional owners, most of them owned the bonds at $100 from 2014.  I spoke to one of the larger holders and he indicated that they were trying to get *all* their energy bonds off the books because it was causing outflows and it was a bit tougher to market the mutual fund.  But maybe guys like Blue Mountain want an extra couple points and they're swinging the vote.  It certainly helps that Cline owns 12% of the notes.  We'll see.

Plus you have decent odds (maybe 30%?) that this turns out to be a monster cash flow machine in a few years.  It's worth playing for the short-term event but if they're going through all this effort to save FELP (presumably for a good reason), there's some real optionality that the market is currently giving no value to.  I mentioned to someone else that it reminds me of LVS from 2009 (casinos were in the toilet, Macau was about to turn the corner, small float with a billionaire owner who could save the equity, it made sense to save the equity, sentiment was rock bottom, but extremely valuable assets if they could get through the down cycle).  A lot of guys I've discussed this idea with don't want to get involved because coal is dead in their eyes.  Well if 99% of the market didn't think coal was dead, it wouldn't be trading for something like a normalized 1-2x DCF.

But if this idea bombs, I don't want to hear any crying.... Just cut down your position size to where you're okay with the worst possible outcome. 
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 19, 2016, 04:59:50 AM
ROIQ is one of the Wilber Ross SPAC, which was trying acquire a cell tower business in India (which is very good business). It has very good chance of closing and they did couple of amendments to the original deal to make sure that it will go through. But they were unable to obtain required % of consent from share holders. There was a tread in CoBF around Oct-Nov 2015.

I am little bit hesitant to do special situation investing because of that experience. If not I would have put lot more money into FELP.

Thanks for the Idea

What's funny is that FELP shares Murray facilities to reduce that maintenance capex.

Quote
Additionally, access to the Murray Energy manufacturing facilities will allow us to significantly reduce our repair cost and maintenance capital expenditures on critical equipment. We continue to expect capital synergies to be $10 million annually, which allows to keep average maintenance capital expenditures at approximately $70 million per year. With respect to SG&A cost, we've largely realized the significant cost reductions laid out when the Murray Energy transaction was announced and expect to see annual SG&A savings of $16 million versus 2014 spending levels.

I wonder what would happen if Cline simply let it go into bankruptcy.  I doubt they'd let Foresight continue to use their facilities.

What exactly happened with ROIQW?  It didn't seem that compelling to me (maybe 50/50 odds) but I'm not entirely aware of what made it fail.
Title: Re: FELP - Foresight Energy
Post by: ragu on May 19, 2016, 10:09:28 AM
I think the more time that passes, you are simply looking at more value that is being extracted from the equity holders to the note holders.   

I'd agree with this. Odds are that the structure of the settlement is what's being discussed, not whether there'll be one.

Re. optionality too, I agree. It's what makes the risk-reward (very) skewed on this one.

Best,
Ragu
Title: Re: FELP - Foresight Energy
Post by: usdtor05 on May 19, 2016, 01:36:59 PM
ROIQ is one of the Wilber Ross SPAC, which was trying acquire a cell tower business in India (which is very good business). It has very good chance of closing and they did couple of amendments to the original deal to make sure that it will go through. But they were unable to obtain required % of consent from share holders. There was a tread in CoBF around Oct-Nov 2015.

I am little bit hesitant to do special situation investing because of that experience. If not I would have put lot more money into FELP.

Thanks for the Idea

WLRH is Wilbur's not ROIQ. This is a completely different situation.

What's funny is that FELP shares Murray facilities to reduce that maintenance capex.

Quote
Additionally, access to the Murray Energy manufacturing facilities will allow us to significantly reduce our repair cost and maintenance capital expenditures on critical equipment. We continue to expect capital synergies to be $10 million annually, which allows to keep average maintenance capital expenditures at approximately $70 million per year. With respect to SG&A cost, we've largely realized the significant cost reductions laid out when the Murray Energy transaction was announced and expect to see annual SG&A savings of $16 million versus 2014 spending levels.

I wonder what would happen if Cline simply let it go into bankruptcy.  I doubt they'd let Foresight continue to use their facilities.

What exactly happened with ROIQW?  It didn't seem that compelling to me (maybe 50/50 odds) but I'm not entirely aware of what made it fail.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 19, 2016, 01:44:37 PM
Yes. You are right. It's Clinton group NOT Ross. It happened 5-6 months back
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 20, 2016, 11:51:43 AM
The article actually has it wrong.  The default back in December already set in motion an acceleration of the debt.  I think there have been several "defaults" since then (missed interest payment, going concern, 1Q operating performance) but the damage was already done.  That missed payment wasn't really the issue.  Their senior lenders already cut access to their revolver.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on May 21, 2016, 08:01:00 AM
Not foresight but general info on coal - interesting to see the divergnce of opinion:

http://www.bloomberg.com/news/articles/2016-05-20/poland-toughens-wind-farm-rules-in-push-to-save-coal-industry

http://www.independent.co.uk/news/business/news/the-day-coal-power-dropped-out-of-the-national-grid-for-the-first-time-in-more-than-100-years-a7040291.html
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on May 23, 2016, 06:26:39 AM
Interesting that no news surfaced yet this morning.  I would have expected a press release before the market opens for something with such a material impact on the business.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 23, 2016, 07:15:52 AM
Its better to IR and find it out. I will try to call some time today.

Title: Re: FELP - Foresight Energy
Post by: Picasso on May 23, 2016, 07:22:35 AM
If there was an extension, they very likely would have announced it by now.   Which means we may finally have the conclusion to this crazy story fairly shortly.
Title: Re: FELP - Foresight Energy
Post by: bigbadwolf on May 23, 2016, 01:29:37 PM
8k out
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on May 23, 2016, 01:36:22 PM
https://biz.yahoo.com/e/160523/felp8-k.html
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 23, 2016, 01:39:13 PM
https://biz.yahoo.com/e/160523/felp8-k.html

It looks like they have the consent and now they have to restructure
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 23, 2016, 02:03:43 PM
Several things:

1) They had the consent on May 17th.  I think they took a little longer to announce it to waterboard PulltheTrigger a little more.
2) Cline bought some more notes in the market.
3) Unpaid interest is going to be in the form of more 2nd lien notes in the tender.
4) No new capital extracted from the equity holders that wasn't part of the senior lender deal.  That's a big plus.

I need to read through it a bit more to see if I missed anything.  Market will probably be nervous about the PIK's coming due, but they don't seem that difficult to pay down through a combination of a rights offering and directing cash for the next year into those notes.  Plus there are a ton of subordinated units so dilution isn't going to be a big deal when nearly half of it will come in the form of more subordinated units.

I'm curious to see how Murray bonds will trade tomorrow.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 23, 2016, 02:11:07 PM
Quote
I think they took a little longer to announce it to waterboard PulltheTrigger a little more.

What doesn't kill you makes you stronger!

Title: Re: FELP - Foresight Energy
Post by: Picasso on May 23, 2016, 05:40:39 PM
http://bit.ly/22m22t7 (http://bit.ly/22m22t7)

Too funny. Which FELP holders are going to vote Trump?
Title: Re: FELP - Foresight Energy
Post by: arcube on May 23, 2016, 05:50:11 PM
http://bit.ly/22m22t7 (http://bit.ly/22m22t7)

Too funny. Which FELP holders are going to vote Trump?
Typical Trump. Shoot first, ask....

Thanks Picasso!
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 23, 2016, 07:16:10 PM
Let's make coal great again.
Title: Re: FELP - Foresight Energy
Post by: jrallen81 on May 23, 2016, 07:29:10 PM
FELP has the best coal, it's fantastic coal. You can ask anybody, their coking coal is just fabulous, really. 
Title: Re: FELP - Foresight Energy
Post by: hswoon on May 23, 2016, 07:32:26 PM
I'm sure a certain SXC holder on cobf will gladly agree with you on that point.
Title: Re: FELP - Foresight Energy
Post by: gadfly on May 23, 2016, 08:08:10 PM
In the 8k it mentions $106 in tender offer, $114-$120 in senior convertible, $294-300 in senior secured and 80 million owned by FELP people...

So because all this sums up to 600 million does that mean there are no holdouts at the 2021 unsecured level?

Also, would debt holders higher up the capital structure have any motives to sideline this deal?

Just wondering with language at the bottom that states:

Quote
Accordingly, there are other creditors and stakeholders of the Partnership and its affiliates who are not party to any support agreement in respect of the Restructuring and such stakeholders have not approved nor agreed (either implicitly or explicitly) to the terms of the Support Agreement, the Transaction Term Sheet or the Restructuring transactions contemplated thereby, nor are they bound to take (or refrain from taking) any actions as a result of the effectiveness of the Support Agreement.
Title: Re: FELP - Foresight Energy
Post by: hswoon on May 23, 2016, 08:17:48 PM
Iirc senior debt holders had 95% approval so probably not
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 23, 2016, 09:00:34 PM
hwsoon is right, it was 95 or 97% senior lender approval.  I forget the number. 

For example, I had some friends buy a million of the notes and we emailed IR to consent to the senior lender deal.  They didn't let us agree to anything because they already had a group negotiating that exchange offer.  It really doesn't matter what some small percentage wants because they only needed 67% from the note holders.  The senior lenders were a different story but that was done first. 

Quote
So because all this sums up to 600 million does that mean there are no holdouts at the 2021 unsecured level?

There's probably some note holders that wanted more, but it's getting swapped at these terms anyway.  They don't have to tender for the cash consideration if they don't feel like it.  But I'm sure they will...

Quote
Also, would debt holders higher up the capital structure have any motives to sideline this deal?

We wouldn't have the senior lender support agreement if that were the case.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 24, 2016, 08:17:05 AM
I thought the market would be pushing up a lot more.

Since Trump is here to save coal, maybe I'll buy more. Perhaps Trump could tap Murray to head the EPA.

I think since the minimum quarterly cash distribution is gone due to the restructure, the stock price will be depressed for a while.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on May 24, 2016, 09:15:38 AM
Hi Picasso,

Do you have an updated share valuation based on  75% of dilution from convertible notes. I remember, you mentioned about $4-5 even with 100% dilution. Thanks
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 09:49:19 AM
Sure, some back of the envelope here.

19.5 million tons @ $13 margins = $253 million of 2016 EBITDA.  There's $70 million of senior lender interest expense and $30 million of interest expense from the remaining $300 million notes.  Minus $70 million of capex leaves $83 million of DCF.

If they don't redeem the PIK's, you'll have about 400 million common units + 65 million subordinated.  So that's like 0.20 of DCF per common share which means it's trading for 8.5x that super crappy outcome.

What's much more likely is that they do a rights offering with Murray sometime over the next year.  The lower the price of the rights offering, the more Murray is screwed because he has all these subordinated units.  When they do that rights offering, you'll have 65 million subordinated + 75 million common (including the new warrants on redemption of the PIK's).  If they don't bother using their 2016/2017 cash flow to pay down the PIK's ahead of time, or sell any assets, the $300 million or so of the rights offering will be split between new subordinated shares and common.  Let's say it's done at $2.  That would add 150 million units; creating about 140 million subordinated and 150 million common. 

If we take the $83 million of DCF on the new 150 million common units, that's still a very high DCF of $0.55/common unit.  And that's with super nasty dilution from a rights offering at $2.

What's more likely is that they use cash flow from the next year to repurchase PIK's, Hillsboro gets fixed up, legal costs go away, and they don't need to issue $300 million of new equity.  If they only need to issue $150 million of equity @ $2 (this is reflexive, so it's probably trading for more than $2 if they don't need to issue as much) then common units go to about 110 million and that's 0.75 of DCF per common unit.

And more than anything, I don't think $83 million of DCF is normal earnings power here.  It's got some decent chance that it's a lot more than that.  But in terms of figuring out the margin of safety I think you should try and look at the possibility of $2 dilution on whatever amount and get comfortable with the share price. 

The market might be thinking they can't redeem the notes in a year and there's going to be massive dilution.  If that were they case, they wouldn't have structured the deal this way.  That feature is a way for the debt holders to get comfortable with a one-year payback without being pushed into bankruptcy in 2017 during a weak coal environment.  But it doesn't speak to the intentions of Murray/Cline as to why that feature exists.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 24, 2016, 10:34:16 AM
Picasso,

My understanding is that the big 75% dilution comes form the $112~$120MM convert PIK notes. That should be not too hard to pay down with cash flow + small right offering.

The $294~300MM new notes has a 9% interest for the first two years. It does not make much sense to pay them off in a year by new equity at low prices, right?

Thanks
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 10:42:06 AM
There's $300 million of PIK notes but Cline will own about $180 million and the rest will be allocated to other note holders. The 75% dilution is a potential full conversion into just common units.  It's 75% dilution to the entire equity capital structure including the subordinated units.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 24, 2016, 10:53:35 AM
There's $300 million of PIK notes but Cline will own about $180 million and the rest will be allocated to other note holders. The 75% dilution is a potential full conversion into just common units.  It's 75% dilution to the entire equity capital structure including the subordinated units.

Maybe I am confused. In below is from the 8-K.  Which one of the three were you referring to as the "$300mm of PIK notes"? I thought only the (i) $114-$120MM is the PIK convert notes that can dilute 75%. The (ii) $294-$300mm new second lien notes with 9% coupon does not convert (at least for the first two years). Am I wrong?
    
Quote
Holders of the Notes who are not affiliates of the Partnership, Reserves (as defined below) or Reserves Investor Group (as defined below) will exchange their Notes, through an exchange offer by the Partnership (the “Exchange Offer”), for:

 

(i)    between $114 and $120 million aggregate principal amount of second-lien senior convertible PIK notes (the “New Convertible PIK Notes”) (with a maturity date of April 7, 2017 and a 15.0% per annum PIK coupon), which may be redeemed or purchased: (a) at the Partnership’s option by or on behalf of the Partnership; (b) at the option of Murray Energy Corporation (“Murray”), by or on behalf of Murray; or (c) some combination of the purchase/redemption options described in clauses (a) and (b) that results in the entire purchase or redemption of the New Convertible PIK Notes (clauses (a), (b) and (c) being referred to as the “Note Redemption”). The New Convertible PIK Notes, if not redeemed or purchased under a Note Redemption, will convert into common units of FELP (the “Common Units”) representing 75% of the total outstanding units of FELP (including Common Units and subordinated units) on April 7, 2017;

(ii)   between $294 million and $300 million aggregate principal amount of second-lien senior secured notes due August 2021 (the “New Second Lien Notes”) (with a 9.0% per annum cash coupon for the first two years, a 10.0% per annum cash coupon thereafter plus, in each case,  an additional 1.0% per annum PIK coupon), plus an additional principal amount resulting from the capitalization of accrued and unpaid interest on the Notes held by such holders; and

(iii) warrants (the “Warrants”), to be issued on the date the Exchange Offer is consummated (the “Effective Date”), to acquire an amount of newly issued Common Units equal to 7.5% of the total outstanding units of FELP (including Common Units and subordinated units) outstanding on the date of a Note Redemption (after giving effect to the full exercise of the warrants and with certain other anti-dilution protections), exercisable only upon and after a Note Redemption until the tenth anniversary of the Note Redemption.


 
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 11:14:06 AM
Quote
Investors in Foresight Reserves LP (“Reserves” and such investors, the “Reserves Investor Group”) will purchase, through a tender
offer (the “Tender Offer”) (conditioned upon the contemporaneous consummation of the Exchange Offer described above), up to
$106 million principal amount of the Notes held by holders that are not Reserves, the Reserves Investor Group or their affiliates,
which shall settle contemporaneously with the settlement of the Exchange Offer (such purchased notes, the “New Affiliate Notes”).
Reserves Investor Group will then exchange the New Affiliate Notes, together with $80 million principal amount of Notes currently
held by them, for: (a) up to $180 million principal amount of New Convertible PIK Notes
and (b) up to $6 million principal amount of
New Second Lien Notes. An additional principal amount of Second Lien Notes equal to the accrued and unpaid interest on the New
Affiliate Notes as of the Effective Date will be issued to the holders tendering in the Tender Offer. An additional principal amount of
Second Lien Notes equal to the accrued and unpaid interest on the Notes held by Reserves Investor Group as of the Effective Date
will be issued to Reserves Investor Group;

Then there's another $120 million of PIK notes that are going to the other "non-affiliate" note holders that you mentioned for a total of $300 million.  Plus another $300 million of the 2021 2nd liens.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 24, 2016, 11:36:25 AM
Then there's another $120 million of PIK notes that are going to the other "non-affiliate" note holders that you mentioned for a total of $300 million.  Plus another $300 million of the 2021 2nd liens.

Ah, I missed that part. Thanks for the clarification.
Title: Re: FELP - Foresight Energy
Post by: roark33 on May 24, 2016, 11:49:35 AM
Just to point out some views from the peanut gallery....

They are planning to do 19.5m in volume this year, with around $13 margins. 

If you consider that a run rate or trough, I think there could be some upside.  But....

If FELP only does 17.5m in 2017 at $11.5 margins (roughly 200m ebitda), with around 80m of capex and a run rate of 130m in interest cost (this is 2016 run rate interest, but considering the equity dilution will come at an unknown and most likely "higher" cost), that gets you into the negative territory. 

My point being that even if you are the low cost producer, with declining volumes and pressured pricing, and a capital structure that carriers a significant amount of debt, you can very quickly turn negative. 

The idea that Cline/Murray were not going to let this go bankrupt this year was spot on.  I am just not sure what value there is going forward....for the equity holders. 

Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 12:08:33 PM
Sorry it shouldn't be up by $5/ton.  I went back through the last time they had a fire at Deer Run and even though it was only a month of downtime versus several months so far, it didn't have a material impact on the costs per ton.  They already booked about 20 million tons for 2016.  Part of the reason costs were so high in 4Q was that production was down big from the Deer Run fire, but it's getting replaced by another mine so we should see that shift by the time they announce earnings; if they make it to next earnings.  If this Deer Run things never gets fixed then I think you're looking at closer to $23-25.  Maybe $10 EBITDA margins per ton in that environment?  $200 million EBITDA minus $75 million for capex leaves $125 million for the interest payments and equity holders.  Not a ton of wiggle room but this is the point where there is a lot of operating and financial leverage.  Costs are about as high as you'll ever get, ILB coal pricing is at or below average production costs (based on what I see from numbers disclosed from other ILB producers), and the interest payments are eating up most of the free cash. 

Whereas in the bearish scenario above you're looking at only $8 million of DCF, if they can get 25 million tons out @ $15 margins, you suddenly have $183 million of DCF again.  I really don't think 25 million tons at $15 margins is that crazy of an assumption for these guys. 

If there was no change of control default nonsense going on and I looked at the units @ $1 and tried to gauge the probable future earnings potential, it looks massive.  Several multiples of the current market cap.  So these trough conditions suck, especially because of the debt expense, but the equity is insanely geared to any positive turn and that's usually when you buy these stocks.  It's generally a terrible idea to buy any commodity producer when they're earning super high returns.  It might not mean this will turn out to be a good idea but more often than not this situation works well over time.
  It helps that you have a bunch of stakeholders who either need this to work out or have substantial financial incentives to make it work.

I referenced that before.  Someone tell me if I'm wrong on this, but here's my logic.

1) Cline/Murray have already gone through great lengths to save this asset.  They've also done it in a way which preserves their upside optionality.  That would imply they see value in a big positive turn, not diluting the crap out of the units at $1 and taking their ball home.

2) You're at the low point where operating and financial leverage are the highest they're going to be.  If energy prices stay here, everyone but a very, very small number of producers are out of business.  Including the nat gas space.  Again that's when you buy these commodity plays, not when they trade for a low multiple on peak earnings.

3) You are in a growing coal basin.

4) You only have to wait until sometime in 2017/2018 to get normal conditions again.

5) Costs are up because their best mine has been nonoperational for a year.  I'd like to think that changes soon.  Even if it doesn't, we're looking at higher costs without it in any low teens margin forecast.  So you're not paying for the mine coming back or being sold. 

6) It's trading for less than the distributions necessary for Murray to convert his shares.

If you throw a super bearish outcome, you might be down to no DCF.  But that's simply not sustainable and I'm not sure you should value a stock on that part of the cycle.  I think XOM trades for 30x earnings or something, no one is going to price that asset at 7x bottom of the market conditions.  That would be silly.

And if Murray/Cline are not heavily diluting at these prices to resolve the CoC, logically they would only dilute lower if they had absolutely no other options.
Title: Re: FELP - Foresight Energy
Post by: alpha asset strategies on May 24, 2016, 01:23:26 PM
Hello-

I'm relatively new around here, but I love the great discussions and investment ideas / debates.

I'm still trying to get up to speed and wrap my head around this interesting opportunity.  The one major question I have is:  With the most recent 8-K filing (May 23), does that imply that the possibility of a Chap. 11 filing is pretty much off the table - or at least greatly diminished?  My hunch is that the answer to my question is "yes"........but I figured I'd check with the experts.

Forgive me if this question is quite elementary.  Over the past year, I have made some very good returns by shorting several coal companies into BK - most of those investments pretty much seemed like "no-brainers" - but FELP does seem like a decent opportunity to possibly make some money on the long side.  It certainly seems as if we're getting down to "survival of the fittest" in the coal sector.

Thanks!
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 03:44:54 PM
My view is that filing is enough to say bankruptcy isn't going to happen anytime soon. But there's a tiny chance it can fall apart. Maybe Cline gets hit by a car before he tenders for the notes and we get the swap.  Technically we aren't completely out of the woods yet.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 24, 2016, 03:47:05 PM

I referenced that before.  Someone tell me if I'm wrong on this, but here's my logic.

1) Cline/Murray have already gone through great lengths to save this asset.  They've also done it in a way which preserves their upside optionality.  That would imply they see value in a big positive turn, not diluting the crap out of the units at $1 and taking their ball home.

2) You're at the low point where operating and financial leverage are the highest they're going to be.  If energy prices stay here, everyone but a very, very small number of producers are out of business.  Including the nat gas space.  Again that's when you buy these commodity plays, not when they trade for a low multiple on peak earnings.

3) You are in a growing coal basin.

4) You only have to wait until sometime in 2017/2018 to get normal conditions again.

5) Costs are up because their best mine has been nonoperational for a year.  I'd like to think that changes soon.  Even if it doesn't, we're looking at higher costs without it in any low teens margin forecast.  So you're not paying for the mine coming back or being sold. 

6) It's trading for less than the distributions necessary for Murray to convert his shares.

If you throw a super bearish outcome, you might be down to no DCF.  But that's simply not sustainable and I'm not sure you should value a stock on that part of the cycle.  I think XOM trades for 30x earnings or something, no one is going to price that asset at 7x bottom of the market conditions.  That would be silly.

And if Murray/Cline are not heavily diluting at these prices to resolve the CoC, logically they would only dilute lower if they had absolutely no other options.

Picasso, I think these are all valid points. One thing I did not understand is why they structure the deal such that Cline can exchange his $180mm second-lien notes for new convertible PIK notes. Otherwise, if all they need to deal with in a year is only the $120MM convertible PIK notes from the non-affiliated group, then I guess the stock price would have responded much better. 

If Cline can be the majority owner of both the equity and the second-lien notes, that would have made it easier for the company to survive down in the road. But why did he not choose to do so? Or, is it not by his choice?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 04:01:33 PM
I don't think Murray wants Cline sitting fulcrum on 2nd lien notes past 2017. The PIK's will be redeemed and Cline gets to slightly increase his stake in FELP through the 7.5% warrant kicker while delevering the business. 

We still might see Cline invest directly into Murray which means he may own even more FELP through a potential Murray ownership.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 24, 2016, 04:09:27 PM
I don't think Murray wants Cline sitting fulcrum on 2nd lien notes past 2017. The PIK's will be redeemed and Cline gets to slightly increase his stake in FELP through the 7.5% warrant kicker while delevering the business. 

We still might see Cline invest directly into Murray which means he may own even more FELP through a potential Murray ownership.

Hopefully you are right. Btw, how did the Murray's bond trade today?
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 04:14:29 PM
No change in either FELP or Murray bonds even though both traded. You can still buy FELP notes around $71.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 04:23:36 PM
Interesting comments by Murray

http://bit.ly/1XQE492 (http://bit.ly/1XQE492)
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 24, 2016, 05:09:35 PM
Interesting comments by Murray

http://bit.ly/1XQE492 (http://bit.ly/1XQE492)

So Murray is looking to capture about 90MM tons of US coal production in the future. How much of that will come from FELP?  ;)
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 05:32:23 PM
Their intention was to eventually run it all through FELP.  But I don't think they can do it with a lot of leverage so they'll need a much stronger LP currency.  Which explains the way they've structured this deal. Murray and Cline probably see the value in the IDR's. They're really in it for the long haul.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 06:38:55 PM
I just noticed something I missed the first read through.  heth, you're on to something here.  It looks like Cline is getting some flexibility on the PIK's.

Quote
FELP shall cause notice of any Partnership Redemption to be given to Reserves no less than 15 business days prior to the consummation of such Partnership Redemption stating its proposed terms. Within 10 business days of receipt, Reserves shall notify FELP that it intends to (i) continue to hold all of the Convertible PIK Notes held by Reserves and receive payment upon redemption in connection with such Partnership Redemption, (ii) exchange its pro rata share of the Convertible PIK Notes (not to exceed $180 million (plus accrued and unpaid interest)) for an equal aggregate principal amount of the debt or having a value (based on the economic terms of the Murray Investment), in the case of other securities, on the same terms being issued or borrowed in connection with such Partnership Redemption or (iii) any combination of (i) and (ii) above. If after exchange, Reserves would not be the holder of at least 60% of the total amount of any such new debt or other securities it shall have the option to provide cash that would result in Reserves holding up to 60% of an aggregate principal amount of such new debt or other securities. 

If Murray or FELP directly purchases or redeems, as the case may be, all of the Convertible PIK Notes directly from the holders thereof, Reserves may elect not to have the Convertible PIK Notes it then holds (in an aggregate principal amount not to exceed $180 million plus PIK interest), purchased or redeemed, as the case may be, and, if Murray or FELP does not purchase or redeem such Convertible PIK Notes from Reserves in connection with the purchase or redemption of Convertible PIK Notes from the other holders, then the Convertible PIK Notes held by Reserves shall automatically convert into Common Units in accordance with the terms of the Convertible PIK Notes Indenture (at a conversion price equal to the higher of (x) $0.8483 per unit (calculated assuming the Effective Date of July 15, 2016) and (y) the VWAP Price).  If Reserves’ Convertible PIK Notes convert as described in this paragraph, for all purposes hereunder, the Note Redemption shall nevertheless be deemed to have occurred so long as all of the other Convertible PIK Notes are purchased or redeemed in full as provided herein.

Reserves = Cline.  Basically Cline can swap into new debt that the 2nd lien holders allow, or he can let it get swapped into new units at the higher of VWAP or 0.85.

Also this:

Quote
Subject to approval by the Synergy and Conflicts Committee, Murray shall be entitled to make an investment in FELP (any such investment, the “Murray Investment”) at any time prior to April 7, 2017.  To the extent the Murray Investment is in the form of debt or preferred equity, it must: (a) be unsecured or secured on a junior lien basis to the Second Lien Notes pursuant to an intercreditor agreement that is reasonably acceptable to Murray, FELP and the holders of a majority in principal amount of the Second Lien Notes, (b) have a maturity date at least 91 days later than the earlier of (i) the maturity date of the Second Lien Notes and (ii) the date on which the Second Lien Notes have been paid in full in cash and are no longer outstanding; (c) have no obligor thereto other than the Issuers and the Guarantors, (d) not include cash payments while the Second Lien Notes are outstanding, and (e) other restrictions set forth in the Description of Notes (defined below).

I'll need to think about what options Murray would have to do a debt/preferred issuance instead of equity.  A lot of that will probably depend on where FELP is trading before the redemption is announced and what's going on at Murray itself and whether Cline steps into that picture.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 06:52:44 PM
Okay sorry for the spam here...

It would appear that Cline owning $180 million of the PIK's would simply say "no thanks to the redemption, I'll take the VWAP in stock."

Which means FELP only needs to come up with another $120 million plus accrued interest to redeem the rest.  Cline has essentially already injected his capital with whatever price FELP happens to be by April 2017.  Worst case dilution happens at $0.85.

Now we're back into incentives again.  Murray is going to want to have Cline's PIK's convert at the highest price possible.  Then we get a Murray + a rights offering for the remaining $120 million + accrued.  An easier pill to swallow than Murray and the other shareholders coming up $300+ million of capital by April.  But this is super reflexive, they need to get the stock price up.  I'm sure they could repurchase a fair amount of PIK's in the open market as well.
Title: Re: FELP - Foresight Energy
Post by: heth247 on May 24, 2016, 08:16:13 PM
Okay sorry for the spam here...

It would appear that Cline owning $180 million of the PIK's would simply say "no thanks to the redemption, I'll take the VWAP in stock."

Which means FELP only needs to come up with another $120 million plus accrued interest to redeem the rest.  Cline has essentially already injected his capital with whatever price FELP happens to be by April 2017.  Worst case dilution happens at $0.85.

Now we're back into incentives again.  Murray is going to want to have Cline's PIK's convert at the highest price possible.  Then we get a Murray + a rights offering for the remaining $120 million + accrued.  An easier pill to swallow than Murray and the other shareholders coming up $300+ million of capital by April.  But this is super reflexive, they need to get the stock price up.  I'm sure they could repurchase a fair amount of PIK's in the open market as well.

Thanks for digging that out, Picasso. This sounds much better to me. :)  Now, the question is, what can they do from now on to get the stock price up before April 2017?  What catalyst do you see can help the stock price up, since their DCF will be limited for now, and the big picture for coal probably would not turn around in the short term.  Maybe we really should start to hope for a Trump win of the election.  ;D
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 08:42:06 PM
A completed tender and swap will be helpful.  Having their notes no longer trading flat and defaulted. Earnings improvement in the back part of the year as they deliver deferred shipments. Utilities feeling okay with contracting 2017 volume now that bankruptcy isn't at play.  A super cold winter. Trump winning might get the market back into coal stocks. Deer Run fire getting extinguished. Maybe selling an asset.

There was basically no press on the 8K from yesterday. Nothing on Seeking Alpha, etc. Maybe we need a good earnings call and some positive PR to get people hyped up again. Right now IR won't even call back investors.  The company has their investors completely in the dark so it's still an uncomfortable situation. Oh god I sound like Bill Ackman.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 24, 2016, 09:24:59 PM
Okay one more comment.  Sorry for all the verbal diarrhea, I'm just rehashing out the price action today/likely outcomes after what should have been super good news.  But yet the response was so muted.  Trying to kill this idea now...

I honestly don't think investors know what the hell is going on with FELP.  If you look under Yahoo Finance, or Seeking Alpha, or Bloomberg (non-subscription, just the site) there's literally nothing.  You have to go digging through this 8-K and realize it's the transaction support agreement which met the deadline for the other lender agreement.  Plus all the dilution mumbo jumbo, no press releases from Foresight, just lots of confusion.  I'm sure a lot of investors still think it's heading into bankruptcy.  Is there anyone else on the web doing a play-by-play on this situation?  It just seems so abandoned.  Plus the float is tiny.

But let's just say it's not just a stock with market abandonment issues, but instead it gets diluted up the wazoo.  Then maybe it simply takes them another year to repurchase a bunch of these new warrants and common units to get back to square one.  I'd have assumed their business would have turned the corner by then and they won't have to deal with this mine fire.  It's not ideal but it might come down to that.  It extends the thesis but won't kill it.  Waiting a couple years to make several times my investment isn't a bad deal.  Plus future optionality, etc.

The term sheet on this deal shows 75% dilution and so perhaps the market thinks that's the outcome when in reality it's more nuanced than that.  And it's extremely unlikely you would see 75% dilution because Murray will redeem before it gets to that point.  But I don't think the market understands that.  Or maybe it does but it's assigning too high of a probability to the 75% dilution event.

Anyway, an interesting situation for sure.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on May 25, 2016, 05:14:17 AM
Keep up as much writing as you please Picasso, you've been invaluable in improving my understanding of the deal. I've been thinking on doing an SA article on FELP if I have some free time soon.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 26, 2016, 12:45:16 PM
More interesting comments by Murray. http://bit.ly/1sRT7E1 (http://bit.ly/1sRT7E1)

So he thinks he can do 60 million tons, seems high? Murray does about 35 million tons if I remember correctly. I need to look again or get the NDA to check their financials.  Their bonds ticked up a couple points today.

Anyone on this board the one who did the recent SumZero post?  If so, PM me. Thanks.
Title: Re: FELP - Foresight Energy
Post by: KJP on May 26, 2016, 01:24:52 PM

19.5 million tons @ $13 margins = $253 million of 2016 EBITDA. 

There's a recent VIC writeup on AHGP that asserts that AGHP/ARLP has historically maintained a significant ($12-14/ton) pricing advantage over Foresight for ILB coal because of better access to transport and higher quality coal.  The author describes Foresight's coal as "lower-quality coal geared for export markets." 

Do you buy this argument about ARLP's pricing advantage?  If so, what price are you using for the $13 FELP margin and what does that imply for AHGP's valuation? 
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 26, 2016, 02:17:05 PM
I've been trying to find the source of this information, but JPM had this in one of their April report:

Quote
On a positive note, FELP strengthened its sales book this quarter contracting 3Mt of coal for a price range of $38.95/t- $42.35/t to Louisville Gas and Electric Co. and Kentucky Utilities Co. through 2019.

If you look at the last quarter, realizations are down to $37.  Produced tons sold in the 1Q was only 3,737 with 89,177 of cost.  So that's still less than $24 of cash costs per ton but it's only on 3,737 of tons sold so you're getting a lot of the fixed costs pushing down normal margins.  Annualizing 3,737 is only 15m tons but they're contracted for at least 4m more.  I think you can reasonably say cash costs are under $24 per ton and maybe closer to $22-23. 

$37 realized per ton on $22-23 per ton are $14-15 margins.  I thought $13 margin was being a bit more conservative.

FELP does have lower btu and quality coal than ARLP, but I don't think Hillsboro stays offline forever.  Their margins should improve quite a bit once that gets resolved, which should place them much more on par with ARLP.  But if it doesn't, then maybe $23-24 cash costs are the new normal.  But then they should sell Hillsboro?  Also exports are only about 2m tons at this point so it's clearly not just a low quality export producer.  There's optionality on their exports which are currently eating into their netbacks  from the Convent take or pays.  FELP also seems to have more stability on contracts for 2016 vs. 2015 but I need to recheck that for 2017. 

Also, if I'm not mistaken, ARLP has a lot more hedges that are running off in 2017/2018.  Their coal sales are running 20% higher than FELP, I didn't get the sense their coal is *that* much better, even though they have lower transport costs and higher btu to offset hedges running off.  There's also more capex at ARLP with lower reserves.  Not that the market even cares about reserves at this point, but I think future capex is probably being understated in their earnings today which makes margins less comparable.
Title: Re: FELP - Foresight Energy
Post by: KJP on May 26, 2016, 06:20:48 PM
I don't think ARLP has any hedges, but they do have some big coal supply agreements running off in the next few years.  I also can't square a big ARLP price advantage with this comment from ARLP's January 2016 call:

Lucas Pipes

My first question is pretty profane, but I hope you could maybe give me and investors that care about this very much a little bit of an update. And that is, where would you put the current spot prices for your products in the Illinois Basin? And, similarly, when you think about 2016, 2017, if you were to place additional volumes in the market, at what level do you think you would be able to realize for those tons?

Brian Cantrell

Lucas, I think the best way to answer that question is to talk about what we’ve actually contracted since our last call. In total, we've contracted about 7.5 million tons breaks [ph] through 2019 at an average price of about $41.73 per ton. That weighted average price reflects lower pricing in the near-term, but also includes contango in the out years at roughly 5% to 7% year-over-year. Looking specifically at the Illinois Basin, we contracted for about 6.5 million tons at an average price of $41.90. And in Appalachia, we contracted for 1.1 million tons at an average price of $40.66.
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 26, 2016, 06:24:11 PM
Sorry I meant to say their contracted prices from previous years are rolling off and it won't be renewed at $50 levels in these market conditions. Hedging only applies to FELP as it relates to their export volumes.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on May 26, 2016, 07:17:51 PM
I've been thinking about this more given all Picasso's recent posts on Murray's comments. Clearly Murray is betting that a Trump win in November will push up coal demand substantially. That would allow him to potentially sell assets into a more interested market in order to pay down the PIK loans.

I don't think Trump will be able to win, but there isn't really much downside given coals current situation.
Title: Re: FELP - Foresight Energy
Post by: ragu on May 27, 2016, 10:44:43 AM
[...]
Which means FELP only needs to come up with another $120 million plus accrued interest to redeem the rest. 

I don't believe the agreement allows for a partial redemption. Cline may well choose to convert, but there must be enough capital to redeem all of the Notes before he makes that election.

The agreement does allow for a Partnership Redemption and a Murray Purchase in conjunction, as long all the Notes are redeemed.

Quote
For the avoidance of doubt, a Partnership Redemption and the Purchase Right can be effected in combination as two transactions that close simultaneously, so long as at the conclusion of the combined transactions all (but not less than all) of the Convertible PIK Notes are redeemed, repurchased, refinanced, defeased or otherwise retired.

Best,
Ragu
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 27, 2016, 12:04:33 PM
Right, it seems like we just need to estimate where the share price will be in a year under the assumption there will be $300 million of equity issuance as a reasonable bear case.  Worst case it's done at $0.88.  Then it will be a story of repurchasing a lot of these new units in 2017/2018.  Which would imply Cline is going to need to come in and help out Murray to get them through a few years of worthless subordinated shares that they paid $1.4 billion for.  Unless Cline is okay with Murray getting wiped out.  But they'd lose all the cost savings associated with the merger.

I wonder if the easiest thing to do would involve FELP selling a fixed up Hillsboro to the Cline Group and using those proceeds to retire all the PIK debt.  Distributions could be restarted and Murray would survive.  Cline's equity stake and IDR's would make a killing in exchange for turning into Murray's pawn shop. 

The biggest thing here is that Murray seems to be tight on time.  I don't think he can wait until 2020 to start getting paid on this investment.  They'll need to be really clever about how they pay down the PIK's.  Good thing they don't need to pay down $700 million by next April.  I could see how $1.75 is justified if that were the case.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on May 31, 2016, 07:24:01 AM
Monthly report on Fidelity holdings are out.


Fund      March 31st; February 29th
FNKLX   743k;           1021k
FEQIX   633k;            795k
FDESX  457k;            565k
VIPS     459k;            566k
FLMLX   110k;            155k
FEIRX    160k;            211k
FSESX   0;                  20k

So they started the year at 4.2 million shares, down to 3.3 million at end of February and down to 2.6 million at the end of March.  By my calculations they've just been sitting on 10% of trading volume and it's now their smallest position and they're the only large institutional owner.  They've gone from owning 22% of the float to 13% over those three months.  I think any stock with a 22% owner dumping down to 13% during a period of no liquidity and possible bankruptcy would kill the market price, which it obviously had/has.  We'll see where they end up at the end of April.

I can't find all the end of April reports for all the above listed funds, but did find the monthly FELP holdings for
FNKLX - $111,546
FEQIX - $114,662
Title: Re: FELP - Foresight Energy
Post by: Picasso on May 31, 2016, 08:53:49 AM
Seems like they're finally out.  They were long around $12, owned a huge chunk of the float, and dumped it all right as it's about to get resolved.
Title: Re: FELP - Foresight Energy
Post by: Deepdive on May 31, 2016, 10:36:56 PM
Interesting, the thread is now 33 pages. Is this an ominous sign?
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 01, 2016, 06:10:09 AM
Interesting, the thread is now 33 pages. Is this an ominous sign?

It's only been a few months?  Most of that is my rambling anyway.

By the way, I decided to start posting my ideas here since guys on twitter make fun of CoBF. I don't think the board needs to be full of bad ideas with long threads. Why not contribute ideas to make it a little better?  And maybe some of the more obnoxious twitter guys can start shorting FELP just so they can be ultra edgy and contrarian. 
Title: Re: FELP - Foresight Energy
Post by: sampr01 on June 01, 2016, 06:40:26 AM
Interesting, the thread is now 33 pages. Is this an ominous sign?

FELP restructuring just started and have until APR 2017 to make this thread 500 pages long.
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 01, 2016, 07:58:20 AM
I attached the latest on Fidelity's stake.  They sold over 2 million units in April. 
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on June 01, 2016, 08:58:32 AM
Doesn't it say they sold 1.6M instead of 2M?

They still account for 3.88% of the float. Selling will continue for another month I guess.
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 01, 2016, 09:03:11 AM
There's a subset that expanded with different dates.  In March they sold 1.6 million units which shows as of file date 03/31.  But as of 4/30 there's only 250k shares left between all the funds. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 01, 2016, 09:15:36 AM
Also they were a much higher percentage of the float than 3.88%.  The float is only about 20 million units.  But Accipiter owns 8.4 million units and Fidelity owned over 4 million units.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on June 01, 2016, 09:16:59 AM
There's a subset that expanded with different dates.  In March they sold 1.6 million units which shows as of file date 03/31.  But as of 4/30 there's only 250k shares left between all the funds.

I just realized you must be showing up on that list  :D
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on June 01, 2016, 11:23:33 AM
Also they were a much higher percentage of the float than 3.88%.  The float is only about 20 million units.  But Accipiter owns 8.4 million units and Fidelity owned over 4 million units.

Thanks I didn't realize it was 2 months old (I thought it was one month)

There's a subset that expanded with different dates.  In March they sold 1.6 million units which shows as of file date 03/31.  But as of 4/30 there's only 250k shares left between all the funds.

I just realized you must be showing up on that list  :D

Likely one of the form4's. A $65k holding will do to be on that list
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on June 03, 2016, 09:38:07 AM
An independant member of the board of directors has passed away and needs to be replaced or FELP will be delisted. Likely nothing major.

https://biz.yahoo.com/e/160603/felp8-k.html
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on June 03, 2016, 01:11:14 PM
I was curious about Accipiter Capital Management's position in FELP given they largely cover the healthcare sector.

It looks like Gabe Hoffman of Accipiter and Chris Cline are neighbors:

http://southflorida.blockshopper.com/taxes/by_subdivision/seminole_club

Hey, the Seminole Golf club is just down the street. Ya think they're members?

And it appears they attended political fundraisers in the past:

https://www.freespeech.org/tags/romney-fundraiser

http://articles.sun-sentinel.com/2012-09-20/news/fl-romney-back-in-palm-beach-20120920_1_romney-returns-mitt-romney-vip-photo-reception

Maybe they've had a few conversations?

Title: Re: FELP - Foresight Energy
Post by: Picasso on June 03, 2016, 01:56:05 PM
Ah, that's a really good find.  That explains the strangeness of their position in FELP. 

If he is close to Cline, it would probably be a bad sign if Accipiter started to sell.  Their last transaction was a purchase back in December after the court decision. 
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on June 03, 2016, 02:08:33 PM
My thoughts exactly.
Title: Re: FELP - Foresight Energy
Post by: roark33 on June 03, 2016, 04:28:10 PM
That's some good research pullthetrigger.  Picasso and I had discussed how strange the position was a while back, but didn't think to do that kind of scuttlebutt research, impressive. 
Title: Re: FELP - Foresight Energy
Post by: heth247 on June 08, 2016, 01:07:36 PM
Just curious how can this stock be up 10% on big volume but back to only up 3 cents at the close of the day. Is it being manipulated?
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 08, 2016, 03:14:59 PM
The float is really small and there aren't a lot of active buyers.  There's been some relatively big sellers in the $2 area but it seems like someone bought a lot of units in the AM, at the same time someone (probably same person) bought up a bunch of notes, and once that buyer was done there wasn't any additional buying.  So it just drifted back down from all the smaller selling.  I don't think I would consider that manipulation?  I was actually surprised that someone punched through all those bidders up near $2.  The tender should start in a couple days and we'll get the restructuring hopefully done by July 15th.  Still a ways to go.

But anyway that's just the short-term trading.  Longer term the returns will be based on the cash flows they produce so it doesn't really matter.  FWIW, a lot of these low float orphaned securities round trip multiple times because the shareholder base is all out of whack.  I think you have a few core holders of the float and the rest has been mostly day traders.  It shows in the volume patterns.
Title: Re: FELP - Foresight Energy
Post by: gadfly on June 08, 2016, 05:18:30 PM
Could someone please update us on how the Murray and FELP bonds are trading? Is the most recent Murray issue still in the teens? Are the FELP 2021s still 70ish? Has there been much trading in the last month?

Thanks!
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 08, 2016, 05:39:10 PM
Murray bonds hit 25 today, FELP notes still 71 or so.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on June 15, 2016, 11:12:37 AM
FELP stock trading suspiciously for last two days with ~ 450K volume at 1.70 +/- 1 cents.
Murray bonds hit 25 today, FELP notes still 71 or so.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on June 15, 2016, 11:42:59 AM
FELP stock trading suspiciously for last two days with ~ 450K volume at 1.70 +/- 1 cents. Its really strange that its not even trading not more than 100K with 5-10% swings for long.

Murray bonds hit 25 today, FELP notes still 71 or so.

I had the same feeling. Maybe we got used to the high volume due to Fidelity dumping? But why would the buying pressure dry up now?
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 15, 2016, 11:58:24 AM
There's a massive offer at $1.70.  Not sure why or who....
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on June 15, 2016, 12:26:54 PM
Massive meaning?
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on June 15, 2016, 12:55:04 PM
Massive meaning?

Cannot be that massive if the bid is at $1.69 now.
Title: Re: FELP - Foresight Energy
Post by: heth247 on June 15, 2016, 04:27:02 PM
Could it be that some connected funds selling to each other so that they can take tax loss? It is really surprising that somebody dumped 450K shares without dragging down the price for even 1c.
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 16, 2016, 09:39:22 AM
https://t.co/dtTzRERmia (https://t.co/dtTzRERmia)

Quote
Once billed as one of the region's most productive mines, Deer Run has hardly produced any coal for a year now. That's because of a fire smoldering belowground that company officials have so far been unable to extinguish, even after trying to seal the mine, pumping nitrogen underground to try to starve the blaze of oxygen, and other measures. Mining experts say company officials likely don't know where the fire is, but they know it exists because of elevated carbon monoxide levels that led federal regulators to bar workers from the mine. Meanwhile, Foresight is pushing forward in seeking permits for a 7,700-acre expansion of Deer Run.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on June 16, 2016, 10:43:58 AM
https://t.co/dtTzRERmia (https://t.co/dtTzRERmia)

Quote
Once billed as one of the region's most productive mines, Deer Run has hardly produced any coal for a year now. That's because of a fire smoldering belowground that company officials have so far been unable to extinguish, even after trying to seal the mine, pumping nitrogen underground to try to starve the blaze of oxygen, and other measures. Mining experts say company officials likely don't know where the fire is, but they know it exists because of elevated carbon monoxide levels that led federal regulators to bar workers from the mine. Meanwhile, Foresight is pushing forward in seeking permits for a 7,700-acre expansion of Deer Run.

Wow that guy they interviewed is an asshole. Way to make an enemy dude!
Title: Re: FELP - Foresight Energy
Post by: Nnejad on June 16, 2016, 02:19:53 PM
My PA friend mentioned this the other day:
https://en.wikipedia.org/wiki/Centralia_mine_fire
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 16, 2016, 03:31:05 PM
My understanding is that Deer Run had never been longwalled before, and it's possible that they need to do continuous mining instead.  That would push up costs and reduce the output.  It's caught fire before and they solved it, but this is taking a lot longer.  I also can't tell if they extracted the long wall equipment or if it's sitting in some other part of the mine.  It doesn't seem as bad as Centralia since that was a bit more extreme in terms of a burning landfill and such.  But who knows.
Title: Re: FELP - Foresight Energy
Post by: heth247 on June 20, 2016, 04:19:35 PM

Coal-fired generation is predicted by EIA to be still at 34% by 2040.

https://www.eia.gov/forecasts/aeo/section_elecgeneration.cfm
Title: Re: FELP - Foresight Energy
Post by: Nnejad on June 20, 2016, 06:51:28 PM
No dog in the fight, but you should know your data is a year stale. It's now 18% - 26% depending on the CPP outcome.
https://www.eia.gov/forecasts/aeo/er/pdf/0383er(2016).pdf
Title: Re: FELP - Foresight Energy
Post by: heth247 on June 20, 2016, 08:16:57 PM
No dog in the fight, but you should know your data is a year stale. It's now 18% - 26% depending on the CPP outcome.
https://www.eia.gov/forecasts/aeo/er/pdf/0383er(2016).pdf

Thanks for pointing that out, my bad! I guess the most relevant part to FELP is page 37 of this update pdf file, which shows the projection of the regional coal production.  I'm surprised to see that the West region production, even after significant projected decline, is still way above the Interior region by 2040. Based on this projection, it looks like FELP does not have much room for growth (in the case of CPP).
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 20, 2016, 08:38:19 PM
No dog in the fight, but you should know your data is a year stale. It's now 18% - 26% depending on the CPP outcome.
https://www.eia.gov/forecasts/aeo/er/pdf/0383er(2016).pdf

Thanks for pointing that out, my bad! I guess the most relevant part to FELP is page 37 of this update pdf file, which shows the projection of the regional coal production.  I'm surprised to see that the West region production, even after significant projected decline, is still way above the Interior region by 2040. Based on this projection, it looks like FELP does not have much room for growth (in the case of CPP).

I saw some comments regarding PRB coal.  https://t.co/wrRKwbFhbK (https://t.co/wrRKwbFhbK) 

Quote
According to Schwartz, PRB coal is "never going back to 400 million tons" per year and could go as low as 200 million tons should the EPA's carbon plan take effect and reach 300 million to 320 million tons if it does not. If the plan is ultimately turned back, the national level of coal burn could increase to 700 million to 800 million tons of coal burn, though the exact amount remains uncertain, he said.

200 million tons would hit these PRB producers pretty hard.  That seems pretty dire, not sure how accurate that would be.  But it seems like ILB holds steady with the CPP and probably grows a lot if they can successfully fight it.  It would seem that some of these PRB producers have become far out of the money call options on nat gas.

By the way, @taykuy has some really good posts on twitter.  I hate stealing his links without giving him credit, but he's worth a follow if you're tracking these coal stocks.
Title: Re: FELP - Foresight Energy
Post by: heth247 on June 20, 2016, 10:01:17 PM
Thanks for the recommendation, just followed him. Have you read his recent article on "America runs on bankrupt coal"?  Looks like all these bankruptcies actually won't reduce the supply much, or necessarily translate into more buyers for FELP's coal.
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 20, 2016, 10:41:05 PM
The bankruptcies are probably a net negative for the likes of Foresight.  I've thought about this a bit because you have pushes and pulls in different directions.

ARLP made the comment that their customers want to know that they have the credit to honor their long-term supply agreements.  In normal market conditions that might be true, but in a way the buyers of certain bankrupt (or potentially bankrupt) coal have a free put option if their counter party goes into bankruptcy.  Look at what has happened with Peabody and the Berkshire utility that is terminating the contract.  It's impossible to know what's in certain coal contracts, but there's probably something to signing a leaky contract on a heavily levered coal producer and getting that termination option for free. 

As an example, if Foresight tries to place some long-term contracts will a utility say "we'd rather put it with ARLP because they have better credit?"  Or is it more likely that Foresight underprices ARLP, puts some fairly loose terms in the supply contract (maybe gives the utility an out if they file for bankruptcy) and they end up taking more market share?  It seems more likely that Foresight will drag down ARLP versus ARLP being in a stronger competitive position.  In that framework, everyone else is dragging down Foresight as well.

It's also possible that these various coal producers will continually go in and out of bankruptcy many times over the next decade (BTU, etc).  That can be a fairly difficult environment to navigate for a FELP or ARLP.  At the same time, I think you have investors confusing some cyclical volume trends for secular.  It's likely these coal stockpiles get worked off over the next several months and you can see some decent improvement in pricing and ILB volumes.  But you'll keep seeing secular declines in overall coal and it's a question of where FELP will fit into that picture.  It seems like they can hold their own fairly well and the current price on the common units isn't giving that much credit. 

By the way, Murray bonds are up 76% YTD.  That's bizarre considering their subordinated units are pretty much worthless if the common units are efficiently priced at $1.70.
Title: Re: FELP - Foresight Energy
Post by: Picasso on June 21, 2016, 10:17:55 AM
See attached.  The notes started the year at 19, dropped to 10 during the height of the FELP bankruptcy talk, and just traded at 27.75.  I'm surprised by how actively these notes trade.  Plus they pay 11.25 in coupons per year, so half a years interest of say 6 is about 33.75 against a 19 starting price.  About a 78% return...
Title: Re: FELP - Foresight Energy
Post by: heth247 on June 30, 2016, 02:22:30 PM
Any bad news coming out, or simply window dressing at quarter end? Somebody dumped a lot at the close today.
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 01, 2016, 12:36:02 PM
Any bad news coming out, or simply window dressing at quarter end? Somebody dumped a lot at the close today.

Your guess is as good as mine.  There isn't a lot of liquidity in the stock so any quarter end flows will do that. 
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 08, 2016, 02:45:01 PM
Hi Picasso,

Do FELP has hedges?. If they don't they will have improved margins by $6-8 now with coal trading close to $56-58 range. I am surprised that it is still trading at same range as before agreement.

Thnaks
 
Any bad news coming out, or simply window dressing at quarter end? Somebody dumped a lot at the close today.

Your guess is as good as mine.  There isn't a lot of liquidity in the stock so any quarter end flows will do that.
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 08, 2016, 03:40:12 PM
I posted something to that tune on Twitter.  The coal export terminal that Cline used to own and sold to SXCP last summer can push through 15Mt of exports.  Murray and Foresight each have a 5 Mt take-or-pay with that facility.  As of the end of the 1Q Foresight only hedged 1Mt.  And if you go through SXCP earnings they were only using about 60% of their capacity at the export terminal in the 1Q.  Or it might be less than 60%, I'm just going off memory. 

If they can push through more volume above their minimum 5Mt levels, that's maybe $4-5 margins per ton at $57 API 2.  Maybe more if you give credit for the fact that it's incremental tonnage and costs are pretty fixed, so per ton costs are probably going down.  I think it would strongly imply that volumes will hold up pretty well this year.  And Foresight seems best positioned as the first producer to be "in the money" on coal exports at current API 2 pricing.  I don't think even Murray is at that level.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 08, 2016, 04:28:00 PM
Is there way track domestic coal spot price?. Is it the same?
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 08, 2016, 05:04:35 PM
ILB spot is different. https://www.eia.gov/coal/markets/ (https://www.eia.gov/coal/markets/)

SNL Energy has some useful information in terms of local pricing. I noticed that some utilities are pulling in spot from Foresight in the high $30's as recently as the 1Q, but it varies. That utility also had contracts with Foresight running off in 2016 and 2018, so kind of interesting to see them pull additional volume at spot.  I'd need to dig in more to see if that's happening at ARLP.  They also signed a contract for 1Mt and an option up to 3Mt with LG-KU at $38-42 out into 2019. 

SNL is around $36k per year, so I haven't decided to purchase it yet because I was sort of hoping I wouldn't need to. But I did a demo with a rep to go through some pieces of their data that I can't find elsewhere and it's getting to the point where I think I need to bite that bullet.  If anyone has access to help out with some data I'm looking for, that'd be helpful.  It seemed to me like the Western producers are at massive risk and I'd like to cross check which utilities are pulling from PRB that can instead pull from FELP more cheaply. 
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 08, 2016, 05:56:31 PM
Thanks for the info. if they do volume 22 mill tons (17 mt to domestic and 5mt) this year. Foresight will have $20-25 mil from exports at $5 margin per ton and $170 mil from domestic at $10 margins per ton. Is it correct math if all variables are same?. EIA shows only $32 per ton for ILB coal, where did you get the info on high $30's pricing?

Thanks

ILB spot is different. https://www.eia.gov/coal/markets/ (https://www.eia.gov/coal/markets/)

SNL Energy has some useful information in terms of local pricing. I noticed that some utilities are pulling in spot from Foresight in the high $30's as recently as the 1Q, but it varies. That utility also had contracts with Foresight running off in 2016 and 2018, so kind of interesting to see them pull additional volume at spot.  I'd need to dig in more to see if that's happening at ARLP.  They also signed a contract for 1Mt and an option up to 3Mt with LG-KU at $38-42 out into 2019. 

SNL is around $36k per year, so I haven't decided to purchase it yet because I was sort of hoping I wouldn't need to. But I did a demo with a rep to go through some pieces of their data that I can't find elsewhere and it's getting to the point where I think I need to bite that bullet.  If anyone has access to help out with some data I'm looking for, that'd be helpful.  It seemed to me like the Western producers are at massive risk and I'd like to cross check which utilities are pulling from PRB that can instead pull from FELP more cheaply.
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 08, 2016, 06:37:07 PM
$10 margins on the ILB seems really low considering they did $13 margins in the 1Q on very little tons sold. The $13 margins also include pretty much no margins on the export volumes, so overall ILB is likely a lot higher than $10.

SNL has all volumes and pricing going into various plants, but high $30's was not the netback price to Foresight. I'd have to dig back into it to get a better idea.
Title: Re: FELP - Foresight Energy
Post by: heth247 on July 11, 2016, 11:59:09 AM
Picasso, how to follow you on Twitter? thanks.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 11, 2016, 12:18:37 PM
Hi Picasso

Do we have a way to find out how many notes were tendered. I hope they had enough and July 15th is the deadline.

 :)
ILB spot is different. https://www.eia.gov/coal/markets/ (https://www.eia.gov/coal/markets/)

SNL Energy has some useful information in terms of local pricing. I noticed that some utilities are pulling in spot from Foresight in the high $30's as recently as the 1Q, but it varies. That utility also had contracts with Foresight running off in 2016 and 2018, so kind of interesting to see them pull additional volume at spot.  I'd need to dig in more to see if that's happening at ARLP.  They also signed a contract for 1Mt and an option up to 3Mt with LG-KU at $38-42 out into 2019. 

SNL is around $36k per year, so I haven't decided to purchase it yet because I was sort of hoping I wouldn't need to. But I did a demo with a rep to go through some pieces of their data that I can't find elsewhere and it's getting to the point where I think I need to bite that bullet.  If anyone has access to help out with some data I'm looking for, that'd be helpful.  It seemed to me like the Western producers are at massive risk and I'd like to cross check which utilities are pulling from PRB that can instead pull from FELP more cheaply.
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 11, 2016, 12:36:29 PM
There's still no note tender from Cline.  I think there may be some change to the note swap but I'm trying to figure out what that may be.  I spoke with Murray and SunCoke about this and they sort of mentioned that certain terms are still being worked through.  In that sense something could still fall apart.

I did take a look at Murray's financials (they're subject to NDA so don't want to say a lot).  I think I know what is going on but I'm not entirely certain.  Rather than speculate I'd rather just let the chips fall. 
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 11, 2016, 01:16:11 PM

Thanks for the color. DMed you on twitter. Hope its the good for Murray subordinates.

 :)
@YoloCapMgt is my handle. 

There's still no note tender from Cline.  I think there may be some change to the note swap but I'm trying to figure out what that may be.  I spoke with Murray and SunCoke about this and they sort of mentioned that certain terms are still being worked through.  In that sense something could still fall apart.

I did take a look at Murray's financials (they're subject to NDA so don't want to say a lot).  I think I know what is going on but I'm not entirely certain.  Rather than speculate I'd rather just let the chips fall.  But if you DM me on twitter I could probably go into more detail.
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 12, 2016, 03:33:02 PM
I forgot to update this before, but Fidelity is officially out.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on July 13, 2016, 03:04:37 AM
Thanks that you keep updating this and good news!
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on July 15, 2016, 11:43:48 AM
Up ten percent rather quickly (on not out of the ordinary volume as far as I can see). Any news?
Title: Re: FELP - Foresight Energy
Post by: heth247 on July 15, 2016, 02:42:31 PM
No SEC filings, and no news....

And I guess Picasso must be busy playing Pokemon Go....  ;)
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 18, 2016, 06:35:42 AM
So there's the confirmation that they're trying to make a change to the note restructuring.  My best guess is that April 2017 is too soon of a maturity on the PIK's.  If they can successfully make any incremental improvement there, then that's probably a better outcome for the equity.  We have some new extensions expiring in August.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 18, 2016, 07:51:12 AM
Hi Picasso

It looks like Cline don't want to contribute more money for this transaction and he is dragging his feet with so many extensions. May be that's the reason for  support agreement between the Murray and Cline Dev.

Thanks for your analysis

So there's the confirmation that they're trying to make a change to the note restructuring.  My best guess is that April 2017 is too soon of a maturity on the PIK's.  If they can successfully make any incremental improvement there, then that's probably a better outcome for the equity.  We have some new extensions expiring in August.
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 18, 2016, 08:20:07 AM
There's probably more to it than that.  As it stands, Cline will be buying back his stake at 10% of what he sold it for a year ago should Murray be unable to come up with funds by April 2017.  If you look at Murray debt trading volume, maybe Murray wants to spend the next year reducing leverage at Murray without having to also figure out a way to redeem the PIK's by April.  If they can extend that April 2017 PIK, then Cline doesn't have to worry about Murray going into bankruptcy and causing other issues for FELP.  I doubt Cline has any issues with the current deal structure, but it may make more sense for all parties to give Murray additional time to generate cash. 
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 19, 2016, 06:30:18 AM
Hi Dennis,

Thanks for the color. Someone slowly accumulating with a disciplined approach (buying around 2.00 in early hours).

http://www.snl.com/web/client?auth=inherit#news/article?id=37108889&cdid=A-37108889-11048

It looks like ILB region coal production is down 6.2% quarter to quarter (Q1 to Q2). It looks like FELP has to produce more in H2 2016.


There's probably more to it than that.  As it stands, Cline will be buying back his stake at 10% of what he sold it for a year ago should Murray be unable to come up with funds by April 2017.  If you look at Murray debt trading volume, maybe Murray wants to spend the next year reducing leverage at Murray without having to also figure out a way to redeem the PIK's by April.  If they can extend that April 2017 PIK, then Cline doesn't have to worry about Murray going into bankruptcy and causing other issues for FELP.  I doubt Cline has any issues with the current deal structure, but it may make more sense for all parties to give Murray additional time to generate cash.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on July 23, 2016, 07:16:22 AM
Increased production.

http://www.platts.com/latest-news/coal/houston/ilb-q2-coal-production-totals-234-million-st-21063126
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 25, 2016, 06:47:07 AM
Hi Picasso

Any thoughts on amended agreement. Thanks

http://google.brand.edgar-online.com/displayfilinginfo.aspx?filingid=11501334&tabindex=2&type=html
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 25, 2016, 07:38:41 AM
So my speculation was close enough to the mark, the PIK's will have a September 2017 maturity instead of April.  That's a big positive.  Also less warrants are being issued (~6 million versus 9.8 million).  Tender launch date should begin August 1st and we should be looking at the new capital structure on September 1st.  Downside is they still have that excess cash flow sweep feature through 2017.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on July 25, 2016, 07:46:57 AM
Thanks. It looks like no Dividends till later half of 2018 based on "the prohibition of certain restricted payments in 2016, 2017 and the first six months of 2018".



So my speculation was close enough to the mark, the PIK's will have a September 2017 maturity instead of April.  That's a big positive.  Also less warrants are being issued (~6 million versus 9.8 million).  Tender launch date should begin August 1st and we should be looking at the new capital structure on September 1st.  Downside is they still have that excess cash flow sweep feature through 2017.
Title: Re: FELP - Foresight Energy
Post by: heth247 on July 25, 2016, 02:52:30 PM
Why? Isn't that "excessive cash flow sweep" requirement only for 50% of the excess cash flow? So can't they still pay out the other 50% for dividend?  I haven't checked the covenant for leverage ratio though.

Thanks. It looks like no Dividends till later half of 2018 based on "the prohibition of certain restricted payments in 2016, 2017 and the first six months of 2018".

So my speculation was close enough to the mark, the PIK's will have a September 2017 maturity instead of April.  That's a big positive.  Also less warrants are being issued (~6 million versus 9.8 million).  Tender launch date should begin August 1st and we should be looking at the new capital structure on September 1st.  Downside is they still have that excess cash flow sweep feature through 2017.
Title: Re: FELP - Foresight Energy
Post by: heth247 on July 25, 2016, 05:01:46 PM
I am sorry, yes you are right. Just got more time to read it:

(iii) the Restricted Payment covenant shall be modified to (A) prohibit any Restricted Payments by the Borrower during fiscal year 2016, (B) prohibit Restricted Payments (other than permitted Tax Distributions and TRA Distributions described in clause (C) below) from January 1, 2017 until the later to occur of (x) June 30, 2018 and (y) the refinancing of the Revolving Facility and (C) permit Tax Distributions and TRA Distributions by the Borrower during fiscal years 2017 and 2018 and thereafter, provided that Tax Distributions related to cancellation of debt income shall be capped at $15 million per fiscal year; provided, further , that in each case such provisions shall be subject to customary exceptions to permit payments of expenses of the MLP and the General Partner, payments under the MSA and other customary exceptions to be agreed;



Why? Isn't that "excessive cash flow sweep" requirement only for 50% of the excess cash flow? So can't they still pay out the other 50% for dividend?  I haven't checked the covenant for leverage ratio though.

Thanks. It looks like no Dividends till later half of 2018 based on "the prohibition of certain restricted payments in 2016, 2017 and the first six months of 2018".

So my speculation was close enough to the mark, the PIK's will have a September 2017 maturity instead of April.  That's a big positive.  Also less warrants are being issued (~6 million versus 9.8 million).  Tender launch date should begin August 1st and we should be looking at the new capital structure on September 1st.  Downside is they still have that excess cash flow sweep feature through 2017.
Title: Re: FELP - Foresight Energy
Post by: hswoon on July 25, 2016, 07:23:09 PM
Lowered senior secured leverage ratios:
(a) 3.8 to 1 through the end of 2016; (b) 4.0 to 1 during 2017; (c) 3.8 to 1 during 2018; (d) 3.5 to 1 during 2019; and (e) 3.25 to 1
during 2020;

to

(a) 3.5 to 1 through the end of 2016; (b) 3.5 to 1 during 2017; (c) 3.5 to
1 during 2018; (d) 3.25 to 1 during 2019; (e) 3.00 to 1 during 2020; and (f) 2.75 to 1 during 2021
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 27, 2016, 01:08:10 PM
Quote
After falling nearly 30% from the previous year during the first quarter of this year, production at mines owned by Ohio-based coal producer Murray Energy Corp. flattened out in the second quarter, slipping just 5.2% from last year and less than a percent from the previous period.

During the second quarter of 2016, Murray Energy mines produced 11.1 million tons of coal, down from 11.7 million tons in the year-ago period and 11.2 million tons in the first quarter of the year.

According to data compiled by the U.S. Mine Safety and Health Administration, output at Murray mines not jointly owned with Foresight Energy LP remained virtually flat from the first quarter of this year overall, though certain individual mines saw sharp changes quarter to quarter and year to year.

Company spokesman Gary Broadbent explained the slight decline as a result of "scheduling changes which reflect the total destruction of the United States coal industry, as caused by the policies of the Obama Administration and the increased use of natural gas to generate electricity."

The largest increases in production over last year were seen at the company's Lila Canyon mine, climbing 477% over 2015, and its Monongalia County facility, growing by 211%.

Broadbent said both increases in production were a result of the mines not being operational during the first half of 2015.

Located in the Uinta Basin, the Lila Canyon mine saw its sharp increase in output as company CEO and founder, Robert Murray, predicted an end to westbound production in the basin by 2030. The basin is made up of facilities in Utah and Colorado.

In early June, Murray told S&P Global Market Intelligence that an earlier prediction he made about the basin's future was becoming a reality far quicker than he expected.

"Uinta Basin coal going west and power from coal in Utah going west is going to be totally eliminated in time so that's why I said five years ago that the Uinta Basin would be destroyed," Murray said, adding that Colorado wasn't doing much better. "I see a rapid decline in the Uinta Basin."

From the first quarter of this year, Murray witnessed growth in output at a number of its Northern Appalachian and Illinois Basin mines, with the largest percentage increase seen at its New Future facility. Production at the mine climbed 79.7% from the first quarter, though it dropped by a little over 50% from the same period last year.

Production at Murray's Powhatan No. 6 mine fell 11.3% from the year-ago period and 17.1% from the previous quarter, but is expected to see a much sharper decline in the months ahead. In May, Murray announced that it will wrap up underground coal mining production at the mine in November 2016. The facility was slated to close this month, but closure was extended for a few months, pushing back a series of likely staff transfers and layoffs.

Another one of the company's mines will also see a sharp drop-off in the months ahead at its New Era facility.

Production at the mine fell 15.6% from the same quarter in 2015 and nearly 50% from the previous period, but is scheduled to cease operations in October, "on completion of mining in the current longwall panel."

Even as it plans for mine closures and the possibility of thousands of layoffs in the months ahead, Murray does have some intention of expanding its production reach. Earlier this month, Murray told S&P Global Market Intelligence that it filed a permit application with the West Virginia Department of Environmental Protection to add about 7,200 acres of coal reserves to the Marion County coal mine in northern West Virginia.

The Marion County mine produced 783,381 tons in the second quarter of this year, amounting to a 54.6% drop from the year-ago period and a 37.6% increase over the first quarter of 2016.

This Murray guy.  Never misses a chance to blame Obama.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on July 27, 2016, 01:42:14 PM
It's just such a bummer that Obama created policies that favor clean energy instead of coal...

Murray should realize that anyone thats not a coal miner or mine owner prefers cleaner energy if its of similar cost. Renewables aren't quite there yet, but they will be once the cost of storage comes down enough.

This will take a few years, hence why I'll happy to buy undervalued FELP in the interim.
Title: Re: FELP - Foresight Energy
Post by: gadfly on July 27, 2016, 04:13:11 PM
Pretty encouraging stuff lately with nat gas prices, summer weather and good price action from some other less leveraged coal MLPs like ARLP and CNXC. Not to mention FELP up a lot today on sorta decent volume.

One thing that has worried me lately is Bob Murray. I wonder why he is pursuing such a strong media offensive right now. It seems like every other day he is on TV or in print sounding off on the EPA and Obama. As a coal exc you'd think the right strategy would be to toil in anonymity...maybe he's trying to ride the Trump wave? I hope it's not desperate behavior.

Anyone have any insight into how the ongoing Murray creditor negotiations could affect FELP? Also, has there been any news about Deer run lately?
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 27, 2016, 04:42:17 PM
Not sure about the MEC negotiations. They have a term loan coming due pretty soon.

I haven't seen any news with Deer Run.  If we could get some progress there, that could be a pretty huge catalyst for the equity.  Otherwise they'll have to convert Hillsboro to continuous mining and the cost structure goes up a bit.

One other thing that seems like a big deal to me.  You would think that if Cline/Murray didn't see the value in their IDR's, they would be okay with giving out whatever warrants on the debt swap.  But instead they reduced the warrant component.  Which sort of leads me to think that they'll come up with something clever to refinance the PIK's and avoid extra dilution.  If they were willing to go through this effort to get a 4 million unit reduction in dilution, then I feel pretty good about the August 2017 maturity being done in a fair manner.  Also Cline isn't taking accrued interest on his FELP tender which is another indication that they're being thoughtful about how much value is being extracted from equity holders.
Title: Re: FELP - Foresight Energy
Post by: valcont on July 29, 2016, 10:32:31 AM
Any idea why its up 12%?  I don't see any new filing.
Title: Re: FELP - Foresight Energy
Post by: Patmo on July 29, 2016, 01:11:14 PM
I spread printouts of Picasso's posts throughout my neighborhood this morning, looking to share the Good News. That should be it...
Title: Re: FELP - Foresight Energy
Post by: heth247 on July 29, 2016, 02:10:52 PM
Any idea why its up 12%?  I don't see any new filing.

Actually, you should ask "why is it still below $3"?  ;)
Title: Re: FELP - Foresight Energy
Post by: valcont on July 29, 2016, 02:34:38 PM
Agree. Having owned FCAU for the last two years,should've learnt that I have no clue what the catalyst are.

I guess I have to vote for Trump to get this stock moving.
Title: Re: FELP - Foresight Energy
Post by: Picasso on July 29, 2016, 07:25:29 PM
Up until a month ago I was able to buy FELP notes at around 71.  I tried to pick some up this week and I started hearing back that no one wanted to sell because of the upcoming tender.  So if they're not selling to me (there's been no volume in the notes since I purchased last and I was willing to bid up a decent amount in the $70's) then I'd be super surprised if there was enough no votes on this tender to mess up the swap.  Why say no to an offer around $95+?  Add in all the improvements in fundamentals and I think you have quite a nice catalyst after they exit this technical default.

Plus SunCoke had some interesting comments from their earnings call (since they own the export terminal that FELP and MEC run volumes through).  There wasn't any improvement in export volumes in the 2Q, which probably means that the extra volumes produced are either going into the higher margin domestic market and/or we're also going to see extra volume put through their Convent terminal later in the year.  And with a pretty decent forward curve on API 2, it doesn't seem like some short term dead cat bounce. 

It's also important to note that FELP isn't trading for $2.50 because coal is dead.  If you look at where CNXC or ARLP trades, any repricing closer to those comps would put it multiples higher.  So the market is still pricing in lots of dilution or a deal falling apart.  But again the structure of this swap isn't so that you'll get massively diluted.  As the market hopefully recognizes this, the higher the units trade, the less impact dilution has on the valuation because we have a fixed dollar refinance coming up.  But if the market is indeed warming up to coal then there's probably other refinance options, including taking out the more restrictive 2021 2nd liens.  Which makes this is a situation where the higher the stock goes, the better the outcome gets and the intrinsic value also goes up.  I think that's what you're normally looking for for multi bagger type returns.

So if you step back and think about this for a minute... you have two guys who own 85% of the equity still playing for maximum equity upside, potential bankruptcy is going to be averted, coal is bouncing off the lows and CEO's of CNXC and CLD are finally positive on the turn, there is massive operating and financial leverage, half the share count is subordinated and way out of the money which cushions the downside risk in dilution, and it's in a sector which is extremely hated.  I really like all those things about this investment.

All that said, I think $2.50 is still really compelling so I bought more today.  I own so much of it that I may sell some after they exit technical default, but not quite sure yet...  We'll see how the market reacts to a clean entity versus one several months into potential bankruptcy. 
Title: Re: FELP - Foresight Energy
Post by: Patmo on July 30, 2016, 05:37:37 AM
Also, lets take a look behind us and appreciate the fact that this stock already more than doubled since its recent lows. Not sure that complaining about this company's stock not moving is warranted.

Personally I shed a tear thinking about how awesome the coal space, and resource-related in general, has done and continues to do this year.
Title: Re: FELP - Foresight Energy
Post by: valcont on July 30, 2016, 10:06:37 AM
I was being sarcastic. My cost basis was $1.70 so I can't complain. I am just surprised at how many stocks have been overtaken by the macros in this market.
Title: Re: FELP - Foresight Energy
Post by: valcont on August 01, 2016, 08:30:39 AM
Wow what a momentum. I am really tempted to sell half of my position. A lot of day traders are jumping in. Better to buy before close.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 01, 2016, 08:42:54 AM
Am I the only guy who is hodling?

https://bitcointalk.org/index.php?topic=375643.0 (https://bitcointalk.org/index.php?topic=375643.0)
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on August 01, 2016, 08:52:14 AM
I'm hodling.

If we are at the turn of the coal market and FELP gets repriced similar to CNXC and ARLP, as you said Picasso, I think it's better to hold.


Title: Re: FELP - Foresight Energy
Post by: leviathan on August 01, 2016, 08:52:35 AM
Am I the only guy who is hodling?

https://bitcointalk.org/index.php?topic=375643.0 (https://bitcointalk.org/index.php?topic=375643.0)

Today, we are all hodling.
Title: Re: FELP - Foresight Energy
Post by: valcont on August 01, 2016, 09:52:08 AM
 I should have explained my reasoning as I don't want to turn this board into a twitter dialog. Actually I am the worst timer, I bought this stock at $2.20 and had to average down quite a bit to get my cost basis to $1.70. I hate it when I find myself in this situation but I just couldn't believe Murray will drop $1.3B and watch the dilution over a technical default. And no bondholder would take that to the bankruptcy. Good luck selling coal assets or running one. My valuation wasn't even close to what you guys came up with correctly but I can spot a cigar butt from a distance.

Title: Re: FELP - Foresight Energy
Post by: sampr01 on August 01, 2016, 10:08:13 AM
Hi Picasso,

Lets get back to boring stuff like EBITDA. Do you see a significant improvement in ~EBTIDA with recent price improvements in export coal and domestic coal (with base EBTIDA ~$ 264 millions at $12 margins).

Thanks for the idea as well as all of the info you provided (on and offline). I don't to make same mistake as I did with SXC (will follow peter lynch advise on winners).

Thanks




Am I the only guy who is hodling?

https://bitcointalk.org/index.php?topic=375643.0 (https://bitcointalk.org/index.php?topic=375643.0)
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 01, 2016, 10:35:33 AM
I should have explained my reasoning as I don't want to turn this board into a twitter dialog. Actually I am the worst timer, I bought this stock at $2.20 and had to average down quite a bit to get my cost basis to $1.70. I hate it when I find myself in this situation but I just couldn't believe Murray will drop $1.3B and watch the dilution over a technical default. And no bondholder would take that to the bankruptcy. Good luck selling coal assets or running one. My valuation wasn't even close to what you guys came up with correctly but I can spot a cigar butt from a distance.

I think it's one of those human tendencies that results from having gone through a lot of anguish.  A lot of FELP holders are used to seeing the stock go down, and it might have been painful or frustrating, so recouping losses or getting a decent exit price can be appealing.  It amazes me how many investors identify a great investment and then just as soon as things are improving, they are happy to sell for some 50% gain.  Or whatever the gain is.  Not because they think they are getting a fully valued price, but just to pull some chips off the table.  It's so detrimental to long-term returns but investors do it all the time.

It's sort of like options traders.  Bad option traders take chips off when they get a double or triple.  Then they get hit with a string of losses and they end up wiping out their capital.  Good option traders hold their bets to realize as much of the upside as long as it's warranted.  Because they know it doesn't come around often and they need to make the most of those opportunities.  FELP was an option (still is) so you almost have to approach it like that as well.

I look at the current price, improvement in fundamentals, the structure of this note exchange, and just can't see how this stock is still trading $2.85 (less at the time I'm posting).  Now it's possible that fundamentals get terrible next year.  But it seems much more probable that the opposite happens.  You also have to ask yourself whether Murray/Cline would go through all this trouble to have the common units trading at $3 or $4. 

Anyway, we'll see what happens. 
Title: Re: FELP - Foresight Energy
Post by: awindenberger on August 01, 2016, 01:02:26 PM
Wild trading on FELP today. First we see panic buying sending the stock up as high as $3.54 in the morning, then panic selling at the close to drop it as low as $2.25 in the last 30mins, before closing the day around $2.85.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 01, 2016, 01:04:17 PM
Cline started the tender for the notes.  My guess is some algo saw the headlines I attached... Amazing.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 01, 2016, 01:14:58 PM
Oh god... Bloomberg put out this news report:

Quote
(Bloomberg) --
Foresight Energy LP is planning to launch a debt exchange as early as Monday that could allow the struggling coal miner to avert a potential bankruptcy and give bondholders a majority stake, according to people with direct knowledge of the matter.

The coal company, which previously disclosed it was in talks with certain lenders about a deal, will offer to swap existing debt for a combination of convertible pay-in-kind securities, cash and warrants, according to the people, who asked not to be named because the arrangements haven’t been publicly announced.

The terms could give bondholders a 75 percent equity stake and warrants for 4.5 percent, the people said.

Gary Broadbent, a spokesman at Foresight, declined to comment.

No, the idea isn't to give bondholders a majority stake... And if that happens they won't get a 75% stake plus the 4.5% warrants.  They only get the 4.5% warrants spread across the PIK's if they are redeemed for cash.
Title: Re: FELP - Foresight Energy
Post by: valcont on August 01, 2016, 02:55:06 PM
Oh god... Bloomberg put out this news report:

Quote
(Bloomberg) --
Foresight Energy LP is planning to launch a debt exchange as early as Monday that could allow the struggling coal miner to avert a potential bankruptcy and give bondholders a majority stake, according to people with direct knowledge of the matter.

The coal company, which previously disclosed it was in talks with certain lenders about a deal, will offer to swap existing debt for a combination of convertible pay-in-kind securities, cash and warrants, according to the people, who asked not to be named because the arrangements haven’t been publicly announced.

The terms could give bondholders a 75 percent equity stake and warrants for 4.5 percent, the people said...


Thanks for the clarification. I couldn't believe that the bondholders can get such a sweetheart deal without forcing them into bankruptcy.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on August 01, 2016, 02:59:26 PM
Im confused, nothing new is happening that we didn't already know right? The Bloomberg reporter is simply misunderstanding what is happening.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 01, 2016, 05:20:19 PM
Here's an updated one.

Quote
(Bloomberg) --
Foresight Energy LP launched a debt exchange that could buy time for the struggling coal miner to ride out the industry’s long-running slump.

The coal company founded by billionaire Christopher Cline offered to swap existing debt for pay-in-kind securities that could eventually be exchanged for common units, as well as cash and warrants, according to a statement Monday.

The deal could end a dispute with investors who claimed Foresight had triggered a clause that required the company to repay all of its notes at a premium when it agreed to be partially bought by rival Murray Energy Corp. last year. Foresight has already persuaded key holders of its $600 million of 7.875 percent senior unsecured notes maturing 2021 to sign up for the deal, according to a July 25 regulatory filing.

Gary Broadbent, a spokesman for Foresight, declined to elaborate beyond the statement. Foresight is restructuring its debt as America’s coal miners struggle to survive the worst industry downturn in decades. Cheap natural gas, new environmental regulations and weakening demand abroad have driven the country’s largest miners, including Peabody Energy Corp., Arch Coal Inc. and Alpha Natural Resources Inc., into bankruptcy.

Foresight shares gained 33 cents, or 13 percent, to $2.83 in New York. The stock is down more than 80 percent over the past two years.

Who Gets What

Terms include giving current holders new senior secured second-lien notes due 2021 that offer a 9 percent cash coupon for the first two years, and 10 percent after that, according to the latest filing. They’d get an additional 1 percent paid-in-kind throughout, among other terms. PIK securities typically issue more notes in lieu of cash.

Holders would also get senior secured second-lien notes with a 15 percent PIK coupon that runs until October 2017. After that, they’d automatically be exchanged for common units, plus warrants equal to 4.5 percent of those units.

The company didn’t specify the numerical common stake for bondholders after the conversion. A previous filing that disclosed preliminary terms put the figure at about 75 percent.


The dispute with bondholders began after Murray bought a 50 percent stake in St. Louis-based Foresight a year ago. The creditors argued that the acquisition amounted to a change of control and pushed to be repaid at a premium.

Senior lenders plan to cut the amount available under Foresight’s credit facility by $75 million and will lower it by another $25 million by the end of the year, according to last month’s regulatory filing.

It's in the filings... Murray needs to exercise their right for the remaining 15% of FELP, redeem the PIK notes and then dilution is limited to 4.5%.  If they issue equity to do the redemption, it's done at the higher of the 30-day VWAP or 0.88/unit.  So if FELP is trading at $4, then divide say $250 million (they'll likely be repurchasing PIK debt ahead of the redemption date) into $4 for another 62.5 million units.  Total common units would total 132 million, subordinated units would total 65 million.  Total units would go from 130 million to 197 million.  Even in that scenario ($4 is probably a low figure for the VWAP), noteholders wouldn't own anywhere close to 75% of the company.  75% dilution is the worst that can possibly happen if FELP somewhere trades for less than $0.88/unit by August 2017.  It didn't even trade there when there was massive Fidelity selling and all the bankruptcy talk.  And if coal does improve then it's likely they'll refinance out all the debt.  A lot of things become possible once they exit default.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on August 01, 2016, 11:53:47 PM
All I want to contribute right now is that I'm holding and it's a large relative position for me (at the spike yesterday it was my largest holding at nearly 20% of my portfolio). My average buy price is $1.70 (I'm probably relatively high compared to most of you).

I'm continously keeping watch on this for when to sell but for now think it's unlikely that selling any before $4 is a good idea at least. Thanks for updating this topic, extremely valuable information for me (especially since I'm on holiday on my phone).
Title: Re: FELP - Foresight Energy
Post by: awindenberger on August 02, 2016, 09:16:31 AM
Thanks again Picasso. I've learned a lot from you on FELP and SXC(P) these past few months.
Title: Re: FELP - Foresight Energy
Post by: heth247 on August 02, 2016, 10:34:25 AM
Thanks again Picasso. I've learned a lot from you on FELP and SXC(P) these past few months.

Same here!
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 02, 2016, 10:52:23 AM
Always happy to share my ideas and get feedback. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 02, 2016, 11:58:07 AM
Spoke to a tax lawyer who deals with a lot of these MLP's (represents LINN and couple others getting hit with CODI) since there's the last pressing matter related to cancellation of debt income.  Depending on where the new FELP debt and warrants trade, if they trade for say $90, then there will be $10 of income generated that will be distributed across the unit holders.  If that's $60 million of CODI (10% of par), then there will be a 0.46 gain sent down to the units (poor Murray).  There's a 31 day window, 15 days after the exchange is over where they assess the value of the exchange for tax reasons.  Even though it's a $600 million for $600 million swap, for tax purposes it will depend on the market value post exchange.

So something to consider in case anyone thinks the value of the exchange will somehow be much less than par, or you start seeing headlines that you may get hit with massive tax bills.  Since Cline and Murray own 85% of the equity, it seems like they made this as close to a par deal as possible.  Unless they think the upside to the deal is way more than the potential tax hit.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 02, 2016, 12:27:30 PM
Just some back of the envelope here to calculate the CODI:

$300 million of 2021 2nd liens @ 90% of par = $270 million
$300 million of 2017 PIK @ par = $300 million
FELP @ $4 gives $3 or so of value to the warrants x 5.85 million = $17.6 million

That's $587 million instead of $600 million, so potentially $13 million of CODI.  Which would be about $0.10 of taxable income for unit.  Seems kind of de minimum but I could see how buyers of FELP will hold off until after the exchange to avoid paying the tax. 

Edit: Turns out the accrued interest (even though it's in the form of bonds) is adjusted into the basis.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on August 03, 2016, 11:10:00 AM
From Taylor Kuykendall on Twitter:

Westmoreland CEO 'excited' to report coal results for coming quarters

http://www.snl.com/web/client?auth=inherit#news/article?id=37289616&cdid=A-37289616-12325

Quote
Like many other coal producers providing quarterly results so far, Westmoreland is reporting improved demand trends due to hotter summer weather. He said the increased number of cooling days at utilities this summer has offset the softness in the first quarter and that Westmoreland is "eager to see" how trends play out.

Jason Veenstra, CFO and treasurer, said the company would expect a "much stronger" 2017 if pricing levels hold.

Tempered by this:

Cloud Peak CEO: Coal not 'going back to where we were'; some optimism in H2'16

http://www.snl.com/web/client?auth=inherit#news/article?id=37287127&cdid=A-37287127-12585

Quote
On a conference call hosted by Morgan Stanley, Marshall said the recent hot weather of summer 2016 is bringing back demand from coal plants that has not been around since Thanksgiving of 2015. He said there is a marked increase in shipments heading through the summer, and demand is expected to improve as utilities whittle down their coal stockpiles.


He said the changes the coal sector has made have been "miserable" but said not to worry that coal demand is "going to nothing." He added that it is mostly a matter of operators figuring out how to operate in a more volatile market, though more stability could be on the horizon.

"It looks like we'll get back to a much more supportive pricing environment and volume as things come out if there's any stability in gas and some sort of normal power demand," Marshall said. "We do have to accept, going forward, that coal, which used to be a true baseload business, is going to become a lot more variable, and demand will vary with the price of gas and weather, and that's just the way it's going to be going forward and we have to adapt to that."

Title: Re: FELP - Foresight Energy
Post by: heth247 on August 04, 2016, 04:25:40 PM
Just some back of the envelope here to calculate the CODI:

$300 million of 2021 2nd liens @ 90% of par = $270 million
$300 million of 2017 PIK @ par = $300 million
FELP @ $4 gives $3 or so of value to the warrants x 5.85 million = $17.6 million

That's $587 million instead of $600 million, so potentially $13 million of CODI.  Which would be about $0.10 of taxable income for unit.  Seems kind of de minimum but I could see how buyers of FELP will hold off until after the exchange to avoid paying the tax. 

Edit: Turns out the accrued interest (even though it's in the form of bonds) is adjusted into the basis.

I hope they try their best to keep the CODI as small as possible. Just learned that for CODI, it will be counted as UBTI in the K-1 form. For any UBTI over $1000, we need to pay a tax rate of 39%, even for IRA accounts!

Anybody holding MLPs in IRA in the past?  For the ordinary income part from the K-1 form, you don't need to worry about tax, do you?
 
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 04, 2016, 05:03:35 PM
I think I referenced this early in the thread but since Cline and Murray own 85% of the units that currently do not pay distributions, they would not want to create a lot of CODI.  So say you own 100k units, $13 million of CODI across all the units would hit you with a $10,000 gain.  If you pay out 40% of that in tax, it cost you $4k.  But what are the 100k units now worth?  Each $1 increase nets you $100k and if it's in an IRA, you're deferring tax on that short-term gain.  I think it's very de minimis but we'll see how the notes trade.  Much ado about nothing imo.  What investors have to worry about are the Linn energy type situations.
Title: Re: FELP - Foresight Energy
Post by: heth247 on August 04, 2016, 08:27:28 PM
I think I referenced this early in the thread but since Cline and Murray own 85% of the units that currently do not pay distributions, they would not want to create a lot of CODI.  So say you own 100k units, $13 million of CODI across all the units would hit you with a $10,000 gain.  If you pay out 40% of that in tax, it cost you $4k.  But what are the 100k units now worth?  Each $1 increase nets you $100k and if it's in an IRA, you're deferring tax on that short-term gain.  I think it's very de minimis but we'll see how the notes trade.  Much ado about nothing imo.  What investors have to worry about are the Linn energy type situations.

Yeah, can't complain about the tax-free capital gains. :)  I was just surprised that I will have to work with my broker to file a 990T form for my Roth IRA account due to the CODI. I never need to worry about tax for those type of account before. Anyway, it is my first time to own these MLPs, so lots of things to learn....

It seems that even for taxable accounts, the future cash distribution is counted as return of capital (ROC), so they will mostly just reduce the basis of the units. Unless you sell, you can get those cash distribution tax-free. Is that so?
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 04, 2016, 09:26:30 PM
Correct, the vast majority of the distributions are considered return of capital.  In the case of FELP if you own it at $1.50, it might only take a couple or few years before the distributions reduce your basis down to zero.  At that point all the distributions become taxable as ordinary income.  Then if you sell FELP in several years, the basis reduction becomes taxable.  Any capital gains above the ROC would be at long-term capital rates.

So say you owned it at $1.50 and by 2020 you received $3 of distributions, maybe $2.50 of which were ROC, and you sell the units at $10.  You would have $3.00 of ordinary income ($1.50 of that was deferred until sale), and $8.50 of long-term capital gains. 

If you own it in an IRA, you just have to deal with the UBTI.  In the case of FELP, if you do not own it on the date of the exchange then you won't have to deal with the CODI.  I believe we'll get news of a successful exchange before that date (not entirely sure, need to double check) which might have a favorable impact on the units.  So technically you could sell ahead of that date, but I feel like there would be investors waiting to buying after that date who do not want to risk CODI?  So you'd risk missing out on that upside.  Would it be worth saving something like 0.05-0.10 of Roth cash?  The bid ask spread on FELP is basically around that area anyway. 

And just a little more color on why I think it wouldn't make a ton of sense to game that exchange date to avoid CODI.

This was in the last SNL report on FELP:

Quote
The company warned the restructuring contemplates potential issuance of additional equity securities that could "significantly dilute" the ownership of existing unitholders. It also warned the exchange offer will generate substantial cancellation of indebtedness income that will be taxable to unitholders and could result in a liability per unit substantial to or even exceeding the value of a common unit.

That's scary for investors right?  But there's a reason for that language.  What if FELP had $600 million of 2021 8% debt being exchanged for $600 million of 2035 2% debt.  It's the same amount of debt being swapped, but in reality the 2% 2035 debt is worth just a fraction of the 2021 8% debt.  Which is basically a de facto debt reduction.  To avoid free income to those types of restructurings it makes sense to tax that market value difference. 

In the case of FELP we're going from $600 million of 2021 unsecured 7 7/8% debt to $300 million of 2017 15% 2nd lien and $300 million of 2021 10% (or so) 2nd liens.  Plus in the money warrants.  So the principal is staying the same, but a big jump in the interest rate, half the duration, higher in the cap structure, and extra warrants.  If FELP debt was trading at around $90 last year (December), here we have much better debt that should be trading much higher than that.  At least collectively between all the pieces. 

So maybe investors are nervous about that nasty language of being taxed more than the value of the units.  But it's clear that's not going to happen.  Between that and the confusion around the potential dilution, it really explains why the units are still so cheap.  My position isn't exactly liquid enough to game that exchange date, but maybe it hits a price high enough to warrant trying to avoid the CODI headache for others. 
Title: Re: FELP - Foresight Energy
Post by: heth247 on August 05, 2016, 09:58:52 AM
Thanks for the color, Picasso.  Yeah, I don't have that many of units in my IRA, so economic wise, it is not a big deal. I was just surprised that I have to deal with it even for Roth accounts.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 09, 2016, 04:51:08 AM
http://investor.foresight.com/file/Index?KeyFile=35425681
 (http://investor.foresight.com/file/Index?KeyFile=35425681)

Looks really good to me.
Title: Re: FELP - Foresight Energy
Post by: heth247 on August 09, 2016, 09:18:18 AM
http://investor.foresight.com/file/Index?KeyFile=35425681
 (http://investor.foresight.com/file/Index?KeyFile=35425681)

Looks really good to me.

Yeah, it good to see that their cost per ton has come down to $22.16 in this Q. Hopefully it will go down further as they sell more in the next 2Qs.   No updates on the deer run fire though.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on August 09, 2016, 09:29:41 AM
Yes, it would be nice to know how long they expect the mine to be sealed before they plan on checking on it.

It's crazy how these mines just burn for years, but maybe it's really difficult to get all the air out.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 09, 2016, 10:16:54 AM
If you look at how much cash they have on the balance sheet, that volumes will continue to improve through the rest of the year, API 2 prices have recovered a lot, that we haven't seen the impact of that yet, how low they're keeping costs, then it seems probable that they can pay down a significant amount of PIK debt over the next year. 

And to think the units were down at $1.35 after their last earnings report because "earnings missed."  Amazes me to see investors gravitate towards low multiple peak earnings stories and run for the hills from cyclical stocks when they're at some kind of trough on the operating leverage.  Fidelity could not have timed their purchase and sale any worse.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on August 09, 2016, 11:13:27 AM
Picasso:
Quote
If you look at how much cash they have on the balance sheet, that volumes will continue to improve through the rest of the year, API 2 prices have recovered a lot, that we haven't seen the impact of that yet, how low they're keeping costs, then it seems probable that they can pay down a significant amount of PIK debt over the next year. 

And to think the units were down at $1.35 after their last earnings report because "earnings missed."  Amazes me to see investors gravitate towards low multiple peak earnings stories and run for the hills from cyclical stocks when they're at some kind of trough on the operating leverage.  Fidelity could not have timed their purchase and sale any worse

And probably in the near future, we'll start to get some upgrades and then the likes of Fidelity will be back to buy again.

Accipiter continues to hold (neighbor with Cline).



Taylor Kuykendall at the American Coal Council gathering this week tweets:

Quote
James Stevenon, IHS director says after long feeling like an undertaker, he has good news of potetnial coal recovery

Quote
May not be huge, but Stevenson says “When we do get a recovery it will be a sharp one" in coal

Quote
Grant Quasha, chief commercial officer of Bowie Resource Partners LP, said he agrees that the coal market bottomed.

Quote
Hallador CEO: “We’re seeing a lot of quiet closures. When the market does respond, when we do need to rely on coal, will it be there?”

Quote
Hallador CEO on bankers buying coal companies: Do bondholders want to own coal companies long-term? I think the answer is no



All positive signs that this ride for FELP may just be the beginning.




Title: Re: FELP - Foresight Energy
Post by: roark33 on August 09, 2016, 11:31:08 AM
Ok, I will take the other side, just because....

I think the idea that "selling at the trough is stupid" is fairly egregious use of hindsight capital.  Let's take this specific example.  If you think the equity is worth 400m+, there was a greater risk than is being admitted that bondholders could have forced a bankruptcy, provided temporary DIP, credit bid their debt and wiped out the equity, thus providing yuge IRR on their debt bought at less than par. 

In fact, this is basically what the equity investors are claiming happened at ZINC (zinc prices have recovered 40% since the bankruptcy).  I actually think the business is better here at FELP, so it is not out the possibility that the debtholders could have done that. 

Secondly, I think the idea that the capital structure game theory paid off in FELP is a little bit underwhelming in terms of stock returns.  CLD, which didn't have the default risk, is basically up just the same if not more this year, and had a much lower risk of bankruptcy.  Perhaps the bankruptcy risk is still on the table until the debt gets tendered.  In other words, coal prices saved FELP, game theory....

I guess my overall point is FELP looks like a slam dunk, but the real risk of bankruptcy sometimes gets overlooked in hindsight.  I am not going to play the odds games, but I think this is much more akin to a lotto ticket that paid off....

Another point on commodity prices is that some people were buying FELP last year thinking that coal prices had bottomed.  If you are "late" to the game, it doesn't mean you are right in calling the bottom....The best example of this is John Paulson, who probably had the best IRR of any of the "Big Short" investors because he was so late to the game, not because he was smart.  His track record since then has born this out....
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 09, 2016, 11:54:36 AM
Quote
I think the idea that "selling at the trough is stupid" is fairly egregious use of hindsight capital.  Let's take this specific example.  If you think the equity is worth 400m+, there was a greater risk than is being admitted that bondholders could have forced a bankruptcy, provided temporary DIP, credit bid their debt and wiped out the equity, thus providing yuge IRR on their debt bought at less than par. 


I've brought this up before, but my point is that investors extrapolate a cyclical asset's value based on what they've done/are doing recently.  Look at all the guys short XOM and CVX this year that are getting killed.  "But, how can it trade at 50x earnings!"  There are certain public securities where it doesn't make sense to value them on trough earnings.  Are XOM or CVX's earnings near a trough?  Maybe, maybe not.  Given their low cost structure, I'd probably argue that you can bet that their earnings today will look very "troughy" in 5-10 years. 

As far as the debt holders going loan to own, it wasn't too difficult to know that not to be the case.  The bondholders who sued owned FELP notes fairly close to par value (not fund vultures who bought them at 50 cents) and none of them had those type of investment mandates.  You could *maybe* argue that BlueMountain would go that route, *maybe*, but good luck getting all the other plain vanilla funds to go along with that.  And nevermind the fact that Cline made up the bulk of the buyside trading volume in the notes. 

Quote
In fact, this is basically what the equity investors are claiming happened at ZINC (zinc prices have recovered 40% since the bankruptcy).  I actually think the business is better here at FELP, so it is not out the possibility that the debtholders could have done that. 

Let's be honest here, the guys at ZINC arguing that the bondholders wanted to steal a plant that's burning money is totally ridiculous.  Yes, the bond holders could have tried to get to the "equity" in the company, but there are much easier targets that don't involve two billionaires owning 85% of the equity.  Well, maybe Murray isn't a billionaire anymore.  Did the Horsehead CEO even own 1% of ZINC?

Quote
Secondly, I think the idea that the capital structure game theory paid off in FELP is a little bit underwhelming in terms of stock returns.  CLD, which didn't have the default risk, is basically up just the same if not more this year, and had a much lower risk of bankruptcy.  Perhaps the bankruptcy risk is still on the table until the debt gets tendered.  In other words, coal prices saved FELP, game theory....

The company still isn't out of default yet, there's the issue of CODI tax, PIK debt coming up, etc.  CLD bonds were trading at 25 cents without even going into default, and FELP notes even with BK talk was trading at $70.  So I don't see the comparison here... And given that I'm arguing the current price in FELP is still quite undervalued, I'm not sure returns over a few months matter?  A lot of junk has rallied.

Quote
Another point on commodity prices is that some people were buying FELP last year thinking that coal prices had bottomed.  If you are "late" to the game, it doesn't mean you are right in calling the bottom....The best example of this is John Paulson, who probably had the best IRR of any of the "Big Short" investors because he was so late to the game, not because he was smart.  His track record since then has born this out....

Buying FELP isn't a bet that coal prices bottomed.  That's just optionality you didn't have to pay for.  The idea is that you get to buy into a very profitable, low cost company that is beaten down on the idea that massive dilution or bankruptcy might take place.  If coal does bottom or recovers, that's some optionality you get for free.  I don't think I ever mentioned to buy FELP as a coal is bottoming play... Which is why I don't own any other coal producers.
Title: Re: FELP - Foresight Energy
Post by: valcont on August 12, 2016, 07:22:40 AM
Has anyone read the recent report from FBR
http://www.com-unik.info/fbr-co-analysts-give-foresight-energy-lp-felp-a-2-00-price-target/

They have a $2.00 price target. Is it because of the restructuring overhang or is it more earnings based? Hard to value it at $2 now that the note holders have consented.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 12, 2016, 09:28:24 AM
I have a hard time getting their reports.  I'm not sure how they get $2.  Maybe they think that the PIK notes will dilute at less than $1.
Title: Re: FELP - Foresight Energy
Post by: valcont on August 12, 2016, 11:24:07 AM
Picasso,
   Do you mind sharing your thoughts on range of expected dilution? If you have already discussed it,let me know the pages. A big part of my thesis centers around Murray's investment in the subordinates. If you dilute the unit holders too much then the billion plus investment is just sitting there until recovery. But these agreements have become too complicated for me to figure out.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 12, 2016, 12:11:01 PM
There are a couple different scenarios that could play out.

If you take a look at Murray, they do have a very large set of assets to potential drop down into FELP.  I think it's a big part of why they paid $1.4 billion for 50% of FELP.  Since FELP itself has a good base load, low cost business (which became lower cost by sharing certain expenses with Murray) there should have been some downside protection even though FELP was a bit levered.  Use it as a stable yield co, sell down assets from Murray, collect on the value of the IDR's and their FELP stake etc.  If anything coal conditions the past year have shown that to be even more of an important thing for them to do.  And I think FELP's coal assets are better than Murray's coal assets.

Anyway, Murray was going to pay a $48 million consent fee from the very beginning to avoid a change on control trigger.  But all this FELP bankruptcy talk really tanked their notes and loans.  They've been able to reduce a lot of leverage through open market repurchases, and a lot of that leverage was used to acquire FELP.  So in a way they've already reduced the purchase cost down somewhere in the low $100 millions.  Add back in their legal expenses to take care of the change of control, and it may end up costing about the same as just paying the consent fee.  Maybe even better because they'll keep reducing leverage at prices well below par over the next year.  It will probably cost the same as paying the consent but they took on major aggravation in the process.

Once the tender and exchange is over, the company is out of default, the going concern issue goes away (their 10Q's and K look ridiculous right now), they can probably just issue some new refunding 9% or 10% debt to redeem all the new 2nd liens and PIK's.  The 2021 2nd liens are restrictive in that anything to refund the PIK's can't be cash pay or mature before 2021.  It'd be hard to issue 5 year PIK paper, but that's a possible outcome.  As far as Murray is concerned, he can just pay a couple percent points more on new debt to preserve his stake.  2% on $600 million is only $12 million of extra expense a year.  But they can't do that while there is going concern language in the 10-K, they're in default, etc. 

If that happens (and it seems more likely to me), then dilution will only be these warrants being issued.  Which is only about 6 million units?

Now if Murray no longer sees the value in his IDR's, then he'll just dilute at the VWAP for the $250 million or $300 million coming due next August.  They'll have enough cash flow to repurchase a fair amount of it beforehand.  But I don't see how Murray doesn't see the value in the IDR's (look at Murray's assets, why sell them off in bankruptcy when you can sell them to FELP), and if he does dilute he's handing out half the new shares to investors who aren't him.  And one of those investors is taking most of that from money that Murray paid him a year ago.  I don't see Murray being cool with that...

I think number wise, maybe you can expect $4 unit issuance in a worst case scenario.  That would double the common unit count, put the sub units way out of the money, and the earnings would accrue to common unit holders.  Murray would own maybe 30 million common units paying him $30 million of income @ $1 of distributions, plus whatever might be leftover for the sub units?  The interest on the debt they issued to buy FELP is costing them over $100 million per year.  So $4 issuance is a killer for Murray. 

Anyway, I've played with a few different scenarios but unless Murray wants to hand over his life's work to Cline and other unit holders I bet they'll just refi out all this debt once they're out of default and keep the dilution to the warrants.  FELP itself is performing pretty well, I don't see why they couldn't get new debt issued.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 12, 2016, 01:32:36 PM
Since someone asked me about Cline's right to exchange his PIK's for common units, I thought I would clarify one more thing.

There are different options to repay the PIK's.  They can either be refinanced for new debt, they can issue new units, and/or they can pay from cash on hand at Foresight.  Since a refinance of the debt can be super dilutive (maybe Murray would want to issue some crazy debt that coverts into 90% of the equity with 30% interest that he or related parties funded), Cline has the right to see the terms of that refi and participate at 60%.  So Murray can't come back in and steal the company away from Cline and other unit holders.  If there is a regular bond refinance that everyone agrees to, then Cline doesn't get to convert to units.  He just gets his warrants and what he's owed in principal and interest. 

The other option is for Murray to exercise their purchase right on the PIK's.  Murray can put out an offer to buy all the PIK's and Cline can choose to keep his and everything would covert into new units at the VWAP.  There's a lot of strange outcomes here (IDR's get killed off, Murray's sub stake is worthless) if the units are trading low enough to cause a lot of dilution.  For example if the units were trading at $4.  It's a right Murray has but I can't see many situations where it would make sense to exercise it?  Plus where would they get that cash.  And they would simultaneously hand a lot of value back to Cline because it's likely Cline would not exchange his PIK's.  But maybe there's a point where Cline would want out and let Murray take as many units as he wanted?  I just can't imagine what would cause that kind of outcome.  And I haven't had any inclination that these two are in cahoots together.

So to calculate the dilution, I think it's either a refi or some amount of additional units issued if the debt markets don't let them refi.  I don't think the Cline option to exchange for units in a purchase offer for the PIK's would really make much of a difference in determining the outcome.  It's either going to be dilutive or it's not.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 12, 2016, 01:46:51 PM
Okay one more point, because like I said I'm sick at home with nothing to do but joke around on twitter and investing forums. 

There's one thing I've always liked about this investment and it kind of shows with the lingering PIK issue.  If it was just Murray owning 85% and another 15% with everyone else (no Cline), we could easily get screwed on the refi.  Then I would agree with the FBR price target of $2 or the headlines of 75% dilution.  But if Murray screws the unit holders, he's screwing Cline and Cline won't let that happen.  And if Cline tries to screw the unit holders, he's screwing Murray and Murray won't let that happen.  It's a nice check and balance for the minority holders.  Plus in this case it's even better because of all the suborindated units that are "out of the money."  Which is kind of cool because if you can dig in and figure that out, I don't know if it's something that markets can easily figure out?  It doesn't pop up on a screener or reading through news articles.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on August 12, 2016, 02:07:45 PM
Quote
But maybe there's a point where Cline would want out and let Murray take as many units as he wanted?  I just can't imagine what would cause that kind of outcome.  And I haven't had any inclination that these two are in cahoots together.

If Cline and Murray were in cahoots, wouldn't Gabe Hoffman get screwed? If we can speculate that Cline and Hoffman are buddies, seems unlikely to happen?
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 12, 2016, 02:16:10 PM
Cline and Hoffman might be buddies, but Hoffman has no control over what happens.  He's really just along for the ride.  Murray can't do anything without Cline and Cline can't do anything without Murray, which is different.  Even though it might make it awkward to go pick up the newspaper in the morning after losing a lot of money for your neighbor.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on August 12, 2016, 02:25:08 PM
Understood. I just think sometimes the "club" type relationships are how a lot of money is made.

Feel better. Must be something going around. I was sick yesterday.
Title: Re: FELP - Foresight Energy
Post by: valcont on August 12, 2016, 02:37:34 PM
Thanks for the color Picasso. This is a complicated scenario with the restructuring, going concern, tax laws thrown in the mix. Which makes it a good investment but it can go really bad if I miss something that the market understands. At this price level , I assume the sophisticated investors are involved (or not) so I am crossing all the t's and dotting the i's. I thought I understood the risks last year when I bought into Ocwen. It was going through the same going concern issues with all kinds of doomsday scenarios but the book value seemed fair and they were the best in subprime servicing. But things went from bad to worse and market was proven right.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 12, 2016, 03:04:38 PM
I remember playing with some numbers on the worst that could happen a few months back.  If all the PIK debt converted at sub $1, then the units would probably be worth at least $2.  Because you'd end up with 365 common million units or so, and with $100 million of DCF maybe $0.27 of DCF per share.  If it's worth 10x, that's $2.73?  Sub units would be worthless.  At 7x it's worth $1.89.  Or whatever you end up with.  Maybe DCF is lower or higher.  Which is why I think the units are still cheap because it's pricing in a lot of dilution.  And it's probably there won't be.  Especially when you look at their earnings last quarter and where stocks like CNXC or ARLP trade now. 

Maybe the risk is that 2017, 2018, 2019 will be terrible for ILB or FELP coal.  That's sort of the wild card here.  They seem so well positioned for almost any coal conditions but perhaps that isn't the case.  Maybe leverage stays too high while coal gets worse and contracts roll off? 

But then you have to step back and think that the two guys who own 85% didn't dilute you over a really bad change on control during the worst possible time to experience a put back on a high yield coal bond.  They could have if they really wanted to.  Why bother waiting for PIK's to come up, just dilute it now while they can.  But again, the Cline/Murray check and balance.  So if they're willing to step up during this hard time I think they'd do their best to manage through anything else.  Can't be any worse than what they've gone through the past year?  Or can it... Famous last words...
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on August 12, 2016, 11:42:26 PM
Picasso, do you mind explaining the sibordinated unit situation? Who owns them? How many are there? Are they out of the money in the sense they only receive distributions after some threshhold distribution to regular units?

Apologies if this was explained before.
Title: Re: FELP - Foresight Energy
Post by: hswoon on August 13, 2016, 05:58:05 AM
Total shares 130m. 65m common units (that's us), 65m subs (that's Murray). Murray bought 50% for 1.4b which included the subs and i think something like 80% of the GP's idrs.

As per 2015 10k:

All subordinated units are currently held by Murray Energy. The principal difference between our common units and subordinated units is that
subordinated unitholders are not entitled to receive a distribution from operating surplus until the holders of common units have received the
minimum quarterly distribution (“MQD”) from operating surplus. The MQD is $0.3375 per unit for such quarter plus any cumulative arrearages of
previously unpaid MQDs from previous quarters. Subordinated unitholders are not entitled to receive arrearages. The subordination period will end,
and the subordinated units will convert to common units, on a one-for-one basis, on the first business day after the Partnership has paid the MQD for
each of three consecutive, non-overlapping four-quarter periods ending on or after March 31, 2017 and there are no outstanding arrearages on the
common units. Notwithstanding the foregoing, the subordination period will end on the first business day after the Partnership has paid an aggregate
amount of at least $2.025 per unit (150.0% of the MQD on an annualized basis) on the outstanding common and subordinated units and the
Partnership has paid the related distribution on the incentive distribution rights, for any four-quarter period and there are no outstanding arrearages
on the common units.

So it will be a while until Murray gets to convert his subs to commons. If they end up paying distributions in 2018, they will need to pay out at least that year's worth of mqd's plus about $3 in arrears (inc q4 2015) before Murray will see a cent for his subs.

The out of the money distributions are for the IDRs which are for the GP:

Minimum quarterly distribution $0.3375 100.0% —
First target distribution Above $0.3375 up to $0.3881 100.0% —
Second target distribution Above $0.3881 up to $0.4219 85.0% 15.0%
Third target distribution Above $0.4219 up to $0.5063 75.0% 25.0%
Thereafter Above $0.5063 50.0% 50.0%

By the time Murray sees a cent on the IDRs this stock is probably a 10 bagger I think.
Title: Re: FELP - Foresight Energy
Post by: hswoon on August 13, 2016, 06:04:06 AM
At this price level , I assume the sophisticated investors are involved (or not) so I am crossing all the t's and dotting the i's.

Do you mean that a requirement is for other funds to be in the trade for you to be in the trade? I think it's more important to have some for of operator ownership rather than fund ownership...
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on August 13, 2016, 06:10:06 AM
Thanks for clarifying :)
Title: Re: FELP - Foresight Energy
Post by: valcont on August 13, 2016, 07:16:25 AM
At this price level , I assume the sophisticated investors are involved (or not) so I am crossing all the t's and dotting the i's.

Do you mean that a requirement is for other funds to be in the trade for you to be in the trade? I think it's more important to have some for of operator ownership rather than fund ownership...

I meant that in these situations , you are really competing against niche funds in restructuring and the bond market. The bond market tells me that the equity is not going to be worthless. The only question than is what are the units worth? The price action tells me that there is a lot of uncertainty in this trade. It could be all the reasons that Picasso has stated. But it may be that FBR is correctly assessing the extreme liquidation risk and assigning it a $2 price tag.  BTW Picasso has  done a nice job valuing it.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 17, 2016, 08:25:10 PM
Results of the consent solicitation came back.   Since Cline owns $83 million face on the notes, the $504 million of non-Cline note holders consenting to an amendment to allow the exchange to happen tallies it to $587 million out of the $600 million outstanding.  Which is 98%?

And Murray has been able to work out a deal with their senior lenders as well.  Those notes have rallied up to 36. 

Everything seems to be falling in place quite nicely.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on August 18, 2016, 05:30:32 AM
is that mean restructuring is done and no more in default?

Results of the consent solicitation came back.   Since Cline owns $83 million face on the notes, the $504 million of non-Cline note holders consenting to an amendment to allow the exchange to happen tallies it to $587 million out of the $600 million outstanding.  Which is 98%?

And Murray has been able to work out a deal with their senior lenders as well.  Those notes have rallied up to 36. 

Everything seems to be falling in place quite nicely.
Title: Re: FELP - Foresight Energy
Post by: hswoon on August 18, 2016, 05:43:23 AM
Deal is 'consented' for the 'effective date' which is Aug 31st.
Title: Re: FELP - Foresight Energy
Post by: Patmo on August 18, 2016, 06:32:57 AM
Results of the consent solicitation came back.   Since Cline owns $83 million face on the notes, the $504 million of non-Cline note holders consenting to an amendment to allow the exchange to happen tallies it to $587 million out of the $600 million outstanding.  Which is 98%?

And Murray has been able to work out a deal with their senior lenders as well.  Those notes have rallied up to 36. 

Everything seems to be falling in place quite nicely.

Kind of a technicality, but out of curiosity, how do you decipher that the $504mil are non-Cline? From the language it felt to me like 504mil total. Doesn't FELP have to "solicitate" Cline as well, although it would be a formality?

It feels a bit misleading to mention the issuer has 600mil outstanding then leave the Cline portion in the very next sentence, especially considering this filing is from the eyes of the issuer and not Cline
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 18, 2016, 06:52:57 AM
Cline can't consent because he's an affiliate. 

Quote
Pursuant to the Existing Senior Notes Indenture, the written consent of holders of at least a majority in aggregate principal amount of the outstanding Existing Senior Notes that were not owned by the Issuers or one of their affiliates as of the record date for the Consent Solicitation (June 30, 2016), voting as a single class, was required to adopt the Proposed Amendment.

The noteholders representing $504,346,000 in aggregate principal amount of Existing Senior Notes that responded to the Consent Solicitation each consented to the Proposed Amendment.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on August 26, 2016, 09:06:41 AM
$100 million of DCF gets you to a $500 million market cap @ a 20% yield.  It's a question of how much they dilute on a settlement.  If the unit count goes from 130 million to 200 million, the upside will only be $2.50.  But you don't need that much dilution and I think $100 million of DCF is probably close to the near term economics here.  And Murray can't afford too much dilution.  The more I've played with the numbers short-term upside is probably between $4-5.  Long-term, especially when adjusted for distributions, can be a lot higher.

But like I mentioned in a previous post, it's going to be tricky owning this *after* a settlement (assuming it happens) when you can see 25 million tons shipped at $15-20 EBITDA margins per ton sometime in the future.  That would push over $300 million of DCF and the market might be willing to price it at a 10% yield.  Suddenly the market cap is $3 billion again and it's a 20 bagger.  There's some real optionality here that would seemingly make it hard for Cline or Murray to just give up.  In the meantime, a 20% yield on bottom of the market DCF seems like an okay benchmark when compared to ARLP or CNXC.

Dug this up from earlier in the thread. We're nearing the bottom of this (conservative) valuation range (ignoring the $0 if Cline dies :p) $500M market cap. What are people's ideas about valuation?

In the topic I've seen $75M DCF estimated for 2016 which at 20% yield which would imply ~$2.86 a unit ($5.73 @10% yield) undiluted. But that's seems a very pessimistic view on earning power long term. If they return to $42M DCF a quarter it would be $6.41 a unit @20% yield. If it really goes back to $90M DCF it's $13.74 a unit @ 20% yield undiluted.

I'm just playing with number here because the price is rising quite rapidly and this is easily my largest position now so I should come up with a more precise idea about the value to be able to decide when to start selling. That this was cheap <$2 seemed obvious (of course without Picasso I would never have found this) and I still think it's cheap at the current price but find it difficult to estimate the chance of DCF going up.

Does anyone have some updated views on this which I can weigh in?
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 26, 2016, 09:46:16 AM
Here are some of my thoughts.

1) Similar comps of CNXC or ARLP are now trading at 10% yields instead of 20%.
2) I really think FELP is a better asset than either CNXC or ARLP.
3) FELP is able to take advantage of this jump in API 2 more than anyone else.  Incrementally there's little downside to this export business but they have the upside that other ILB/NAPP comps do not have.
4) Unlike other comps, FELP has half the equity structure in subordinated units.  So you won't feel the full blunt of dilution and earnings will almost entirely accrue to the commons for several years.

So how do you value that?  If we start with 71 million common units including the upcoming warrant issuance, we'll need to know how many units can get issued to refi the $350 million PIK next year.  If it's done at $4, that will add 87.5 million units for a total of 159 million units. 

If we have $100 million of DCF, there would be $0.63 of earnings which would make the commons trade for 6x assuming it was somehow diluted at $4.  If you throw in the sub units, then there would be $0.45 of earnings per unit which would still be less than 10x.  So I think it would be strange for FELP to dilute at $4 in a year because the issuance price should kind of match up to a 10-15% yield or a 10-8x multiple of DCF on a pro-forma diluted basis. 

If the refi is done @ $8, then commons go up to 113 million units which is about $1 of DCF/unit and that would be an 8x multiple.  Include the sub units, a 14x multiple. 

If you play around with those numbers you can kind of triangulate $6-8 if DCF stays around $100 million.  That assumes no refinance of the debt and simply 100% equity issuance to pay off the PIK's. 

Ideally we'd want to do a present value calculation of all the future cash earnings attributable to the LP.  But right now it's hard to estimate that because we only have a couple years of visibility.  A lot of things can change in a few years, but I feel like this is a great coal asset and over time the earnings should be many multiples of what I paid for it.  Hopefully the units are trading towards the higher end of my "estimates" so the dilution is a bit less.  And in a blue sky scenario they can just refinance out the debt.  But I'm leaning more towards assuming we'll see equity issuance by next October.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on August 26, 2016, 12:16:14 PM
Thanks Picasso :)
Title: Re: FELP - Foresight Energy
Post by: heth247 on August 28, 2016, 10:52:53 PM
The question is how will the Market value FELP over the next 12 months, since they won't be able to pay out any dividend until later half of 2018.

Here are some of my thoughts.

1) Similar comps of CNXC or ARLP are now trading at 10% yields instead of 20%.
2) I really think FELP is a better asset than either CNXC or ARLP.
3) FELP is able to take advantage of this jump in API 2 more than anyone else.  Incrementally there's little downside to this export business but they have the upside that other ILB/NAPP comps do not have.
4) Unlike other comps, FELP has half the equity structure in subordinated units.  So you won't feel the full blunt of dilution and earnings will almost entirely accrue to the commons for several years.

So how do you value that?  If we start with 71 million common units including the upcoming warrant issuance, we'll need to know how many units can get issued to refi the $350 million PIK next year.  If it's done at $4, that will add 87.5 million units for a total of 159 million units. 

If we have $100 million of DCF, there would be $0.63 of earnings which would make the commons trade for 6x assuming it was somehow diluted at $4.  If you throw in the sub units, then there would be $0.45 of earnings per unit which would still be less than 10x.  So I think it would be strange for FELP to dilute at $4 in a year because the issuance price should kind of match up to a 10-15% yield or a 10-8x multiple of DCF on a pro-forma diluted basis. 

If the refi is done @ $8, then commons go up to 113 million units which is about $1 of DCF/unit and that would be an 8x multiple.  Include the sub units, a 14x multiple. 

If you play around with those numbers you can kind of triangulate $6-8 if DCF stays around $100 million.  That assumes no refinance of the debt and simply 100% equity issuance to pay off the PIK's. 

Ideally we'd want to do a present value calculation of all the future cash earnings attributable to the LP.  But right now it's hard to estimate that because we only have a couple years of visibility.  A lot of things can change in a few years, but I feel like this is a great coal asset and over time the earnings should be many multiples of what I paid for it.  Hopefully the units are trading towards the higher end of my "estimates" so the dilution is a bit less.  And in a blue sky scenario they can just refinance out the debt.  But I'm leaning more towards assuming we'll see equity issuance by next October.
Title: Re: FELP - Foresight Energy
Post by: benhacker on August 29, 2016, 11:21:16 AM
Picasso....

<bows deeply>

I hope you are drinking something nice tonight (today?).  $4.00.

You picked your spot, and called your shot.

Thanks again for sharing, and congrats.
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 29, 2016, 12:08:22 PM
Thanks Ben.  I'm still "hodling" but happy to see things play out positively.  I sound like a broken record but I still think it's super cheap.

It will be interesting to see where the new notes start trading.  One year PIK paper at 15% would be great to pick up.  It's not high octane FELP equity returns, but better than 0% while I work on some other ideas.

And in case anyone didn't know this, 25% of SXCP earnings come from FELP and Murray.  SXCP is up 7% today, but I think SXC is more levered to this outcome based on the share price.  It wouldn't surprise me to see some kind of capital allocation change at SXC once the restructuring is effectively done.  And Mangrove was just a buyer at $7 as well.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on August 29, 2016, 12:31:59 PM
I'll throw in a thank you as well Picasso. I only wish I had been more aggressive buying at $1.20 than I was in response to your posts at the time.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on August 29, 2016, 12:40:52 PM
Thank you Picasso and congratulations!

Title: Re: FELP - Foresight Energy
Post by: valcont on August 29, 2016, 01:15:09 PM
Joining the crowd here. Thanks a lot Picasso. This was an event driven investment for me based on Murray's investment. Had I not read your posts on valuation, I would have gotten out after they were out of default.
Title: Re: FELP - Foresight Energy
Post by: Patmo on August 29, 2016, 02:10:02 PM
Are you guys all selling already? The party's just getting started...
Title: Re: FELP - Foresight Energy
Post by: valcont on August 29, 2016, 03:24:40 PM
Picasso et al,
   What are your thoughts on Murray's plan for post default FELP? One of the reasons he paid up for it last year was potential tax advantaged drop down  from Murray to FELP with lower cost of capital and to use FELP to buy up the coal assets by accessing the capital markets. This isn't true anymore although he can still get some accretive synergies. FELP wouldn't trade as stable yield vehicle for atleast a year or two so until then aren't we in a commodity play here?
Title: Re: FELP - Foresight Energy
Post by: tgrafos on August 29, 2016, 06:39:58 PM
Thank you Picasso for all this great work!
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 31, 2016, 11:24:18 AM
Picasso et al,
   What are your thoughts on Murray's plan for post default FELP? One of the reasons he paid up for it last year was potential tax advantaged drop down  from Murray to FELP with lower cost of capital and to use FELP to buy up the coal assets by accessing the capital markets. This isn't true anymore although he can still get some accretive synergies. FELP wouldn't trade as stable yield vehicle for atleast a year or two so until then aren't we in a commodity play here?

I don't think his plan has changed.  It just might take a couple extra years to get back to square one.  I do agree that the closer it trades to peers the more commodity-like this investment becomes.  So having a view on their coal and margins will become a lot more important for all the upside optionality we didn't have to pay for.
Title: Re: FELP - Foresight Energy
Post by: valcont on August 31, 2016, 12:16:47 PM
Picasso et al,
   What are your thoughts on Murray's plan for post default FELP? One of the reasons he paid up for it last year was potential tax advantaged drop down  from Murray to FELP with lower cost of capital and to use FELP to buy up the coal assets by accessing the capital markets. This isn't true anymore although he can still get some accretive synergies. FELP wouldn't trade as stable yield vehicle for atleast a year or two so until then aren't we in a commodity play here?

I don't think his plan has changed.  It just might take a couple extra years to get back to square one.  I do agree that the closer it trades to peers the more commodity-like this investment becomes.  So having a view on their coal and margins will become a lot more important for all the upside optionality we didn't have to pay for.

Thanks Picasso,
   Yes the margins are going to play a big role. IB mid sulfur is trading at $32 and their basis is about $22(probably the cheapest) . API2 is at $57 so some margin there as well. You'll see a lot of mine closures at $27-28 so there is an optionality to buy assets on fire sale. I won't be surprised if Hillsboro suddenly becomes operational after the restructuring drama  ;)
Title: Re: FELP - Foresight Energy
Post by: heth247 on August 31, 2016, 01:07:47 PM
What happened at the close today?!
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 31, 2016, 01:44:06 PM
What happened at the close today?!

You asked the same question on the last day of June. Not sure why someone throws end of month orders at an illiquid stock like this, but it seems to happen a lot with FELP.
Title: Re: FELP - Foresight Energy
Post by: indirect on August 31, 2016, 01:48:06 PM
daytraders going wild?
Title: Re: FELP - Foresight Energy
Post by: Picasso on August 31, 2016, 01:49:20 PM
daytraders going wild?

I have that on VHS somewhere.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on September 01, 2016, 12:53:45 AM
What happened at the close today?!

You asked the same question on the last day of June. Not sure why someone throws end of month orders at an illiquid stock like this, but it seems to happen a lot with FELP.

Broken algo? Manipulating (downward) some metric which only looks at the end of month price of a stock?
Title: Re: FELP - Foresight Energy
Post by: writser on September 01, 2016, 01:21:10 AM
Quant traders are not _that_ stupid .. Probably a human being playing around trying to achieve something arbitrary (and probably not with his own money).
Title: Re: FELP - Foresight Energy
Post by: heth247 on September 01, 2016, 09:13:01 PM
Hi, Picasso,

Murray paid ~$20 for the sub units, and they issued debt with coupon of 11.25% to finance it.  Ignoring the IDRs he get along with it, would it be fair to assume that he expects the units (on a fully diluted basis once the sub converted) to at least pay out a dividend of $20x11.25%=$2.25 or more in the future when this company in fully growth mode?

Thanks,

Picasso et al,
   What are your thoughts on Murray's plan for post default FELP? One of the reasons he paid up for it last year was potential tax advantaged drop down  from Murray to FELP with lower cost of capital and to use FELP to buy up the coal assets by accessing the capital markets. This isn't true anymore although he can still get some accretive synergies. FELP wouldn't trade as stable yield vehicle for atleast a year or two so until then aren't we in a commodity play here?

I don't think his plan has changed.  It just might take a couple extra years to get back to square one.  I do agree that the closer it trades to peers the more commodity-like this investment becomes.  So having a view on their coal and margins will become a lot more important for all the upside optionality we didn't have to pay for.
Title: Re: FELP - Foresight Energy
Post by: valcont on September 13, 2016, 08:46:50 AM
Market is completely freaked out about the IEA report. This would hurt FELP's export volume. Expect a lot of volatility.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on September 13, 2016, 09:14:56 AM
Market is completely freaked out about the IEA report. This would hurt FELP's export volume. Expect a lot of volatility.

The IEA report is about oil demand. FELP sells coal. How will it be affected?
Title: Re: FELP - Foresight Energy
Post by: valcont on September 13, 2016, 09:19:08 AM
Market is completely freaked out about the IEA report. This would hurt FELP's export volume. Expect a lot of volatility.

The IEA report is about oil demand. FELP sells coal. How will it be affected?

Its the energy demand that drives prices. IEA says Asia is slowing down demand wise. That would slowdown the international coal price recovery that we saw in the last few months.
Title: Re: FELP - Foresight Energy
Post by: valcont on September 22, 2016, 06:51:12 AM
Upgraded by S&P to B- from D.

http://www.streetinsider.com/Credit+Ratings/S%26P+Upgrades+Foresight+Energy+LP+(FELP)+to+B-+Following+Recent+Restructuring/12061122.html
Title: Re: FELP - Foresight Energy
Post by: valcont on September 26, 2016, 01:09:57 PM
Lets speculate why it dropped today.My top two:

1. Picasso bailing out and moving to SXC.
2. China restarting some coal mines.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on September 26, 2016, 01:27:34 PM
It's up over 130% since day 1 of this thread and over 250% since it's low in early April.

Probably smart to take profits if it's the right thing to do for your own personal situation.





Title: Re: FELP - Foresight Energy
Post by: Picasso on September 26, 2016, 02:23:27 PM
Lets speculate why it dropped today.My top two:

1. Picasso bailing out and moving to SXC.
2. China restarting some coal mines.

Interesting theory....

API 2 keeps cranking higher, Murray debt went over 50 today (turns out it was better to buy Murray debt than it was to buy FELP), the new 2021 debt traded at 90, and I'm still waiting for some trades on the PIK debt.  Against my better judgement, I've been buying more FELP and plan to buy up PIK debt to hedge out the worst case scenario.  I may end up a little cranky if they can't refi that PIK debt.

Plus if FELP is still trading like death going into the refi, Cline will probably choose to take equity.  It would forever lock out Murray from getting any reasonable return off his investment.  So I'd say there is still a ton of incentive to get a nice return for the common units.  Also amazing to see where other coal stocks are now trading.  Some of this volatility is incredible.... NRP goes up to $30 then drops back to $17, then back up to $30.  Over a month.  Six flags needs a new ride called Coal Rush.  Based on a real life coal stock chart.
Title: Re: FELP - Foresight Energy
Post by: roark33 on September 26, 2016, 08:55:49 PM
When ZINC went from 2 to 10, people started calling it a compounder as it slowly went up to 15 (heck, I think it even hit 20).  Just a reminder, these are not compounders, these are cigar butts that have an eventual value of zero....

Picasso will obviously disagree with me.  In fact, I hear Picasso is inviting the CFO of FELP to his annual meeting this year. 

Title: Re: FELP - Foresight Energy
Post by: Picasso on September 26, 2016, 10:29:01 PM
Well it's only been several months and the fundamental picture keeps getting better.  So probably a bit early to talk about this cigar butt having an eventual price of zero.

There are good reasons why this will stay relatively inexpensive to something like an ARLP.  Since these are partnership units, owners will likely get taxed on income generated during the year even without getting distributions.  That's not a good selling point to the types of investors who would normally buy this kind of thing.  It's also unclear to the market how the PIK refi will happen.  Plus there is still no analyst coverage (look at the ugly attachment).  We haven't had an earnings call in about a year.  The restructuring hasn't even been done for a month yet.  And there's been less than $2 million of volume on the new FELP debt.  I'd like to think those are all conditions where an investor might poke around to find a security trading a fair amount below intrinsic value.

I was sort of joking about being cranky if they can't refi the PIK debt.  In reality I can buy FELP units here at less than the future MQD's, some super low multiple on a diluted DCF basis, and simultaneously buy their one year debt at a 15% yield.  If they can refi the debt like I think they will, I can make a very low risk 15% return on the PIK's (it's unlikely to trade over par/accrued PIK because of the call feature) and probably get another 100% or more on my units.  If they can't refi the debt for some crazy reason, that PIK debt will likely get some 50-100% return based on the no redemption conversion feature and my units will probably be sitting at breakeven.  The no refi outcome is an extremely low probability event, but even if it happens I don't think losing money on this trade is likely.  Plus given what I've made on other parts of this FELP/Murray cap structure it would take some extreme events... And never mind the downside support of the subordinated equity structure.

Since I can't find anything else like that in the market, I'm happy to press the bet further.  But it's sort of dependent on how much PIK debt I can pick up. 
Title: Re: FELP - Foresight Energy
Post by: valcont on September 27, 2016, 11:17:47 AM
When ZINC went from 2 to 10, people started calling it a compounder as it slowly went up to 15 (heck, I think it even hit 20).  Just a reminder, these are not compounders, these are cigar butts that have an eventual value of zero....

Picasso will obviously disagree with me.  In fact, I hear Picasso is inviting the CFO of FELP to his annual meeting this year.

ZINC was never a cigar butt imo. It was "Heads I win , tails I don't lose much" kind of investment (not) . Most of the retail crowd was in because of Pabrai. Could I tell it will go to the bankruptcy when it was at $10? Not at all. But I could really tell that the management is slimy. Overpromising and under delivering quarter over quarter. This was not a last minute shocking development as lot of people including Guy Spier believes. This was a slow train wreck but everyone trusted the conductor (Pabrai) rather than the driver(mgmt).

I didn't get in to FELP because of Picasso but he made me look at the whole Murray complex and a new way of valuing the investment. I was way off but I knew the price wasn't right few months ago.


Title: Re: FELP - Foresight Energy
Post by: valcont on September 27, 2016, 11:26:46 AM
API 2 keeps cranking higher, Murray debt went over 50 today (turns out it was better to buy Murray debt than it was to buy FELP), the new 2021 debt traded at 90, and I'm still waiting for some trades on the PIK debt.  Against my better judgement, I've been buying more FELP and plan to buy up PIK debt to hedge out the worst case scenario.  I may end up a little cranky if they can't refi that PIK debt.

Plus if FELP is still trading like death going into the refi, Cline will probably choose to take equity.  It would forever lock out Murray from getting any reasonable return off his investment.  So I'd say there is still a ton of incentive to get a nice return for the common units.  Also amazing to see where other coal stocks are now trading.  Some of this volatility is incredible.... NRP goes up to $30 then drops back to $17, then back up to $30.  Over a month.  Six flags needs a new ride called Coal Rush.  Based on a real life coal stock chart.

FELP has transitioned from a restructuring to an export coal story. Its easy to correlate the volatility to Chinese coal planning. There was a rumor floating around yesterday that the Chinese planning commission might allow some mine restarts due to the recent rally but then Goldman came out and supported the current price level. Anytime I am in commodity plays I like to keep an ear out for these stories. Adds zero value to my thesis but saves a lot of heartburn.

 
Title: Re: FELP - Foresight Energy
Post by: Picasso on September 27, 2016, 11:31:45 AM
My understanding of the Goldman report was the forecast of coking coal going into China?  I didn't see them make any mention of the coal exports that Foresight participates in. 
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on September 27, 2016, 12:11:46 PM
Some information related to the EPAs Clean Power Plan:

http://www.snl.com/web/client?auth=inherit#news/article?id=37836371&cdid=A-37836371-10034

 
Quote
Regardless of whether the U.S. EPA's signature climate change regulation for fossil fuel power plants survives the court challenge, many industry experts agree that the power industry is transitioning to cleaner sources of fuel amid lower natural gas prices, dropping costs of renewable infrastructure and other regulatory actions impacting coal-fired generators. Those same facts were touted by EPA Administrator Gina McCarthy in the aftermath of the U.S. Supreme Court decision to place a hold on the rule pending the outcome of the litigation

And Bob Murray's release:

https://www.documentcloud.org/documents/3114757-2016-09-27-MEC-PRESS-RELEASE-Murray-Energy.html

Nothing really new here.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on September 27, 2016, 02:03:31 PM
Some information related to the EPAs Clean Power Plan:

http://www.snl.com/web/client?auth=inherit#news/article?id=37836371&cdid=A-37836371-10034

@Pull,

Could you please load the other article in this series? It would be great for further context.

I find the whole thing very interesting because I support the goals of the CPP, but also think that coal will remain an important portion of the US energy mix for another couple decades. I expect to see massive growth in electric vehicles over the next few years, and those cars are going to use a lot of electricity. So overall we can expect electricity demand to go up, with gasoline demand coming down. Even with solar, wind and NG additions, its hard to see coal usage shrinking too quickly in the face of increasing demand.

Anyone know if the CPP includes any tracking of oil/gasoline emissions, given that the targets are expressed in pounds/MWh?
Title: Re: FELP - Foresight Energy
Post by: Aqul on September 27, 2016, 02:09:10 PM
Well it's only been several months and the fundamental picture keeps getting better.  So probably a bit early to talk about this cigar butt having an eventual price of zero.

There are good reasons why this will stay relatively inexpensive to something like an ARLP.  Since these are partnership units, owners will likely get taxed on income generated during the year even without getting distributions.  That's not a good selling point to the types of investors who would normally buy this kind of thing.  It's also unclear to the market how the PIK refi will happen.  Plus there is still no analyst coverage (look at the ugly attachment).  We haven't had an earnings call in about a year.  The restructuring hasn't even been done for a month yet.  And there's been less than $2 million of volume on the new FELP debt.  I'd like to think those are all conditions where an investor might poke around to find a security trading a fair amount below intrinsic value.

I was sort of joking about being cranky if they can't refi the PIK debt.  In reality I can buy FELP units here at less than the future MQD's, some super low multiple on a diluted DCF basis, and simultaneously buy their one year debt at a 15% yield.  If they can refi the debt like I think they will, I can make a very low risk 15% return on the PIK's (it's unlikely to trade over par/accrued PIK because of the call feature) and probably get another 100% or more on my units.  If they can't refi the debt for some crazy reason, that PIK debt will likely get some 50-100% return based on the no redemption conversion feature and my units will probably be sitting at breakeven.  The no refi outcome is an extremely low probability event, but even if it happens I don't think losing money on this trade is likely.  Plus given what I've made on other parts of this FELP/Murray cap structure it would take some extreme events... And never mind the downside support of the subordinated equity structure.

Since I can't find anything else like that in the market, I'm happy to press the bet further.  But it's sort of dependent on how much PIK debt I can pick up.

How are you buying the PIKs/what pricing are you seeing? I tried to go through Bloomberg today; saw the cash-pays at 89. There was no pricing on the PIKs
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on September 27, 2016, 02:13:12 PM
I don't have a subscription to this series.

Taylor Kuykendall on Twitter is an energy (coal) reporter who posts a lot of good information and I saw this on his feed.
Title: Re: FELP - Foresight Energy
Post by: valcont on September 27, 2016, 02:52:24 PM
My understanding of the Goldman report was the forecast of coking coal going into China?  I didn't see them make any mention of the coal exports that Foresight participates in.

Here is an article that talks about the recent run up in prices for both thermal and coking coal.

http://www.abc.net.au/news/2016-08-24/coal-price-spike-on-back-of-reduced-chinese-mining/7776904

The fear was that China would relax the mine restrictions but Goldman validated that the higher price is here to stay.
Title: Re: FELP - Foresight Energy
Post by: roark33 on September 27, 2016, 03:47:00 PM
Not to be overly sarcastic, but Goldman validating a price of a commodity does not seem to give me much comfort. 

My point is mainly that this is a leveraged commodity play, plain and simple.  If you pick the absolute bottom, you are going to make a killing, but if the price of the commodity declines before you sell (chasing those long-term capital gains rates), you are still exposed to the commodity risk....and the leverage. 
Title: Re: FELP - Foresight Energy
Post by: Picasso on September 27, 2016, 08:12:22 PM
You don't have to pick the absolute bottom in a commodity turn to make a killing in a producer.  You just need a price that already accounts for further headwinds/losses/acts of good/whatever.  The upside will be whatever it is.

Here's the U.S. coal outlook from the EIA.

Supply   (million short tons)
                                   2014   2015   2016   2017
U.S. Coal Production   1000.0   897.0   732.8   764.4

FELP has massive reserves, the lowest cost structure in the only coal region that's actually expected to grow, and is currently only doing about 16 million tons into the domestic coal market.  Where exactly do you see those U.S. coal production numbers heading where FELP can't place an average of at least 20 million tons?  We've already seen their production numbers over the past year while the rest of the industry has imploded.  It's been pretty stable which indicates to me that FELP is at a minimum a stable base load in the coal industry (granted coal in general is now more variable than fixed because of nat gas pricing).  Take a look at the rest of the coal industries cost curve.  FELP's cost per ton seems to be nearing $20 again, so I don't really understand what scenario you picture in the future? 

Meanwhile you have export pricing going up which will smooth over the rough transition into 2017/2018.  Netbacks are over $30 now, which on incremental tons can mean something like $20 margins to FELP.  If they max out their SXCP contract volume over the next year (spot netbacks are closer to $40) that alone is an extra $50-100 million of cash coming in I didn't anticipate a few months ago.  If the EIA is only roughly right on their 2017 forecast and their longer term ILB projections, it's not hard to see pretty solid cash flow for the next couple years.

And again I've never argued that coal is going to make some epic comeback.  This is a fairly simple situation where FELP will take larger portions of a smaller pie.  But for arguments sake, lets say there's no terminal value at some point.  It's high probable you'll see more than the current share price in distributions if you can just wait a few years.  I can't say the same for the likes of an ARLP.  It could be ten years or longer before you recover the current share price in distributions from other coal plays. 

And this isn't about playing for long-term capital gains.  I think the risk profile is still much better than anything else I've researched lately, so I'm buying more because I still expect a solid return with limited risk on new capital invested.  Plus I have the luxury of pledging my account to a private bank at up to 50% LTV without worrying about margins calls.  They just check the statement value at the end of each month and give me two weeks to meet a deficiency balance should my holdings take a beating.  So if I find something else that I would like to invest in (I haven't used margin yet because I haven't seen anything that good), I can pull out some fairly stable leverage to make the investment.  So it's not like I have to sell FELP just to move the deck chairs around and make it seem like I'm doing something.  Given the valuation, selling and paying tons of short term capital gains isn't that wise either.  You can suck up some amount of volatility once you end up with this kind of problem because the net return for being patient an extra year is fairly substantial.  In addition to the returns that FELP is likely to provide as it rolls into a more favorable tax situation.

As for the leverage at FELP, if there was ever a time that leverage should have killed this company "ZINC style," it was back in April.  I can't imagine a worse time to have debt issues.  But I like the leverage here because it will work just as well in the other direction if just one or two things work out better than expected.  Not to mention the 2017 debt is structured in a way that will prevent a catastrophe.  Plus a couple years of mandatory debt paydown.  Leverage + commodity doesn't always have to = uninvestable.  And you get paid to hedge out a lot of risk if you can purchase the PIK debt. 

To answer Aqul, there's only $120 million of PIK outstanding so you have to contact holders with an offer.  No one has been willing to sell them to me yet.  So I'm just waiting for someone I haven't contacted to put out any kind of pricing.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on September 27, 2016, 09:48:03 PM
You can suck up some amount of volatility once you end up with this kind of problem because the net return for being patient an extra year is fairly substantial.  In addition to the returns that FELP is likely to provide as it rolls into a more favorable tax situation.


What are you expecting in regards to their tax situation Picasso?

Also, how quickly to you expect the dividend to be reinstated? That of course will be an exciting day.
Title: Re: FELP - Foresight Energy
Post by: Picasso on September 28, 2016, 07:34:05 AM
Hmm....

Quote
First, he said, Murray Energy had to act to shore up the financing of Foresight Energy LP after Murray's purchase of a large stake in the partnership. Shortly after Murray Energy spent $1.40 billion for Foresight, the lenders accelerated about $600 million in debt and a Delaware court issued an opinion supporting them.

Murray says now Foresight's debt is shored up and Murray Energy is operating the mines and marketing the coal. Murray said he hopes in coming months his company "will have a path to control Foresight Energy and bring it under Murray Energy, a private corporation."

https://t.co/TSDLJuywwM (https://t.co/TSDLJuywwM)
Title: Re: FELP - Foresight Energy
Post by: Picasso on September 28, 2016, 07:42:02 AM
You can suck up some amount of volatility once you end up with this kind of problem because the net return for being patient an extra year is fairly substantial.  In addition to the returns that FELP is likely to provide as it rolls into a more favorable tax situation.


What are you expecting in regards to their tax situation Picasso?

Also, how quickly to you expect the dividend to be reinstated? That of course will be an exciting day.

Sorry, I meant that the fundamentals for FELP should get better as my position starts to move into long-term cap gains treatment. 

It all depends how Murray addresses the new cap structure at FELP.  It's beginning to sound like he wants to take it private.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on September 28, 2016, 08:30:50 AM
Hi Picasso,

Wow. May be he mean that  "acquire an additional 46% of the interest for $25mm over the next five years, and 50% of the limited partner interest" to reach 80% ownership. That way he can control the company?. 

"Murray said he hopes in coming months his company "will have a path to control Foresight Energy and bring it under Murray Energy, a private corporation".


Title: Re: FELP - Foresight Energy
Post by: Picasso on September 28, 2016, 11:17:22 AM
I think that was a given since the irony of this whole thing is that he's never had control over FELP despite being put back on a ton of debt over a change of control.  Completing the Cline purchase to get control is just part of this whole debt exchange and redemption.  But bringing it under Murray in the coming months is pretty strong language. 
Title: Re: FELP - Foresight Energy
Post by: heth247 on October 09, 2016, 10:25:19 AM
You were probably right. Now that 2021 notes have been refied, Murray can exercise his option to acquire addition 46% of FEGP for $25mm.

Picasso, what is the implication of Murray taking full control of the GP? Are we LPs (including Cline) all at the mercy of him? 

Please correct me if I am wrong. I think Murray's economic interest can be achieved in three ways:
1. Through the distribution from the sub units (still years away).
2. Through the IDRs for GP (also years away).
3. Through "drop-down" of assets from MEC to FELP. For this one, once he has full control of GP, what can be blocking him from dropping down an asset to FELP at a crazy inflated price?

Thanks.

Hi Picasso,

Wow. May be he mean that  "acquire an additional 46% of the interest for $25mm over the next five years, and 50% of the limited partner interest" to reach 80% ownership. That way he can control the company?. 

"Murray said he hopes in coming months his company "will have a path to control Foresight Energy and bring it under Murray Energy, a private corporation".
Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 10, 2016, 04:12:16 PM
Coal Miner CEO Calls Tesla Fraud (http://seekingalpha.com/news/3213253-coal-miner-ceo-calls-tesla-fraud?source=email_rt_mc_readmore&app=1&uprof=44#email_link)

When I saw the headline I was almost certain it was Murray. Guess if I was right or not...

Title: Re: FELP - Foresight Energy
Post by: Picasso on October 11, 2016, 07:18:13 AM
heth,

Cline can choose to participate in the PIK refi.  If FELP is still at $4, he'll probably choose to take 60% of whatever is issued to redeem the PIK.  So Murray trying to screw the common units ahead of the refi would be unusual because I think he would want to issue as few new units as possible to Cline or others.  If he wanted to heavily dilute or could care less about the LP units by stuffing drop downs, he would have already diluted instead of this complicated bond swap.  If FELP is at $10, maybe Cline won't want to participate so Murray could take all the new equity or something.  It would probably benefit Murray to see the common units realize some value in that situation, but stranger things have been done.

They also formed that special committee as part of the transaction, partly because Cline is probably worried about that risk since Murray is more distressed compared to when they first struck the deal.

Quote
Synergy and Conflicts Committee

The board of directors of FELP’s general partner (the “GP Board”) has created a Synergy and Conflicts Committee (the “Synergy and Conflicts Committee”) comprised of the three independent directors of the GP Board (Messrs. Brian D. Sullivan, G. Nicholas Casey and Daniel S. Hermann) which will be responsible for reviewing, approving, or denying approval of: (i) any unbudgeted affiliate or synergy transactions involving the Partnership, in each case having a value in excess of $5.0 million; and (ii) any transaction which would, if consummated, provide financing for or be materially related to the redemption of the Exchangeable PIK Notes, and will be delegated all rights, power and authority of the GP Board in respect thereof. The Synergy and Conflicts Committee shall also serve as the general conflicts committee of the GP Board. In respect of the matters over which the Synergy and Conflicts Committee has been delegated authority under clause (i) and (ii) of the first sentence of this paragraph, the Synergy and Conflicts Committee shall: (i) have the right to retain independent financial and legal advisors of its own choosing; (ii) be empowered to act on behalf of the Partnership independently of any affiliates or interested directors; and (iii) have the power to enforce the decision made by it (including any decision to reject any proposed transaction with any affiliate of the Partnership).

Overall, I'm not too worried about Murray doing crazy drop downs. 
Title: Re: FELP - Foresight Energy
Post by: heth247 on October 11, 2016, 10:45:13 AM
Thanks, Picasso,  btw, are you able to get any PIKs?  I saw Murray's notes rose to 65 last Friday.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 11, 2016, 03:02:36 PM
Just in case anyone is wondering about the run up today.

http://www.mining.com/coking-coal-iron-ore-prices-resume-surge/

Gotta love the communists in a commodity play.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on October 12, 2016, 01:01:06 AM
Quote
The rally was triggered by Beijing’s decision to limit coal mines' operating days to 276 or fewer a year from 330 before as it seeks to restructure the industry.

Silly communists.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 23, 2016, 09:16:44 AM
Quote
"And we look forward to supporting them and their export needs throughout Convent Marine Terminal. We'll have some more to say about that later, because what we've also seen is pretty significant uptick in price of export coals and the expectation of profitability of export coals for our customers, going forward."
Quote
"At Coal Logistics, the $4.3 million contribution from our Convent facility was comparable to Q3 2015, and KRT and Lake Terminal were impacted this quarter by lower throughput. Volumes across the terminals were below expectations, but we expect a sequential improvement in volumes in the fourth quarter."
Quote
"Let's take a closer look at the increased profitability of those thermal coal exports on slide nine. Low cost U.S. producers still turn a profit when API2 prices were in the mid to high 50s. And with the benchmark in the mid 70s, the mine netbacks are meaningfully higher. We regularly update our estimate of export profitability. And based on our assumptions, our CMT customers are solidly profitable at current delivery prices. While this is an encouraging sign for the thermal exports coming through CMT, we are also looking at incremental business that I will cover on the next slide."
Comments from the SXCP's CEO in yesterday's conference call. So FELP was able to get the rebate should the API2 move down in the 50s. API 2 is in the 70s now and they are seeing higher coal volume at the Convent in the 4th quarter. This is highly accretive to FELP.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 23, 2016, 09:29:13 AM
Is there a link to the conference call?

EDIT: I answered my question. Didn't realize Q3 call was this early for SXCP.
Title: Re: FELP - Foresight Energy
Post by: Picasso on October 23, 2016, 07:27:04 PM
Quote
"And we look forward to supporting them and their export needs throughout Convent Marine Terminal. We'll have some more to say about that later, because what we've also seen is pretty significant uptick in price of export coals and the expectation of profitability of export coals for our customers, going forward."
Quote
"At Coal Logistics, the $4.3 million contribution from our Convent facility was comparable to Q3 2015, and KRT and Lake Terminal were impacted this quarter by lower throughput. Volumes across the terminals were below expectations, but we expect a sequential improvement in volumes in the fourth quarter."
Quote
"Let's take a closer look at the increased profitability of those thermal coal exports on slide nine. Low cost U.S. producers still turn a profit when API2 prices were in the mid to high 50s. And with the benchmark in the mid 70s, the mine netbacks are meaningfully higher. We regularly update our estimate of export profitability. And based on our assumptions, our CMT customers are solidly profitable at current delivery prices. While this is an encouraging sign for the thermal exports coming through CMT, we are also looking at incremental business that I will cover on the next slide."
Comments from the SXCP's CEO in yesterday's conference call. So FELP was able to get the rebate should the API2 move down in the 50s. API 2 is in the 70s now and they are seeing higher coal volume at the Convent in the 4th quarter. This is highly accretive to FELP.

Between what's happened with API 2 and the subordinated equity structure, it provides a lot of downside support to the equity where I think it would be really difficult to get screwed on a PIK refi.  Probably shouldn't be trading for around the unpaid distributions given that fundamental improvement.

The MSHA announced 3Q production numbers from FELP which are in line with last quarter and the 3Q in 2015.  So you aren't seeing these big production drops that some earlier on the thread were talking about.  Operating leverage basically got as bad as it was going to get in the 1Q of 2016.

And just for some comparisons.  The 1Y forward on API 2 was $47 this time in 2015.  Today it's $70.  A year ago FELP was at $8 versus $4.50 today.  FELP is highly geared towards export prices because all of it is done with incremental tons on a low variable cost.  So this is obviously positive operating leverage in the other direction.  I believe it's somewhere around $10/ton on about $40 netbacks using the 1Y forward.  Spot is $10 higher. 

Also, spot ILB pricing has started moving up (although not by much) but is higher than it was this time in 2015 when FELP was much higher.  This is partly because nat gas is also about 50% higher than this time last year.  Plus European utilities are having a lot of issues with their nuclear reactors which should support API 2 prices going into the PIK refi.

Not to mention the general sentiment towards coal has changed a lot over the last year.  Companies are exiting bankruptcy and (gasp) providing investors with securities that are actually moving up in price and creating positive free cash flow.  For example see ARCH or CNTE.  I think investors are probably figuring out that coal isn't totally dead.

It's unclear what is going on with Hillsboro.  But given the rest of the assets can support FELP as it currently stands (which still has it worth a lot more than the current unit price) then that's become a weird hidden asset.  Any kind of clarity on that asset will be important and it's not something an investor is paying for at this point.

Some reasons why it's still cheap:

1) Owners get the joy of paying taxes on income they won't receive (since it's a partnership and distributions are being withheld) 
2) Market is probably nervous about the upcoming PIK refi
3) At least one large sell-side firm has dropped coverage coming out of the refi
4) This thing is very illiquid, hard to get any large size for the bulk of fund managers.  If something goes wrong on a big position here, you're trapped.  Float is tiny as heck.

That said, I'm comfortable with all those things.  Others might not be but hey that's what makes a market.  If someone has shares they want to unload in a block trade feel free to send me a message.  As long as you're not Accipiter.  I'm not that rich.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 24, 2016, 07:23:27 AM
Between what's happened with API 2 and the subordinated equity structure, it provides a lot of downside support to the equity where I think it would be really difficult to get screwed on a PIK refi.  Probably shouldn't be trading for around the unpaid distributions given that fundamental improvement.

I agree. The only way to screw the unit holders is if Cline and Murray get into some kind of agreement to sell FELP to Murray for cheap. Or Murray gives up on FELP and start dumping bad assets on it wiping the equity and the debt.

As a wise man once said  "A mine is just a hole in the ground with a liar on the top" . Gotta be careful.

Title: Re: FELP - Foresight Energy
Post by: Picasso on October 24, 2016, 07:39:20 AM
Well both of those are extremely unlikely.  It's part of the reason this restructuring took so long.  Cline made sure he wasn't going to get screwed by going in for the bond tender. 

Plus why would Cline sell FELP to Murray on the cheap after coming in to help with the bond tender?  By my estimates FELP can do around $200 million of free cash flow next year because of this API 2 rebound.  That means it probably trades for 3x earnings even including all the Murray subs.  Cline isn't likely to sell at this price.

And Murray can't just start dumping bad assets on FELP because of the conflict committee that was put in place as part of the Cline tender. 

Not that bad things can't happen but I think getting screwed for those reasons isn't likely to be an outcome here.  Maybe another mine catches fire or something.  Or China decides to kill this met coal rally and investors assume FELP will be impacted.  The winter doesn't look like it will be that cold but we'll see what happens to coal inventories.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 24, 2016, 08:40:15 AM
Well both of those are extremely unlikely.  It's part of the reason this restructuring took so long.  Cline made sure he wasn't going to get screwed by going in for the bond tender. 

Plus why would Cline sell FELP to Murray on the cheap after coming in to help with the bond tender?  By my estimates FELP can do around $200 million of free cash flow next year because of this API 2 rebound.  That means it probably trades for 3x earnings even including all the Murray subs.  Cline isn't likely to sell at this price.

And Murray can't just start dumping bad assets on FELP because of the conflict committee that was put in place as part of the Cline tender. 

Not that bad things can't happen but I think getting screwed for those reasons isn't likely to be an outcome here.  Maybe another mine catches fire or something.  Or China decides to kill this met coal rally and investors assume FELP will be impacted.  The winter doesn't look like it will be that cold but we'll see what happens to coal inventories.
I was just trying to think of the scenarios. I agree they are unlikely. Murray is an old school guy and will not risk his reputation by screwing the unit holders.

As for the China killing the rally. The only thing they hate more than accepting a  bad policy outcome is to go back on the policy. The likelier result will be a slowdown on the implementation that may check further price rally. I do think that will be a much better outcome. Lots of coal companies left for dead are starting to ramp up in Australia. A 20-30% decline in the coal prices will slow it down considerably. Either way FELP is still a "restructuring didn't bring down the company" story.  Coal price rally is an icing on the cake.




Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 24, 2016, 08:52:45 AM
At this point, it seems like it would be nice for FELP to lock in pricing on a decent portion of their planned 2017 production so they can set themselves up for a strong 2017.
Title: Re: FELP - Foresight Energy
Post by: Picasso on October 24, 2016, 09:02:34 AM
At this point, it seems like it would be nice for FELP to lock in pricing on a decent portion of their planned 2017 production so they can set themselves up for a strong 2017.

Not to mention the SXCP export terminal will have capacity for up to 15 million tons in 2017. 
Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 24, 2016, 12:15:31 PM
At this point, it seems like it would be nice for FELP to lock in pricing on a decent portion of their planned 2017 production so they can set themselves up for a strong 2017.

Not to mention the SXCP export terminal will have capacity for up to 15 million tons in 2017.

If they could lock in $20/ton profits on say 10-12Mil tons (not sure how much capacity Murray is responsible for), that would potentially mean even more than $200M FCF in 2017.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 24, 2016, 12:40:10 PM
If they could lock in $20/ton profits on say 10-12Mil tons (not sure how much capacity Murray is responsible for), that would potentially mean even more than $200M FCF in 2017.

In the case of commodities, market usually discounts forward prices but FELP's case is interesting. There is a big overhang on the stock due to the PIK refinancing next year. If that path gets some clarity because of higher pricing hedges, FELP will be repriced close to where ARLP is since the debt ratios will be lot better due to higher earnings.  From there on , its a commodity stock.

What really surprises me is that at today's prices , you are locking in $2.00 of distributions before Murray can assume control.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 24, 2016, 01:39:56 PM
What a jump today!! Looks like market is figuring this one out.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 25, 2016, 02:28:42 PM
Any thoughts on the valuation after the run up of the last two days? My last notes say assuming no refinance and full dilution , at 100m DCF they should be valued around $5.70 at 8x multiple(350m/6 = 58m + 71m =129 m shares divided by 100m discount to today at 8%). Do you guys think this is fully valued at 100m DCF. I know they will be doing more but until this qtr earning comes out , I am just trying to figure out the value with the information that I have.
Title: Re: FELP - Foresight Energy
Post by: Picasso on October 25, 2016, 02:34:28 PM
I'd agree with that, if you think the long-term earnings here are $100 million then $6 is fully valued. 
Title: Re: FELP - Foresight Energy
Post by: valcont on October 25, 2016, 02:53:47 PM
I'd agree with that, if you think the long-term earnings here are $100 million then $6 is fully valued.

Thanks Picasso. Off course there is a lot of optionality here that I like. Refinancing and hillsboro situation are the short term catalyst here. Talking about Hillsboro , they settled a lawsuit with the fired employees couple weeks ago. Not material but maybe a PR gig considering they've been waiting for the decision on extending the mine since March of this year.
Title: Re: FELP - Foresight Energy
Post by: Picasso on October 25, 2016, 03:05:22 PM
Yep.  I think there's still a lot of optionality here that should play out favorably.  It looks fairly easy to just refi out the whole debt structure or worst case dilute at these higher unit prices.  And there is a very high probability of more than $100 million of DCF next year.  So I'd prefer to think of $6-ish as my worst case price target assuming nothing else bad happens.  I'm keeping all my eggs in the FELP basket but watching the basket very carefully...
Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 25, 2016, 03:32:02 PM
So I'd prefer to think of $6-ish as my worst case price target assuming nothing else bad happens.  I'm keeping all my eggs in the FELP basket but watching the basket very carefully...

I imagine you'd really like to be able to hold at least a year to take advantage of long term Cap Gains rates when you sell, right!

Clearly we weren't the only one's that put two and two together regarding the SXCP commentary. I'm really curious on what the timeline might be to restart paying dividends.
Title: Re: FELP - Foresight Energy
Post by: Picasso on October 25, 2016, 03:37:58 PM
So I'd prefer to think of $6-ish as my worst case price target assuming nothing else bad happens.  I'm keeping all my eggs in the FELP basket but watching the basket very carefully...

I imagine you'd really like to be able to hold at least a year to take advantage of long term Cap Gains rates when you sell, right!

Clearly we weren't the only one's that put two and two together regarding the SXCP commentary. I'm really curious on what the timeline might be to restart paying dividends.

I'd really, really like to take advantage of the LTCG treatment if possible.  I think there's a good possibility of that.

First they need to refi out the new debt before they work on the distributions.  I noticed the new debt traded today at 95 on both the PIK's and cash pays.  Also good from a very low CODI tax standpoint.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 26, 2016, 10:26:10 AM
Is this for real? Has everyone realized all of a sudden what a great deal this stock is.

BTW do you guys know when the earning call is? Google Finance shows its tomorrow but I don't see anything on their website.
Title: Re: FELP - Foresight Energy
Post by: arcube on October 26, 2016, 10:34:13 AM
Is this for real? Has everyone realized all of a sudden what a great deal this stock is.

BTW do you guys know when the earning call is? Google Finance shows its tomorrow but I don't see anything on their website.

This from BusinessWire.


Foresight Energy LP Schedules Third Quarter 2016 Earnings Call
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7:30 AM ET 10/26/16 | BusinessWire

Foresight Energy LP ("Foresight") (NYSE: FELP), a Delaware limited partnership, will report its third quarter 2016 earnings before the market opens on Wednesday, November 9, 2016. A conference call to discuss financial results will take place on the same day at 10:00 a.m. Eastern Standard Time. Participating on the call will be Robert D. Moore, President and Chief Executive Officer and James T. Murphy, Chief Accounting Officer.

Participants may access the call using the following phone number:

Teleconference Dial in: (800) 288-8968

Participant Passcode: 405201

Investors may also listen to the call via webcast on Foresight's website at http://investor.foresight.com. A replay of the call will be available on the website for approximately one week.

About Foresight Energy LP

Foresight is a leading producer and marketer of thermal coal controlling over 3 billion tons of coal reserves in the Illinois Basin. Foresight currently operates two longwall mining complexes with three longwall mining systems (Williamson (one longwall mining system) and Sugar Camp (two longwall mining systems)), one continuous mining operation (Macoupin) and the Sitran river terminal on the Ohio River. Foresight's operations are strategically located near multiple rail and river transportation access points, providing transportation cost certainty and flexibility to direct shipments to the domestic and international markets.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20161026005078r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20161026005078/en/

SOURCE: Foresight Energy LP

 Foresight Energy LP
 Gary M. Broadbent, 740-338-3100
 Assistant General Counsel and Media Director
 Investor.relations@foresight.com
 media@coalsource.com
 

Title: Re: FELP - Foresight Energy
Post by: valcont on October 26, 2016, 10:49:17 AM
Thanks arcube
Title: Re: FELP - Foresight Energy
Post by: jrallen81 on October 26, 2016, 01:39:33 PM
So, is this a situation where the dilution is lessened as the share price goes up?
Title: Re: FELP - Foresight Energy
Post by: Picasso on October 26, 2016, 01:49:50 PM
Pretty much. Fair value actually goes up as the stock goes up. Already half the potential dilution as a month ago.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 27, 2016, 05:49:39 PM
Part of what I think explains the current price is this hedge fund Accipiter Capital.  I attached their holdings.

Here's a little bio:

Quote
Accipiter Capital Management, LLC is an employee owned hedge fund sponsor. The firm primarily provides its services to pooled investment vehicles. It invests in public equity markets of the United States. The firm primarily makes its investments in equity securities in the life science, biotechnology, pharmaceuticals, medical device, healthcare providers, managed care, and health care service sectors. It employs fundamental analysis to make its portfolio. The firm obtains external research to complement its in-house research. Accipiter Capital Management, LLC was founded in 2002 and is based in New York City

Now get this... They bought roughly 6.4% of all FELP shares outstanding last quarter.  They also bought $25 million worth of VRX in the $100's.  But more importantly, why the hell did they buy $50 million of FELP at $6?  It doesn't fit their circle of competence at all.  And FELP is the bulk of their equity portfolio.  The rest of their portfolio has been getting smoked so maybe they have some redemption pressures.

Assuming they're the fund selling here, there just isn't enough liquidity to get out.  Average volume is in the 100k share region, they need to unload 84x that.  So I think you have some interesting dynamics with a low float and seller that may want out of a badly timed purchase. 

Or it could be Fidelity and Accipiter is just riding out that mistake.

I'm having some fun reading through this thread again and found this interesting comment by Picasso. Now I'm curious if Accipiter is still holding their position or not.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on October 27, 2016, 06:07:14 PM
They have over 8 million shares. It won't be easy to unload.

Gave Hoffman is buddies with Cline. Hard to say.
Title: Re: FELP - Foresight Energy
Post by: Picasso on October 27, 2016, 06:13:22 PM
It's tempting to put together a some investors to make an offer for Accipiter's units at a discount to market value.  I imagine he's hurting pretty bad from poorly timed healthcare investments and it can't be easy to get liquidity from FELP since he'd need to file any changes within a couple days.  Probably not a lot of natural buyers for those units because of the complexity of this situation.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 28, 2016, 08:00:07 AM
ARLP just posted their results and they beat on both revenue and earnings. The conference call was pretty interesting. Although they are not a major exporters , they did 3 million tons this quarter. Here are my notes from the management discussion:

1. Illinois Basin will see 5-10% increased demand next year.
2. Higher API2 will increase US prices.
3. Their Hamilton mine in ILB can be ramped up to increase export volume but they like to see sustainable API2 prices to start hiring.
4. They are focussed on US demand and anticipate higher volumes here.
5. Maintains distribution of 43c and they believe they can sustain it next year.
6. Higher guidance.

Its difficult to imagine downside for FELP at current prices. Higher export demand, increased US demand. I added to my stake today.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 28, 2016, 08:07:29 AM
I was reading through the  exchange agreement (http://seekingalpha.com/filing/3217046) again last night and had something regarding the PIKs I wanted to confirm my understanding of:

Quote
If all of the Exchangeable PIK Notes have not been redeemed or purchased for cash at 100% of the principal amount thereof plus accrued interest to, but excluding, the date of redemption and/or purchase on or prior to October 2, 2017, then, at 1:00 p.m. (New York City time) on the Exchangeable PIK Notes Maturity Date, the Exchangeable PIK Notes shall mature, at which time the Issuers will be required to repay the Exchangeable PIK Notes in cash at 100% of the principal amount of the Exchangeable PIK Notes plus accrued interest to the Exchangeable PIK Note Maturity Date; provided , that if the Issuers fail to so repay the Exchangeable PIK Notes at or prior to 1:00 p.m. (New York City time) on the Exchangeable PIK Notes Maturity Date, then all outstanding Exchangeable PIK Notes (including all principal, interest, and other amounts outstanding thereunder) shall immediately and automatically be exchanged for Common Units representing 75% of FELP’s outstanding units (including Common Units and subordinated units) on the Exchangeable PIK Notes Maturity Date (after giving effect to the full exchange of the Exchangeable PIK Notes into Common Units), subject to adjustment on account of certain anti-dilution protections.

1. We've previously discussed that the amount of potential dilution depends on the price of the shares, but nowhere in this statement do I see anything indicating that share price will be used, it simply says the exchange will be for 75% of FELP's outstanding units.

2. The language seems to indicate that the conversion would be for 75% of outstanding units, whether the outstanding PIKs due were $250Million, or $10Million.

So it seems to be that all we need to care about is whether or not Murray can find a way to pay these off via some sort of refinance, and he needs to pay off the entire amount; its all or nothing. Share price doesn't matter at all either.

I've skimmed through the rest of the document and didn't find anything to refute this interpretation, but hoping I missed something.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 28, 2016, 08:28:42 AM
1. We've previously discussed that the amount of potential dilution depends on the price of the shares, but nowhere in this statement do I see anything indicating that share price will be used, it simply says the exchange will be for 75% of FELP's outstanding units.

Dilution will depend on the price of share. If at the time of dilution , price is $6 then FELP only has to assign 58million common units. If however the price is $3 then units double which impacts distributions.

Oh I see what you are saying. You are saying that the unit holders will get 75% of the outstanding units if the notes can't be redeemed or refinanced by the maturity date. I thought they was another paragraph that discussed the maturity.Let me look it up.
Title: Re: FELP - Foresight Energy
Post by: valcont on October 28, 2016, 08:31:18 AM
1. We've previously discussed that the amount of potential dilution depends on the price of the shares, but nowhere in this statement do I see anything indicating that share price will be used, it simply says the exchange will be for 75% of FELP's outstanding units.

Dilution will depend on the price of share. If at the time of dilution , price is $6 then FELP only has to assign 58million common units. If however the price is $3 then units double which impacts distributions.


Oh I see what you are saying. You are saying that the unit holders will get 75% of the outstanding units if the notes can't be redeemed or refinanced by the maturity date. I thought they was another paragraph that discussed the maturity.Let me look it up.

Duh that will not happen. FELP will simply redeem the notes based on the price of the shares at the time. I was right the first time.
Title: Re: FELP - Foresight Energy
Post by: Picasso on October 28, 2016, 08:54:24 AM
My interpretation was fuzzy/wrong on the PIK's in the past.  But basically the conversion is protection against non-payment where fair value on non-payment would likely be well in excess of the $0.89 price where it would represent 75% dilution.  That would only happen if the units were trading at $0.25 and it would be cheaper for Murray to let it convert and wipe out his sub units.  You really just have to ignore the conversion feature and assume it will be done closer to fair value, maybe through a rights offering if need be.

But I could see how the market will view those odds at 50/50 for non-repayment and try to price in crappy dilution.  There's a sweet spot where Murray doesn't want to issue equity at too attractive a price or else Cline will take 60% of it.  But it can't be so unattractive that Murray doesn't get a good return if he eats it all up with other investors.  At $6 I think Cline would take his fill considering it would be more common units with a very high cash yield.  We should take bets for fun, but I think it will eventually be done over $10.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on October 28, 2016, 09:13:38 AM
Hi Picasso,

I taught MEC is going to take this one private in couple months. But, you have my permission to smack me in the face if I don't listen to you next time. ;D
My interpretation was fuzzy/wrong on the PIK's in the past.  But basically the conversion is protection against non-payment where fair value on non-payment would likely be well in excess of the $0.89 price where it would represent 75% dilution.  That would only happen if the units were trading at $0.25 and it would be cheaper for Murray to let it convert and wipe out his sub units.  You really just have to ignore the conversion feature and assume it will be done closer to fair value, maybe through a rights offering if need be.

But I could see how the market will view those odds at 50/50 for non-repayment and try to price in crappy dilution.  There's a sweet spot where Murray doesn't want to issue equity at too attractive a price or else Cline will take 60% of it.  But it can't be so unattractive that Murray doesn't get a good return if he eats it all up with other investors.  At $6 I think Cline would take his fill considering it would be more common units with a very high cash yield.  We should take bets for fun, but I think it will eventually be done over $10.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 28, 2016, 10:19:36 AM
My interpretation was fuzzy/wrong on the PIK's in the past.  But basically the conversion is protection against non-payment where fair value on non-payment would likely be well in excess of the $0.89 price where it would represent 75% dilution.  That would only happen if the units were trading at $0.25 and it would be cheaper for Murray to let it convert and wipe out his sub units.  You really just have to ignore the conversion feature and assume it will be done closer to fair value, maybe through a rights offering if need be.

But I could see how the market will view those odds at 50/50 for non-repayment and try to price in crappy dilution.  There's a sweet spot where Murray doesn't want to issue equity at too attractive a price or else Cline will take 60% of it.  But it can't be so unattractive that Murray doesn't get a good return if he eats it all up with other investors.  At $6 I think Cline would take his fill considering it would be more common units with a very high cash yield.  We should take bets for fun, but I think it will eventually be done over $10.

So would I be correct in assuming that you think the following will happen:

1. Over the next year, FELP buys back as much of the 2017 PIK Notes as possible with operating cashflows.

2. Any amount remaining is dealt with via a share offering at prevailing market prices.

If FELP can generate FCF of $200M over the next 12 Months and uses it all to buy-back the PIKs, that would leave about $100M next October to refinance. Assuming a share offering, that would only be 10M new units at $10/unit, 16.6M at $6/unit, or 25M at $4/unit.

Given the $1.35/Minimum Annual Distribution, its definitely hard to imagine Cline not being willing to buy 60% of any units issued under $7 (19%+ yield, not including the arrearages that will have accrued by then).

Alternatively, Murray should be able to refinance with a new note on better terms, particularly if FELP can lock in current API2 rates on a solid portion of a couple years of production. That would be the best outcome in terms of limited dilution.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on October 28, 2016, 10:22:01 AM
Its amazing how I'm more interested in adding to my position at current prices than I was with the stock at $4 when the deal was confirmed at the end of August.

What exactly does the company need to do before they can start paying distributions again?
Title: Re: FELP - Foresight Energy
Post by: heth247 on October 28, 2016, 11:22:05 AM
Its amazing how I'm more interested in adding to my position at current prices than I was with the stock at $4 when the deal was confirmed at the end of August.

What exactly does the company need to do before they can start paying distributions again?

I thought they cannot pay out any dividend until 2H of 2018.  Not sure if this restriction can change if they refinance the PIK in a year.
Title: Re: FELP - Foresight Energy
Post by: Patmo on October 28, 2016, 09:46:24 PM
Yeah, I put a pretty large bet on coal a while ago. FELP, Teck, Suncoke, Consol... Not going to complain about the state of affairs

Title: Re: FELP - Foresight Energy
Post by: heth247 on November 02, 2016, 12:10:35 PM
If Trump won next week, we should expect this one to fly instead of going down with the broad market, correct?
Title: Re: FELP - Foresight Energy
Post by: valcont on November 02, 2016, 03:52:47 PM
Does anyone know how much ton of coal they exported in the last two qtrs? There Qs don't give that breakdown although the K does.

"During the years ended December 31, 2015, 2014 and 2013, export tons (inclusive of tons sold from mines under development) represented 24%, 30% and 33% of tons sold, respectively. Tons exported into Europe during the years ended December 31, 2015, 2014 and 2013 represented approximately 22%, 26% and 23%, respectively,"
Title: Re: FELP - Foresight Energy
Post by: Green King on November 02, 2016, 07:13:03 PM
Does anyone know how much ton of coal they exported in the last two qtrs? There Qs don't give that breakdown although the K does.

"During the years ended December 31, 2015, 2014 and 2013, export tons (inclusive of tons sold from mines under development) represented 24%, 30% and 33% of tons sold, respectively. Tons exported into Europe during the years ended December 31, 2015, 2014 and 2013 represented approximately 22%, 26% and 23%, respectively,"

I Just assume that they have excess capacity in terms of production and if the export contact allows it they will export as much as they can to maximize profit. The bottleneck is at exporting capacity and ramp up speed.
Title: Re: FELP - Foresight Energy
Post by: valcont on November 03, 2016, 01:31:03 PM
Looks like they have to do 5m minimum. This is from the last conf call :

Quote
Evan Kurtz

A couple questions on sales, what's the minimum level of export sales you can go to before you start to run into take or pay issues and maybe on the same line as if you were to export sales down to zero just try to place everything domestically. What sort of liquidated damages would you be looking at?

Rob Moore

We have 5 million tons of take or pay through convent marine terminal and around take or pay on a per ton basis in the mid-550. So as we as we look at the export obviously the netbacks are extremely challenging right now and we're going to be disciplined with respect to how we look at the bit of the hedges in 2016 and 2017. We do expect to be in the export market, the level at which we will participate in export market remains to be seen to the extent that we're not in the export market we're going to evaluate options domestically.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on November 09, 2016, 05:29:45 AM
I'm having a hard time wrapping my head around some of the language regarding the redemption of the 2017 PIK Notes. See page 12 of the Q3 report: (http://seekingalpha.com/filing/3284366?app=1&uprof=44[url=http://See page 12 of the Q3 report:)

The highlighted part seems poorly worded.

Quote
Terms of the New Notes

The Second Lien Notes were issued pursuant to an indenture and have a maturity date of August 15, 2021. The Second Lien Notes bear interest at a rate of: (i) 9.0% per annum until August 15, 2018 and 10.0% per annum thereafter, in each case, payable in cash on each interest payment date; and (ii) 1.0% per annum payable in kind. Interest will be payable semi-annually on February 15th and August 15th, commencing on February 15, 2017. The Issuers may redeem the Second Lien Notes in whole or in part subject to the redemption premiums and provisions in the indenture. 

The Exchangeable PIK Notes were issued pursuant to an indenture and have a maturity date of October 3, 2017 (the “Exchangeable PIK Notes Maturity Date”). The Exchangeable PIK Notes bear interest payable in kind at a rate of 15.0% per annum, payable on March 1, 2017 and October 3, 2017.

We may redeem, repurchase, refinance, defease or otherwise retire (any of the foregoing, a “redemption”) all of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at 100% of the principal amount thereof plus accrued interest (any such redemption, an “Exchangeable PIK Note Retirement”). In addition to the Exchangeable PIK Note Retirement, Murray Energy, an affiliate of Murray Energy or a group of persons which includes Murray Energy or any of its affiliates (collectively, the “Murray Group”) shall have the right to purchase all (but not less than all) of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at a price equal to 100% of the principal amount of the Exchangeable PIK Notes plus accrued interest (a “Murray Purchase,” and together with an Exchangeable PIK Note Retirement and any repayment of the Exchangeable PIK Notes in full in cash that occurs on the Exchangeable PIK Notes Maturity Date, a “Note Redemption”).

Upon a Murray Purchase, the Murray Group will receive FELP units equal to the principal and interest settlement amount divided by the lesser of: (a) a number equal to one divided by 92.5% of the last thirty days weighted-average trading price or (b) 1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes. The Issuer and Murray Energy may each purchase less than all of the Exchangeable PIK Notes, so long as the combination results in redemption of all of the Exchangeable PIK Notes. The Exchangeable PIK Note Retirement may be funded with the proceeds from an investment by the Murray Group or any member thereof in FELP, from general working capital or from any other source permitted by the Exchangeable PIK Notes Indenture (and subject to compliance with the Partnership’s other debt agreements). If the Exchangeable PIK Notes have not been redeemed or purchased for cash at 100% of the principal amount thereof plus accrued interest by the Exchangeable PIK Note Maturity Date, then all outstanding Exchangeable PIK Notes (including accrued interest) shall be exchanged for common units representing 75% of FELP’s outstanding limited partner units on the Exchangeable PIK Notes Maturity Date, subject to adjustment on account of certain anti-dilution protections.
The obligations under the New Notes are unconditionally guaranteed on a senior secured basis by each of FELP’s wholly owned domestic subsidiaries that guarantee the Senior Secured Credit Facilities (other than Foresight Energy Finance Corporation) and on a senior unsecured basis by FELP and are or will be secured by second-priority perfected liens on substantially all of our and the subsidiary guarantors’ existing and future assets, subject to certain exceptions.

Based on my interpretation, assuming that none of the notes are retired early, it seems that Murray Group could do the following:

principal and interest settlement amount: $404.5M. If they buy all this back they would get new FELP units equal to either:

$404.5/1.12007= 361.1M units.
 or
$404.5/(1/.925*5) = 1,870.6M units (I used $5/share as an example here)

What am I missing here? It seemed that the higher the unit price goes, the more units Murray Group would be in line to receive, which obviously makes no sense. I must be messing up some function or misreading the statement, but I've gone over it about 50 times and can't come to any other conclusion.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on November 09, 2016, 07:20:23 AM
Just listened to the call, pretty worthless IMO. They didn't take any questions and didn't mention anything concrete about expanding exports to take advantage of API2 pricing.
Title: Re: FELP - Foresight Energy
Post by: valcont on November 09, 2016, 07:45:53 AM
Just listened to the call, pretty worthless IMO. They didn't take any questions and didn't mention anything concrete about expanding exports to take advantage of API2 pricing.

The only useful information was the reduction in the cash cost per ton sold from $22 to $20. Granted that includes $10m in insurance recoveries but they are really efficient.
Title: Re: FELP - Foresight Energy
Post by: gadfly on November 09, 2016, 04:45:06 PM
Few questions after looking at the earnings:

Anyone know why FELP's realized prices in 3Q (43.2) are $4 lower than the prices ARLP realized in 3Q (47.5) in the ILB?

When looking at the 3Q interest expense does that include PIK non cash interest?

What would tons sold be in 2017 in the bull case?

Lastly, does this back of the envelope valuation make sense...

units in 1 year = 170 (assuming 300m PIK done at around $7)

*Assuming nothing changes in 1 year*

Margin per ton  = 16
tons sold = 21 million

= 336 Million

Annual SG&A = 28
Annual Interest = 105 (something like that once 300mm PIK are gone)
Maintenance CAPEX = 60

2017 FCFE = 143

*assuming no growth in FCFE and 10% required return on equity*

143/.10 = 1,430

1430/170 = $8.41 value in 1 yr

8.41/1.1 = $7.6 today
Title: Re: FELP - Foresight Energy
Post by: hswoon on November 09, 2016, 06:11:11 PM
ARLP coal has higher heat content.
Title: Re: FELP - Foresight Energy
Post by: hswoon on November 09, 2016, 08:11:53 PM
Does anyone have a link to the transcript for the call? Thanks
Title: Re: FELP - Foresight Energy
Post by: valcont on November 09, 2016, 08:18:15 PM
Does anyone have a link to the transcript for the call? Thanks

No transcript but here is the audio
Title: Re: FELP - Foresight Energy
Post by: Picasso on November 09, 2016, 09:18:24 PM
Since there are a few questions from a few guys, thought I would bunch my responses on this thread. 

There's really two segments of earnings for FELP, domestic and export.  Domestic hasn't improved much aside from this Trump victory.  I think there's some EIA projection out there that show the ILB growth without the CPP.  There's a certain fixed cost associated with producing volumes going into the domestic market.  However export prices have gone nuts and that's done more on a variable cost basis.  There was an old presentation that showed margins at FELP from 2012/2013/2014 versus peers.  Margins were well above peers because of this operating leverage.  We basically had a call option on export pricing that we didn't pay for and probably aren't paying for at $6-7.  So if you're using $15-16 margins on their volumes next year, that's probably too low since margins on exports alone are looking around $30-40.  With spot at $90, net backs are around $55-60 with variable costs around $10-15.  2018 contracts are $71-72 where you'll see closer to $30 margins when adjusting for sulfur content etc.  Domestic margins are closer to $15.  So I'd look at FELP margins from 2014 or so to paint a picture for the upcoming years.  Don't use margins from the worst time in recent coal history.

If you listen to various earnings commentary at the coal stocks (ARLP, CNXC), supply is falling a lot faster than demand is coming back.  I haven't heard anything that says we're going to see some big supply/demand imbalances that causes domestic prices to plummet.  Nat gas might roll over (winter isn't that cold) but API 2 pricing is giving a big cushion to potential weakness in domestic pricing.  And look at the cost curve for ARLP even adjusting for btu content.  Plus based on this FELP earnings call, they placed another 4mt of volume even as the market looks soft.  And it sounds like they're making headway into displacing PRB coal.  Not to mention SXCP now has capacity to export an extra 50% for FELP and Murray.

All that said, I think $150 million of DCF is way too low for 2017 and beyond.  It's ignoring a lot of the operating leverage at work and the fact that the CPP is likely out the window.  If CPP is out the window, then volume and pricing will improve (versus just volumes) for domestic.  And given the supply cost curve it's hard to imagine how FELP can't turn a lot of free cash flow. 

So now for the PIK.  I no longer think dilution will happen at $7.  Not with how much cash flow they're producing and this Trump victory.  The math wouldn't work for Bob Murray.  Plus Bob Murray probably feels like a million bucks now, and he probably doesn't want to sell this stock to anyone else at $7.  He paid $20 when the fundamentals were a lot worse.  I have free cash flow for next year at over $250 million, so if he chooses to dilute at $7 you're talking about 121 million common units + 65 million subs earning $1.35+.  Commons will get the first $2-3 of arrears which is a 28% return from that alone.  And the whole equity structure including subs will be at 5x FCF.  Why would Cline turn that down since he has the right to take 60% of whatever the equity issuance is?  Murray would be handing a lot of value back to Cline.  It makes much more sense to issue equity at a price where Cline isn't going to take a big chunk of the free cash flow coming out of FELP.  So it comes down to figuring out what price Cline says, "it's okay I don't want a 10% return, you take all the commons with so-and-so," or whatever.

Which brings me to my next thought.  Bob Murray has over a billion in debt tied to this purchase of FELP and he's not getting any credit for the $450 million or whatever EBITDA this entity is shooting off.  It would be an incredibly accretive transaction to roll the rest of the FELP equity structure into Murray.  By paying another $1 billion for the remaining equity, he'd get access to $450 million of EBITDA.  It's a no brainer.  Murray debt still trades under 80 with a ridiculous yield.  But he can't run FELP into the ground and drive down the stock to make a low ball offer because Cline can take up 60% of any equity issuance to redeem the PIK's to trigger Murray control for the remainder of the purchase option.  He has to first get FELP up before he can make an offer.  In theory he could do it around current prices and have Cline participate, but the yield looks really high and I don't see how anyone would advise him to do that.  Cline would be taking Murray's money to take more of Murray's money.

And since they didn't take questions on this earnings call, I'm thinking they want to refi the PIK at an attractive price, refi the revolver at FELP, and then roll up the rest of the equity structure.  Either that or they're going to keep this a public entity (my preferred outcome) and make this a growing yieldco which now looks much more feasible.  But based on Murray's comments before (and this earnings call), I think they want to take it private.

Add all that up and I think the downside on the equity is small here.  Maybe it goes back to $5 or $6.  I'd consider that a great entry point to buy more because of this fundamental change.  Not even thinking about selling yet.  If Trump lost, and this was at $8-9 in a retirement account, then I'd consider it a possible exit point.  But for tax reasons, the Trump win, the likelihood of a take private, export margins, etc, I think it's foolish to sell now.

Reminds me a bit of 2009.  I remember investors buying these cyclical stocks in February and then selling in May/June because they made 50-80%.  Then the stocks went on to go up 10x or 20x.  People get so anchored on how bad the recent past was that they don't realize the cycle has turned and to just stay long.  It won't ever get as bad at 2008 again (it might, but very low odds and not for a long time), and a few months isn't long enough to kill the cycle.  So just stay long...

Same thing is happening here.  We bought a company that got forced near bankruptcy on a technicality at the worst possible time.  Energy downturn, junk bond revolt, coal bankruptcies, coal pricing falling off a cliff, etc.  It's only been a few months and the cycle is now going the other way and a big climate skeptic just took control over every branch of government and has climate change deniers on his economic team.  Probably going to get volatile, but I view drops as potential buying opportunities versus being nervous about giving back profits...  If they do only earn $150 million next year for some crazy reason, well big whoop about owning a stock at 8x earnings with $2 of distributions owed to us.   I don't see any other stocks like that out there to sell FELP and buy into.  Much less add in the massive tax bill.

Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.   ;)
Title: Re: FELP - Foresight Energy
Post by: heth247 on November 09, 2016, 09:40:19 PM
Yes, based on the wording your interpretation seems correct to me. However, my understanding is that a "Murray Purchase" is defined as "Murray purchasing all (but not less than all) of PIKs".  That should be an event which has very little chance to happen.  E.g. if FELP + Murray redeem PIK together, then Murray's part should not be considered as a "Murray Purchase" event, and therefore such conversion formula does not apply.  Is my understanding correct?

A separate question -- in addition to cash on hand, would FELP be allowed to use their revolver that has just been restored for redeeming PIK?

I'm having a hard time wrapping my head around some of the language regarding the redemption of the 2017 PIK Notes. See page 12 of the Q3 report: (http://seekingalpha.com/filing/3284366?app=1&uprof=44[url=http://See page 12 of the Q3 report:)

The highlighted part seems poorly worded.

Quote
Terms of the New Notes

The Second Lien Notes were issued pursuant to an indenture and have a maturity date of August 15, 2021. The Second Lien Notes bear interest at a rate of: (i) 9.0% per annum until August 15, 2018 and 10.0% per annum thereafter, in each case, payable in cash on each interest payment date; and (ii) 1.0% per annum payable in kind. Interest will be payable semi-annually on February 15th and August 15th, commencing on February 15, 2017. The Issuers may redeem the Second Lien Notes in whole or in part subject to the redemption premiums and provisions in the indenture. 

The Exchangeable PIK Notes were issued pursuant to an indenture and have a maturity date of October 3, 2017 (the “Exchangeable PIK Notes Maturity Date”). The Exchangeable PIK Notes bear interest payable in kind at a rate of 15.0% per annum, payable on March 1, 2017 and October 3, 2017.

We may redeem, repurchase, refinance, defease or otherwise retire (any of the foregoing, a “redemption”) all of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at 100% of the principal amount thereof plus accrued interest (any such redemption, an “Exchangeable PIK Note Retirement”). In addition to the Exchangeable PIK Note Retirement, Murray Energy, an affiliate of Murray Energy or a group of persons which includes Murray Energy or any of its affiliates (collectively, the “Murray Group”) shall have the right to purchase all (but not less than all) of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at a price equal to 100% of the principal amount of the Exchangeable PIK Notes plus accrued interest (a “Murray Purchase,” and together with an Exchangeable PIK Note Retirement and any repayment of the Exchangeable PIK Notes in full in cash that occurs on the Exchangeable PIK Notes Maturity Date, a “Note Redemption”).

Upon a Murray Purchase, the Murray Group will receive FELP units equal to the principal and interest settlement amount divided by the lesser of: (a) a number equal to one divided by 92.5% of the last thirty days weighted-average trading price or (b) 1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes. The Issuer and Murray Energy may each purchase less than all of the Exchangeable PIK Notes, so long as the combination results in redemption of all of the Exchangeable PIK Notes. The Exchangeable PIK Note Retirement may be funded with the proceeds from an investment by the Murray Group or any member thereof in FELP, from general working capital or from any other source permitted by the Exchangeable PIK Notes Indenture (and subject to compliance with the Partnership’s other debt agreements). If the Exchangeable PIK Notes have not been redeemed or purchased for cash at 100% of the principal amount thereof plus accrued interest by the Exchangeable PIK Note Maturity Date, then all outstanding Exchangeable PIK Notes (including accrued interest) shall be exchanged for common units representing 75% of FELP’s outstanding limited partner units on the Exchangeable PIK Notes Maturity Date, subject to adjustment on account of certain anti-dilution protections.
The obligations under the New Notes are unconditionally guaranteed on a senior secured basis by each of FELP’s wholly owned domestic subsidiaries that guarantee the Senior Secured Credit Facilities (other than Foresight Energy Finance Corporation) and on a senior unsecured basis by FELP and are or will be secured by second-priority perfected liens on substantially all of our and the subsidiary guarantors’ existing and future assets, subject to certain exceptions.

Based on my interpretation, assuming that none of the notes are retired early, it seems that Murray Group could do the following:

principal and interest settlement amount: $404.5M. If they buy all this back they would get new FELP units equal to either:

$404.5/1.12007= 361.1M units.
 or
$404.5/(1/.925*5) = 1,870.6M units (I used $5/share as an example here)

What am I missing here? It seemed that the higher the unit price goes, the more units Murray Group would be in line to receive, which obviously makes no sense. I must be messing up some function or misreading the statement, but I've gone over it about 50 times and can't come to any other conclusion.
Title: Re: FELP - Foresight Energy
Post by: heth247 on November 09, 2016, 10:33:39 PM
Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.   ;)

Yes, Picasso, I went very concentrated on this and may even owe you an early retirement if this turns out to be a 10X bagger!

So, by "another billion" were you thinking Murray might take this private at $20?
Title: Re: FELP - Foresight Energy
Post by: awindenberger on November 09, 2016, 11:13:49 PM
Picasso,

I completely agree with you, yet I still don't quite understand the language I highlighted in that mathematically it seems that Murray gets more units as the prices goes higher.

I was also disappointed that management didn't say anything about their plans regarding exporting.
Title: Re: FELP - Foresight Energy
Post by: valcont on November 10, 2016, 06:07:07 AM
I'm having a hard time wrapping my head around some of the language regarding the redemption of the 2017 PIK Notes. See page 12 of the Q3 report: (http://seekingalpha.com/filing/3284366?app=1&uprof=44[url=http://See page 12 of the Q3 report:)

The highlighted part seems poorly worded.

Quote
Terms of the New Notes

The Second Lien Notes were issued pursuant to an indenture and have a maturity date of August 15, 2021. The Second Lien Notes bear interest at a rate of: (i) 9.0% per annum until August 15, 2018 and 10.0% per annum thereafter, in each case, payable in cash on each interest payment date; and (ii) 1.0% per annum payable in kind. Interest will be payable semi-annually on February 15th and August 15th, commencing on February 15, 2017. The Issuers may redeem the Second Lien Notes in whole or in part subject to the redemption premiums and provisions in the indenture. 

The Exchangeable PIK Notes were issued pursuant to an indenture and have a maturity date of October 3, 2017 (the “Exchangeable PIK Notes Maturity Date”). The Exchangeable PIK Notes bear interest payable in kind at a rate of 15.0% per annum, payable on March 1, 2017 and October 3, 2017.

We may redeem, repurchase, refinance, defease or otherwise retire (any of the foregoing, a “redemption”) all of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at 100% of the principal amount thereof plus accrued interest (any such redemption, an “Exchangeable PIK Note Retirement”). In addition to the Exchangeable PIK Note Retirement, Murray Energy, an affiliate of Murray Energy or a group of persons which includes Murray Energy or any of its affiliates (collectively, the “Murray Group”) shall have the right to purchase all (but not less than all) of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at a price equal to 100% of the principal amount of the Exchangeable PIK Notes plus accrued interest (a “Murray Purchase,” and together with an Exchangeable PIK Note Retirement and any repayment of the Exchangeable PIK Notes in full in cash that occurs on the Exchangeable PIK Notes Maturity Date, a “Note Redemption”).

Upon a Murray Purchase, the Murray Group will receive FELP units equal to the principal and interest settlement amount divided by the lesser of: (a) a number equal to one divided by 92.5% of the last thirty days weighted-average trading price or (b) 1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes. The Issuer and Murray Energy may each purchase less than all of the Exchangeable PIK Notes, so long as the combination results in redemption of all of the Exchangeable PIK Notes. The Exchangeable PIK Note Retirement may be funded with the proceeds from an investment by the Murray Group or any member thereof in FELP, from general working capital or from any other source permitted by the Exchangeable PIK Notes Indenture (and subject to compliance with the Partnership’s other debt agreements). If the Exchangeable PIK Notes have not been redeemed or purchased for cash at 100% of the principal amount thereof plus accrued interest by the Exchangeable PIK Note Maturity Date, then all outstanding Exchangeable PIK Notes (including accrued interest) shall be exchanged for common units representing 75% of FELP’s outstanding limited partner units on the Exchangeable PIK Notes Maturity Date, subject to adjustment on account of certain anti-dilution protections.
The obligations under the New Notes are unconditionally guaranteed on a senior secured basis by each of FELP’s wholly owned domestic subsidiaries that guarantee the Senior Secured Credit Facilities (other than Foresight Energy Finance Corporation) and on a senior unsecured basis by FELP and are or will be secured by second-priority perfected liens on substantially all of our and the subsidiary guarantors’ existing and future assets, subject to certain exceptions.

Based on my interpretation, assuming that none of the notes are retired early, it seems that Murray Group could do the following:

principal and interest settlement amount: $404.5M. If they buy all this back they would get new FELP units equal to either:

$404.5/1.12007= 361.1M units.
 or
$404.5/(1/.925*5) = 1,870.6M units (I used $5/share as an example here)

What am I missing here? It seemed that the higher the unit price goes, the more units Murray Group would be in line to receive, which obviously makes no sense. I must be messing up some function or misreading the statement, but I've gone over it about 50 times and can't come to any other conclusion.

Well it is poorly worded.You have to make both (1) and (2) comparable first. Here is how I interpret it going by your example of $404m amount with a $5 price.

1. "a number equal to one divided by 92.5% of the last thirty days weighted-average trading price"
   .925*5 =  $4.6 which when divided by 1 gives us unit per $1 (i.e. 1/4.6)
  SO
  $1 of principal amount will buy you 0.21 unit

2. "1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes."
     Here
   $1 of principal amount will buy you 1.12 unit

you take the lesser of these two which is 0.21 unit/$1 prinicipal and multiply it by total amount due $404m * 0.21 ~ 84m units

I think the clause is there to prevent extreme dilution in case the price goes below $1 at the time of refinance say at $0.50 after the 92% discount.

In case (1) you'll get 2 units per $1 and in (2) you get 1.12 so you will go with 1.12 unit.


 
Title: Re: FELP - Foresight Energy
Post by: Picasso on November 10, 2016, 06:37:40 AM
Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.   ;)

Yes, Picasso, I went very concentrated on this and may even owe you an early retirement if this turns out to be a 10X bagger!

So, by "another billion" were you thinking Murray might take this private at $20?

No, just throwing out a number.  But I think FELP looks better now versus when they first bought it and paid $20 in the past.  Since it will be a couple years before distributions restart (unless they refi the revolver?), you can make the math work pretty well for Murray even if he paid $1 billion for the rest of the commons.  Cline can't be stupid enough not to know that. 

One other part to this is that you have Cline's colleagues who participated in the bond tender.  I hadn't realized that it wasn't just Cline's capital.  So I think he'd do what's in the best interest of his colleagues (like Meyers) since they helped save the company and are friends?  Plus Accipiter is still long.  I think they are all in a position to be treated fairly because of the option to participate in anything Murray does to raise funds needed to repay the PIK's.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on November 10, 2016, 07:50:20 AM
Who is Meyers?
Title: Re: FELP - Foresight Energy
Post by: Picasso on November 10, 2016, 08:14:03 AM
Sorry, meant Beyer.  He was the old CEO of FELP.

Unless otherwise indicated or the context otherwise requires, references in this Exhibit 99.2 to: (i) ”Reserves” refers to Foresight Reserves LP; (ii) ”Reserves Investor Group” refers to Reserves, Michael J. Beyer (“Beyer”), Christopher Cline, The Candice Cline 2004 Irrevocable Trust, The Alex T. Cline 2004 Irrevocable Trust, The Christopher L. Cline 2004 Irrevocable Trust, The Kameron N. Cline 2004 Irrevocable Trust, Munsen LLC, Filbert Holdings, LLC, and Forest Glen Investments, LLC; and (iii) “Cline Group” refers to the Reserves Investor Group and Cline Resources and Development Company.
Title: Re: FELP - Foresight Energy
Post by: valcont on November 10, 2016, 08:41:01 AM
Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.   ;)

How about lump of coal with the card? I definitely owe you one. I was ready to sell based on my original thesis of FELP surviving restructuring and reaching fair value of $4 :)

 
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on November 10, 2016, 08:51:39 AM
Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.   ;)

How about lump of coal with the card? I definitely owe you one. I was ready to sell based on my original thesis of FELP surviving restructuring and reaching fair value of $4 :)

I reduced my position 25% 2 weeks ago at 6.25 (my avg purchase price in 1.79) because the position is so large in my portfolio. It's still almost 25% of my portfolio but I am planning to wait with reducing further until price is significantly higher. Especially after the Trump win. Picasso's updates are helping tremendously and I would never have discovered this investment without him in the first place. I appreciate it a lot man! :)

I don't face taxes on disposition though so I should probably sell earlier than the rest of you.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on November 10, 2016, 09:10:43 AM
We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

Picasso should probably change his screen name to Babe Ruth.

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.
Title: Re: FELP - Foresight Energy
Post by: arcube on November 10, 2016, 09:14:04 AM
We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

Picasso should probably change his screen name to Babe Ruth.

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

+1. Well said.
Title: Re: FELP - Foresight Energy
Post by: heth247 on November 10, 2016, 09:15:25 AM

Well it is poorly worded.You have to make both (1) and (2) comparable first. Here is how I interpret it going by your example of $404m amount with a $5 price.

1. "a number equal to one divided by 92.5% of the last thirty days weighted-average trading price"
   .925*5 =  $4.6 which when divided by 1 gives us unit per $1 (i.e. 1/4.6)
  SO
  $1 of principal amount will buy you 0.21 unit

2. "1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes."
     Here
   $1 of principal amount will buy you 1.12 unit

you take the lesser of these two which is 0.21 unit/$1 prinicipal and multiply it by total amount due $404m * 0.21 ~ 84m units

I think the clause is there to prevent extreme dilution in case the price goes below $1 at the time of refinance say at $0.50 after the 92% discount.

In case (1) you'll get 2 units per $1 and in (2) you get 1.12 so you will go with 1.12 unit.


Sounds like you are implying that those lawyers who drafted this do not understand the difference between division and multiplication....  ;)

Anyway, even at 1.12 units it is already extreme dilution to me. I think this is more of a protection for Murray, so that he will not be the only guy to come up with the funds to redeem all PIKs (the "Murray Purchase" event).
Title: Re: FELP - Foresight Energy
Post by: heth247 on November 10, 2016, 09:20:58 AM
We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

Picasso should probably change his screen name to Babe Ruth.

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

+1. Well said.

+2!
Title: Re: FELP - Foresight Energy
Post by: Patmo on November 10, 2016, 11:37:54 AM
We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

Picasso should probably change his screen name to Babe Ruth.

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

Relax there, his ideas are great but at the end of the day it's your own balls on the line. If it had gone the other way, I'm not sure he'd want nor deserve the other side of those kinds of comments...
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on November 10, 2016, 11:57:42 AM
Good point Patmo.

I'm thanking myself now for putting my own balls on the line.
Title: Re: FELP - Foresight Energy
Post by: arcube on November 10, 2016, 11:59:16 AM
We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

Picasso should probably change his screen name to Babe Ruth.

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

Relax there, his ideas are great but at the end of the day it's your own balls on the line. If it had gone the other way, I'm not sure he'd want nor deserve the other side of those kinds of comments...

While what you are saying makes sense but the gratitude is not just for the idea but the painstaking way he has been explaining this ultra complex situation and answering everyone's questions. Most of us have balls here but putting them to work on everything is not easy or clear. Just for that I think we owe him gratitude. Thanks for understanding.
Title: Re: FELP - Foresight Energy
Post by: Patmo on November 10, 2016, 01:02:23 PM
Fair enough, thx Picasso my brother, your enthusiasm for talking shop is well appreciated
Title: Re: FELP - Foresight Energy
Post by: jrallen81 on November 10, 2016, 02:24:05 PM
Hello,

Maybe I'm reading the 10-q wrong - Doesn't Murray have first right to redeem the exchangeable PIKs and get 1.12 units per PIK? I don't see where Cline gets the right to buy 60% of the equity. It looks like dilution isn't based on the price of the shares but rather the lesser of that or the 1.12 ratio. Can someone set me straight?




So now for the PIK.  I no longer think dilution will happen at $7.  Not with how much cash flow they're producing and this Trump victory.  The math wouldn't work for Bob Murray.  Plus Bob Murray probably feels like a million bucks now, and he probably doesn't want to sell this stock to anyone else at $7.  He paid $20 when the fundamentals were a lot worse.  I have free cash flow for next year at over $250 million, so if he chooses to dilute at $7 you're talking about 121 million common units + 65 million subs earning $1.35+.  Commons will get the first $2-3 of arrears which is a 28% return from that alone.  And the whole equity structure including subs will be at 5x FCF.  Why would Cline turn that down since he has the right to take 60% of whatever the equity issuance is?  Murray would be handing a lot of value back to Cline.  It makes much more sense to issue equity at a price where Cline isn't going to take a big chunk of the free cash flow coming out of FELP.  So it comes down to figuring out what price Cline says, "it's okay I don't want a 10% return, you take all the commons with so-and-so," or whatever.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on November 10, 2016, 03:10:19 PM
We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

Picasso should probably change his screen name to Babe Ruth.

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

Relax there, his ideas are great but at the end of the day it's your own balls on the line. If it had gone the other way, I'm not sure he'd want nor deserve the other side of those kinds of comments...

While what you are saying makes sense but the gratitude is not just for the idea but the painstaking way he has been explaining this ultra complex situation and answering everyone's questions. Most of us have balls here but putting them to work on everything is not easy or clear. Just for that I think we owe him gratitude. Thanks for understanding.

I 2nd that. Picasso's best accomplishment here was definitely being willing to explain the nuances clearly and carefully.

What's your next idea Picasso?
Title: Re: FELP - Foresight Energy
Post by: awindenberger on November 10, 2016, 03:12:29 PM
Well it is poorly worded.You have to make both (1) and (2) comparable first. Here is how I interpret it going by your example of $404m amount with a $5 price.

1. "a number equal to one divided by 92.5% of the last thirty days weighted-average trading price"
   .925*5 =  $4.6 which when divided by 1 gives us unit per $1 (i.e. 1/4.6)
  SO
  $1 of principal amount will buy you 0.21 unit

2. "1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes."
     Here
   $1 of principal amount will buy you 1.12 unit

you take the lesser of these two which is 0.21 unit/$1 prinicipal and multiply it by total amount due $404m * 0.21 ~ 84m units

I think the clause is there to prevent extreme dilution in case the price goes below $1 at the time of refinance say at $0.50 after the 92% discount.

In case (1) you'll get 2 units per $1 and in (2) you get 1.12 so you will go with 1.12 unit.


Thanks, this makes a lot more sense! I figured it must mean this but couldn't get the wording to mean that in my head.
Title: Re: FELP - Foresight Energy
Post by: Patmo on November 10, 2016, 05:04:18 PM
Good point Patmo.

I'm thanking myself now for putting my own balls on the line.

Damn right, own it, man. You're Carl Icahn, you're Warren B. You're from their cloth. You are the best there has ever been, nobody can match you. Your style is impetuous, your analysis is impregnable and you are just ferocious.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on November 10, 2016, 05:51:12 PM
Damn straight Patmo!

Except Icahn and Buffet are patsies. I studied under J. Wohl. Bam!
Title: Re: FELP - Foresight Energy
Post by: jrallen81 on November 14, 2016, 05:46:23 PM
Accipiter sales: http://www.snl.com/IRWeblinkx/ShowFile.aspx?KeyFile=36700373&Output=XML&Format=XML

Title: Re: FELP - Foresight Energy
Post by: awindenberger on November 15, 2016, 07:03:23 AM
Accipiter sales: http://www.snl.com/IRWeblinkx/ShowFile.aspx?KeyFile=36700373&Output=XML&Format=XML

No wonder the stock has tanked every afternoon after a morning move up.
Title: Re: FELP - Foresight Energy
Post by: valcont on November 15, 2016, 07:10:48 AM
Accipiter sales: http://www.snl.com/IRWeblinkx/ShowFile.aspx?KeyFile=36700373&Output=XML&Format=XML

No wonder the stock has tanked every afternoon after a morning move up.

Its only 6% of their stake. I would worry if they keep selling and keep playing golf with Cline. You gotta give these guys a break though. They bought at 6 in the industry they had no experience in and almost got closer to losing their entire stake.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on November 15, 2016, 07:43:07 AM
They had a large percentage in VRX if I recall, so maybe they are dealing with redemptions.
Title: Re: FELP - Foresight Energy
Post by: Beardog on November 15, 2016, 09:08:44 AM
They had a large percentage in VRX if I recall, so maybe they are dealing with redemptions.

Maybe I'm wrong, but since all of the sales came from the onshore fund, can't we infer the sales are the result of a redemption from a US taxable investor?  If Accipiter was selling down their stake, share sales would be reported pro rata from the onshore and offshore funds.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on November 17, 2016, 06:35:36 AM
Beardog - you could be right given the selling seems to have stopped.

It would be tough for Accipter to sell down their stake with such low volume. All speculation.
Title: Re: FELP - Foresight Energy
Post by: heth247 on November 17, 2016, 11:24:11 AM
New SeekingAlpha writing up:

http://seekingalpha.com/article/4024019-impending-catalysts-foresight-energy-
will-drive-strong-returns (http://seekingalpha.com/article/4024019-impending-catalysts-foresight-energy-
will-drive-strong-returns)
Title: Re: FELP - Foresight Energy
Post by: heth247 on November 17, 2016, 12:02:40 PM
New SeekingAlpha writing up:

http://seekingalpha.com/article/4024019-impending-catalysts-foresight-energy-
will-drive-strong-returns (http://seekingalpha.com/article/4024019-impending-catalysts-foresight-energy-
will-drive-strong-returns)

Nothing new that Picasso does not know of.... ;)
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on November 17, 2016, 12:08:04 PM
No mention in the article of the possibility of Murray taking it private.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on November 17, 2016, 12:18:34 PM
No mention in the article of the possibility of Murray taking it private.
Mr. Lazarus commented to the effect afterwards. Could that be Picasso?
Title: Re: FELP - Foresight Energy
Post by: valcont on November 17, 2016, 01:16:08 PM
Mr. Lazarus commented to the effect afterwards. Could that be Picasso?

Nah. he was raised from the dead by Picasso.
Title: Re: FELP - Foresight Energy
Post by: valcont on November 17, 2016, 02:24:16 PM
New SeekingAlpha writing up:

http://seekingalpha.com/article/4024019-impending-catalysts-foresight-energy-
will-drive-strong-returns (http://seekingalpha.com/article/4024019-impending-catalysts-foresight-energy-
will-drive-strong-returns)

And its down 5%. Terrible article loaded with information , no pump whatsoever.
Title: Re: FELP - Foresight Energy
Post by: Aqul on November 20, 2016, 03:12:58 PM
Is there any chance of a re-fi for the Exchangeable PIK? The new 2021 notes don't allow the refinancing debt to pay cash, or have more favorable maturity terms (see below), so it's going to be difficult to re-fi, to say the least. Are you all assuming full dilution for the PIK in your valuations?

From the Indenture (Exhibit 4.1 from the 9-6-16 8-K):
With respect to (i) any Debt Incurred pursuant to this Section 4.06 to refinance the Exchangeable PIK Notes and all subsequent refinancings thereof (collectively, the “Exchangeable PIK Notes Refinancing Debt”) and (ii) any Debt Incurred pursuant to this Section 4.06 after the Issue Date more than a majority of which is loaned or otherwise provided by an Affiliate (other than the Issuers and any Restricted Subsidiary) (which, for the avoidance of doubt, does not apply to any Debt outstanding on the Issue Date, including the Exchangeable PIK Notes, or any Debt outstanding (whether Incurred before, on or after the Issue Date) that is acquired by an Affiliate after the initial Incurrence thereof), in each case of clauses (i) and (ii) other than Excluded Debt, such Debt must: (a) be unsecured or constitute Junior Lien Obligations, (b) have a maturity date no earlier than 91 days later than the earlier of (i) the Notes Maturity Date and (ii) the date on which the Notes are no longer outstanding, (c) have no issuer, obligor or guarantor thereof other than the Issuers and the Guarantors, (d) not provide for any cash payments while the Notes are outstanding and (e) not contain any negative covenants or events of default that are more restrictive than the negative covenants and Events of Default (as applicable) in this Indenture unless this Indenture is amended to contain such more restrictive negative covenants or events of default (as applicable).
 
Title: Re: FELP - Foresight Energy
Post by: heth247 on November 21, 2016, 09:31:35 AM
Is there any chance of a re-fi for the Exchangeable PIK? The new 2021 notes don't allow the refinancing debt to pay cash, or have more favorable maturity terms (see below), so it's going to be difficult to re-fi, to say the least. Are you all assuming full dilution for the PIK in your valuations?

From the Indenture (Exhibit 4.1 from the 9-6-16 8-K):
With respect to (i) any Debt Incurred pursuant to this Section 4.06 to refinance the Exchangeable PIK Notes and all subsequent refinancings thereof (collectively, the “Exchangeable PIK Notes Refinancing Debt”) and (ii) any Debt Incurred pursuant to this Section 4.06 after the Issue Date more than a majority of which is loaned or otherwise provided by an Affiliate (other than the Issuers and any Restricted Subsidiary) (which, for the avoidance of doubt, does not apply to any Debt outstanding on the Issue Date, including the Exchangeable PIK Notes, or any Debt outstanding (whether Incurred before, on or after the Issue Date) that is acquired by an Affiliate after the initial Incurrence thereof), in each case of clauses (i) and (ii) other than Excluded Debt, such Debt must: (a) be unsecured or constitute Junior Lien Obligations, (b) have a maturity date no earlier than 91 days later than the earlier of (i) the Notes Maturity Date and (ii) the date on which the Notes are no longer outstanding, (c) have no issuer, obligor or guarantor thereof other than the Issuers and the Guarantors, (d) not provide for any cash payments while the Notes are outstanding and (e) not contain any negative covenants or events of default that are more restrictive than the negative covenants and Events of Default (as applicable) in this Indenture unless this Indenture is amended to contain such more restrictive negative covenants or events of default (as applicable).

My understanding of "(d) not provide for any cash payments while the Notes are outstanding and" is that you cannot use the refinancing as an opportunity to get cash out of it to pay other bills.  E.g. you cannot take another $400MM loan to pay off the $300MM PIK and also get 400-300=$100MM cash out to pay other stuff like cash distribution. This however does not prevent you from taking another $300MM loan to pay off this $300MM PIK.

But I could be wrong since English is not my first language.   
Title: Re: FELP - Foresight Energy
Post by: Aqul on November 21, 2016, 10:08:21 AM
Is there any chance of a re-fi for the Exchangeable PIK? The new 2021 notes don't allow the refinancing debt to pay cash, or have more favorable maturity terms (see below), so it's going to be difficult to re-fi, to say the least. Are you all assuming full dilution for the PIK in your valuations?

From the Indenture (Exhibit 4.1 from the 9-6-16 8-K):
With respect to (i) any Debt Incurred pursuant to this Section 4.06 to refinance the Exchangeable PIK Notes and all subsequent refinancings thereof (collectively, the “Exchangeable PIK Notes Refinancing Debt”) and (ii) any Debt Incurred pursuant to this Section 4.06 after the Issue Date more than a majority of which is loaned or otherwise provided by an Affiliate (other than the Issuers and any Restricted Subsidiary) (which, for the avoidance of doubt, does not apply to any Debt outstanding on the Issue Date, including the Exchangeable PIK Notes, or any Debt outstanding (whether Incurred before, on or after the Issue Date) that is acquired by an Affiliate after the initial Incurrence thereof), in each case of clauses (i) and (ii) other than Excluded Debt, such Debt must: (a) be unsecured or constitute Junior Lien Obligations, (b) have a maturity date no earlier than 91 days later than the earlier of (i) the Notes Maturity Date and (ii) the date on which the Notes are no longer outstanding, (c) have no issuer, obligor or guarantor thereof other than the Issuers and the Guarantors, (d) not provide for any cash payments while the Notes are outstanding and (e) not contain any negative covenants or events of default that are more restrictive than the negative covenants and Events of Default (as applicable) in this Indenture unless this Indenture is amended to contain such more restrictive negative covenants or events of default (as applicable).

My understanding of "(d) not provide for any cash payments while the Notes are outstanding and" is that you cannot use the refinancing as an opportunity to get cash out of it to pay other bills.  E.g. you cannot take another $400MM loan to pay off the $300MM PIK and also get 400-300=$100MM cash out to pay other stuff like cash distribution. This however does not prevent you from taking another $300MM loan to pay off this $300MM PIK.

But I could be wrong since English is not my first language.

I don't think so. I think any Refinancing Debt must be PIK as opposed to cash-pay. I believe this is why the existing Exchangeable PIK was structured in this way, to allow the Second-Liens to have no junior tranche paying out cash interest, and have this continue until maturity. Of course, I'm no expert and could very well be wrong.
Title: Re: FELP - Foresight Energy
Post by: Picasso on November 21, 2016, 10:49:01 AM
You're right Aqul, there would need to be a full refinance of the 2021 notes since it's unlikely that someone would buy 2022 PIK debt without a relatively high rate attached to it.  I'm sure Murray/Cline would rather take common units.

I think FELP should maintain as much leverage as it can comfortably carry.  Having debt at 8-10% is better than being non-leveraged since the equity of these coal yieldco's are trading at really high yields on what appears to be trough earnings.  I'd feel better about owning FELP longer term if they reduce debt by that $350 million when the PIK comes due.  Even if it comes at the expense of some equity. 

I am confused about one part.  Moore mentioned this on the earnings call:

Quote
Importantly, this restructuring alleviated all existing defaults under the various debt and equipment lease agreements to
which the partnership is a party. It provided certain covenant relief and restored four sites access to liquidity beyond
cash held on the balance sheet. It also places restrictions on distributions through the later of June 30, 2018 or the
refinancing of our revolving credit facility, which matures in August of 2018. It also introduces the exchangeable PIK
Notes which mature October 3rd, 2017.

I don't get the "later of" comment.  Wouldn't it just mean August 2018?  But if they refinance the revolver earlier (say next year) then it would obviously re-rate the equity soon. 

My thinking is that Murray would rather not refinance the revolver until he negotiates the equity issuance to repay the PIK's.  He'd want to create some uncertainty around the asset to redeem the PIK for common units ahead of the revolver refi, not the other way around.  Assuming he has the cash to eat all $350 million (I think he'll have it).  Maybe if he runs out of cash he'd push to refi the revolver, get the stock to jump and then have others partner on the equity issuance.  Which would imply he wants a price on FELP just high enough for Cline not to participate or participate at a price that's minimally dilutive to Murray while balancing the eventual refi of the revolver.  Maybe would better help explain the lack of questions on the earnings call.

I do have someone I can call about this, should probably do so...
Title: Re: FELP - Foresight Energy
Post by: Aqul on November 21, 2016, 03:32:35 PM
I think that means June 30, 2018 is the earliest that distributions will begin, and they could be delayed further if the revolver is not refinanced.

Honestly, the stock is cheap enough even with no credit to the export business AND full dilution for the PIK that it doesn't make sense to sell now. That being said, this is precisely why giving up $180M of equity to Reserves would be bad for the minority holders, not to mention Murray. I am assuming that the non-reserves holders would simply take cash (which FELP should generate comfortably). Any thoughts on this last part?
Title: Re: FELP - Foresight Energy
Post by: Picasso on November 21, 2016, 04:11:46 PM
I'm just confused why he didn't use language that indicated the "earlier of."  I'm turning into those FNMA guys reading into the silliest phrasing.*  ;)  I'm having a lawyer who does nothing but work on these credit agreements read back through it to see what kind of options are available here.  Should have had her work on this earlier but it didn't seem like a big deal at the time.   Well, still doesn't but trying to see if there might be an earlier catalyst or another incentive here... There's $773 million of senior debt that is all under the amended credit agreement so my guess is you need a pretty big refi across the board.  And rolling over the PIK's will take a refi of the 2021 2nd liens as well.  That's a lot of make whole and finance related costs in addition to giving the bond holders more than par in the exchange.  Would probably make sense to wait that out but those interest payments on the Murray debt must be painful to stomach. 

My guess is that Murray will have to do a transaction similar to what he did to buy his subordinated units in 2015.  He paid a pretty big premium to get Cline to hand over that 50%.  He'll likely need to offer a premium in order to keep the common units out of the hands of the Reserves group.  So the units might trade for $7, but it would be economical for Murray to take new common units at $12 (or whatever) since he wouldn't be giving FELP earnings back to Cline.  It would give Murray more value to his IDR's and he'd probably get a reasonable return on the commons.  FELP doesn't have to actually trade at "fair market" for there to be something done along those lines.  But the transaction would be a positive for FELP common units and the market price might start to approach that Murray deal price over time, so Murray might not be overpaying in that sense.  FELP never traded at the $20 Murray paid for his original sub units.  (I know, I know, starting to sound like those guys on the PWE board talking about "bought deals" at a premium to the market price).

And if Murray offers something like $15 maybe Cline is a "jerk" and still says he'll take 60%.  But at least the dilution to Murray will be minimal.  Also important to note that Cline doesn't want to be diluted either.  He still owns a big chunk of FELP, helped with the bond tender (granted made a good return off it), reduced the 15% option price, and so on.  It would make sense to just agree upon the right price to minimize dilution and keep Cline in the picture.  $7 seems too low for a Cline/Murray redemption price but as usual we'll see.

* http://img.wennermedia.com/article-leads-horizontal/elin-nordegren-48ee4d7b-9e72-4374-9e71-4da702fe8533.jpg (http://img.wennermedia.com/article-leads-horizontal/elin-nordegren-48ee4d7b-9e72-4374-9e71-4da702fe8533.jpg)

(You might spot an interesting book in the background.  Maybe Cline is a time traveler who left a message for us.  CC: conspiracy theory fanniegate)
Title: Re: FELP - Foresight Energy
Post by: arcube on November 21, 2016, 04:23:28 PM
* http://img.wennermedia.com/article-leads-horizontal/elin-nordegren-48ee4d7b-9e72-4374-9e71-4da702fe8533.jpg (http://img.wennermedia.com/article-leads-horizontal/elin-nordegren-48ee4d7b-9e72-4374-9e71-4da702fe8533.jpg)

(You might spot an interesting book in the background.  Maybe Cline is a time traveler who left a message for us.  CC: conspiracy theory fanniegate)

Good one. : )
Title: Re: FELP - Foresight Energy
Post by: Aqul on November 21, 2016, 06:09:16 PM
There's $773 million of senior debt that is all under the amended credit agreement so my guess is you need a pretty big refi across the board.  And rolling over the PIK's will take a refi of the 2021 2nd liens as well.  That's a lot of make whole and finance related costs in addition to giving the bond holders more than par in the exchange.  Would probably make sense to wait that out but those interest payments on the Murray debt must be painful to stomach. 

Can you clarify this further please? All I've read with respect to the amended credit agreement and the senior secured debt is that there is now an anti-hoarding provision.
Title: Re: FELP - Foresight Energy
Post by: valcont on November 22, 2016, 03:36:14 PM

* http://img.wennermedia.com/article-leads-horizontal/elin-nordegren-48ee4d7b-9e72-4374-9e71-4da702fe8533.jpg (http://img.wennermedia.com/article-leads-horizontal/elin-nordegren-48ee4d7b-9e72-4374-9e71-4da702fe8533.jpg)

(You might spot an interesting book in the background.  Maybe Cline is a time traveler who left a message for us.  CC: conspiracy theory fanniegate)

This is hilarious.

Title: Re: FELP - Foresight Energy
Post by: valcont on November 23, 2016, 07:38:21 AM
https://www.com-unik.info/2016/11/23/fbr-co-boosts-foresight-energy-lp-felp-price-target-to-6-00.html

They are catching up. Better late than never.
Title: Re: FELP - Foresight Energy
Post by: valcont on December 13, 2016, 09:08:38 PM
I considered Zacks a joke investment research until:

https://baseballnewssource.com/markets/foresight-energy-lp-felp-upgraded-to-buy-by-zacks-investment-research/284882.html
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on December 19, 2016, 04:18:19 PM
Cline bought shares. 48K.
Title: Re: FELP - Foresight Energy
Post by: bonkers on December 24, 2016, 03:49:10 PM
Merry Christmas to entire FELP board!

- bonkers
Title: Re: FELP - Foresight Energy
Post by: Picasso on December 24, 2016, 04:28:25 PM
You stole my post bonkers  :)

Merry Christmas everyone!
Title: Re: FELP - Foresight Energy
Post by: valcont on December 24, 2016, 05:28:04 PM
Best Xmas gift ever , a lump of coal.
Merry Christmas everyone.
Title: Re: FELP - Foresight Energy
Post by: Green King on December 25, 2016, 04:33:22 AM
Merry Christmas everyone.
 :D
Title: Re: FELP - Foresight Energy
Post by: Patmo on December 25, 2016, 04:28:01 PM
Merry Christmas to entire FELP board!

- bonkers

Merry Christmas my fellow financial markets warrior amigos, it is a privilege and an honor to share the scars and spoils of battle with you.
Title: Re: FELP - Foresight Energy
Post by: Picasso on December 25, 2016, 04:53:54 PM
Merry Christmas to entire FELP board!

- bonkers

Merry Christmas my fellow financial markets warrior amigos, it is a privilege and an honor to share the scars and spoils of battle with you.

To my FELP family, you'll always be my brothers.  Even if we aren't a quarter mile away.

https://www.youtube.com/watch?v=Bj-Qcafs3Co&feature=youtu.be&t=3m41s
Title: Re: FELP - Foresight Energy
Post by: Jurgis on December 25, 2016, 09:57:27 PM
Did you guys see that FELP was recommended by one of the "top guys" in Sum Zero - this week's Barron's had an article:
http://www.barrons.com/articles/facebook-for-stockpickers-1482555902

Merry Coal Day or something like that!  8)
Title: Re: FELP - Foresight Energy
Post by: heth247 on December 27, 2016, 09:25:20 AM
Best Xmas gift ever , a lump of coal.
Merry Christmas everyone.

Best Xmas gift indeed. Just came back from vacation. Happy Holidays guys!
Title: Re: FELP - Foresight Energy
Post by: heth247 on December 27, 2016, 11:52:36 AM
Cline bought shares. 48K.

Where did you see this? I couldn't find the SEC filings.
Title: Re: FELP - Foresight Energy
Post by: valcont on December 27, 2016, 12:18:37 PM
Cline bought shares. 48K.

Where did you see this? I couldn't find the SEC filings.

http://insideri.com/1540729_000089924316035934_0000899243-16-035934
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on January 12, 2017, 04:37:41 AM
Illinois coal production down 21% in 2016, but expected to improve. [Duh]

http://www.platts.com/latest-news/coal/louisville-kentucky/illinois-coal-production-down-in-2016-but-may-21573820

Quote
Illinois apparently produced around 44 million short tons of thermal coal in 2016, down from 56 million st the year before, but certain factors are trending upward for 2017, a coal industry official said Wednesday.

Although final data is not yet in, Illinois turned out less coal last year for several reasons including a soft market, a cutback at Murray Energy's Galatia underground mining complex in Saline County, the continued idling of Foresight Energy's Deer Run longwall mine in Montgomery County and the closing last April of Vigo Coal's Friendsville surface mine in Wabash County, Phil Gonet, president of the Illinois Coal Association, said in an interview.

The state produced 11.2 million st, 11.1 million st and 10.1 million st, respectively, during the first three quarters of 2016, according to Gonet. But there are indications the tide may be turning more positive for a state that posted steady production gains in recent years, reaching 58 million st in 2014 only to drop off the past two years.

Not much there regarding Foresight other than:

Quote
No major mine closings or cutbacks are expected in Illinois in 2017. That would be a relief to an industry that saw Foresight keep Deer Run idle in 2016 because of a stubborn underground fire or hotspot that has bedeviled the mine since March 26, 2015, and Ohio-based Murray finally closed the New Era part of its two-mine Galatia complex. The New Future mine continues in operation under the auspices of Murray's American Coal subsidiary.
Title: Re: FELP - Foresight Energy
Post by: heth247 on January 12, 2017, 09:09:35 AM
Thanks for sharing, PulltheTriger!
Title: Re: FELP - Foresight Energy
Post by: Patmo on January 16, 2017, 02:02:27 PM
So discussion died down on this name, we are now playing a bit of a waiting game until October to see if PIK can be mostly refinanced. I think we are sitting right around fair value if "worst case" scenario happens as at current prices, including interest (assuming March is accrued) we would face 35% dilution (344mil total consideration at 7.34 so 47mil shares to be issued vs current 131mil outstanding common + sub, correct me if I'm missing something). That would bring EV to $3bil with no share price change, and in my opinion that's about FV with current Illinois coal prices and on the low end on a normalized basis. There's inherent pricing risk though - market might think it's currently giving more credit to FELP than it is, and negative outcome could drop share price. There's also the 350mil that will need to be refinanced on the revolving credit facility in Aug 2018 - I take it this facility is not too difficult to extend?

As Picasso has mentioned multiple times, all the incentives are in place on FELP mgmt side to make sure this gets refinanced. It would be a near term catalyst that should send the share price at least into the $10 range (+ a premium for taking on odds, hopefully.), so I think it's still worth holding given the odds and risks. It's important to note that the risk/reward profile goes way up if the business is really worth more than $3bil.

After that the next hard catalyst will be resumption of dividends which would attract yield guys again and send the multiple upwards, I think I will sell majority of my shares sometime after we learn of the PIK outcome though. It seems they can only pay out dividends at earliest past July 2018, and from then on out only 25mil per year until the entire senior credit facilities are undone, which by my understanding would happen 2020 (term loan).

And also there's the wild card of the new presidency possibly calling for some crazy policies that could affect the coal industry significantly.

Just my random thoughts, maybe we can get some discussion going again.




Title: Re: FELP - Foresight Energy
Post by: valcont on January 16, 2017, 05:11:58 PM
So discussion died down on this name, we are now playing a bit of a waiting game until October to see if PIK can be mostly refinanced. I think we are sitting right around fair value if "worst case" scenario happens as at current prices, including interest (assuming March is accrued) we would face 35% dilution (344mil total consideration at 7.34 so 47mil shares to be issued vs current 131mil outstanding common + sub, correct me if I'm missing something). That would bring EV to $3bil with no share price change, and in my opinion that's about FV with current Illinois coal prices and on the low end on a normalized basis.

What does EV has to do with dilution? If debt is converted to equity , it counts towards market cap and the EV is constant. Are you referring to the stake of each unitholder in case of dilution. Here is my take on it:

Right now they have 65m outstanding , forget the subs since FELP has about $2 MQD before they can count. Add up 47m post dilution and you end up with 112m unit count.
If they do $150m DCF this year, then you have got $1.33DCF/unit. So at today's price they are at 5.5x multiple. A 10x multiple would take the price at $13.So it is slightly undervalued considering they can easily do $150m this year.

Murray will probably take it private post PIK payment. The notes are structured in a way that gives him the option to convert into units.Why keep it public if market is not giving it any credit for the low cost, drop down yield vehicle? Plus the Trump's election is another tailwind. Trump won big in coal counties of Pennsylvania & Ohio. I won't be surprised if he offers subsidies or at least remove the subsidies from clean energy. CPP and probably the  EPA is dead.

I am also curious about Hillsboro. If I were Murray, I would have no incentive to bring this back up until I can take it private so as not to pay the multiples on its cash flow to Cline and unit holders. But that's just me, I'm evil that way.
Title: Re: FELP - Foresight Energy
Post by: Patmo on January 16, 2017, 06:00:09 PM
So discussion died down on this name, we are now playing a bit of a waiting game until October to see if PIK can be mostly refinanced. I think we are sitting right around fair value if "worst case" scenario happens as at current prices, including interest (assuming March is accrued) we would face 35% dilution (344mil total consideration at 7.34 so 47mil shares to be issued vs current 131mil outstanding common + sub, correct me if I'm missing something). That would bring EV to $3bil with no share price change, and in my opinion that's about FV with current Illinois coal prices and on the low end on a normalized basis.

What does EV has to do with dilution? If debt is converted to equity , it counts towards market cap and the EV is constant. Are you referring to the stake of each unitholder in case of dilution. Here is my take on it:

Right now they have 65m outstanding , forget the subs since FELP has about $2 MQD before they can count. Add up 47m post dilution and you end up with 112m unit count.
If they do $150m DCF this year, then you have got $1.33DCF/unit. So at today's price they are at 5.5x multiple. A 10x multiple would take the price at $13.So it is slightly undervalued considering they can easily do $150m this year.

Murray will probably take it private post PIK payment. The notes are structured in a way that gives him the option to convert into units.Why keep it public if market is not giving it any credit for the low cost, drop down yield vehicle? Plus the Trump's election is another tailwind. Trump won big in coal counties of Pennsylvania & Ohio. I won't be surprised if he offers subsidies or at least remove the subsidies from clean energy. CPP and probably the  EPA is dead.

I am also curious about Hillsboro. If I were Murray, I would have no incentive to bring this back up until I can take it private so as not to pay the multiples on its cash flow to Cline and unit holders. But that's just me, I'm evil that way.

valcont you are right, I went through a lot of mental gymnastics for no reason. I swear I do this all the time, that and putting milk back in the cupboard. Ask me to kill the electronic bad guys and my genius goes unrivalled. Other than that...

I think you do need to cap the 50mil in interest on the PIK's though which is not trivial in my opinion, so my effort was not a complete waste. Unless I read the language in the filings wrong?

Good bit on the MQD, totally flew over my head. These shares do need to be accounted for at some point since they do end up grabbing some of the profits. But put a 10% yield on the distribution and it stays irrelevant until the 20's, and that's without accounting for arrears... Although it looks like the MQD is 1.35 annually and the $2 mark is a threshold to allow the subs to be converted to common? I'm not clear on this, the writings are confusing.

Question: The terms for the credit facilities don't allow any "restricted payments including discretionary dividends" until the later of June 2018 or some other crap, after which they can pay up to 25mil. Do the MQD's get lumped into "discretionary dividends" or is the company in the clear for those distributions? I figure some common holders with a lot of clout in the company might want to drive share price up before that happens. You're not the only person who is evil that way !
Title: Re: FELP - Foresight Energy
Post by: Picasso on January 16, 2017, 06:51:19 PM
Patmo where are you getting a $3B EV? 

Assuming they pay for all $350 million at $7.34, that would add the 47 million common units on top of the 6 million warrants issued as part of that redemption plus the existing 130 million common + subs.  183 million units total @ $.734 = $1.3B.  But debt will drop down to $1B plus FELP itself has a decent amount of cash and will generate more going into the refi (some of which will pay down the senior debt).  That's an EV around $2.3B or so. 

If Cline was buying in the open market at $6.74, then he's probably a buyer for his 60% of that $7.34 and Murray would be handing out a lot of value at that price? 

I'm in agreement with you guys that there shouldn't be a lot of downside here.  I haven't sold anything and it makes up at least 95% of my net worth.  But if it started trading with more liquidity in the $10-12 area I'd probably sell some of it down.  There's still some interesting optionality like killing the CPP, something with Deer Run, restarting distributions, maybe some drop down and so on.  Right now Cline and the remaining common units stand between Bob Murray and a lot of free cash flow so I imagine we'll get some conclusion to the situation when the capital markets allow it.  The 2017 PIK debt is at 104 and the 2021 debt is at 102.  If that continues to firm up (I imagine the 2021 debt will trade tighter once the PIK refi is over) then you do open up a lot of options for both FELP and Murray.  API 2 is holding up nicely, we had a cold winter, nat gas pricing in the Marcellus has gone up a lot.  I think we have decent visibility into that refinance unless something weird comes out of left field.
Title: Re: FELP - Foresight Energy
Post by: valcont on January 16, 2017, 07:21:19 PM

Good bit on the MQD, totally flew over my head. These shares do need to be accounted for at some point since they do end up grabbing some of the profits. But put a 10% yield on the distribution and it stays irrelevant until the 20's, and that's without accounting for arrears... Although it looks like the MQD is 1.35 annually and the $2 mark is a threshold to allow the subs to be converted to common? I'm not clear on this, the writings are confusing.

Question: The terms for the credit facilities don't allow any "restricted payments including discretionary dividends" until the later of June 2018 or some other crap, after which they can pay up to 25mil. Do the MQD's get lumped into "discretionary dividends" or is the company in the clear for those distributions? I figure some common holders with a lot of clout in the company might want to drive share price up before that happens. You're not the only person who is evil that way !

Here is from their 10K

"All subordinated units are currently held by Murray Energy. The principal difference between our common units and subordinated units is that subordinated unitholders are not entitled to receive a distribution from operating surplus until the holders of common units have received the minimum quarterly distribution (“MQD”) from operating surplus. The MQD is $0.3375 per unit for such quarter plus any cumulative arrearages of previously unpaid MQDs from previous quarters. Subordinated unitholders are not entitled to receive arrearages. The subordination period will end, and the subordinated units will convert to common units, on a one-for-one basis, on the first business day after the Partnership has paid the MQD for each of three consecutive, non-overlapping four-quarter periods ending on or after March 31, 2017 and there are no outstanding arrearages on the common units. Notwithstanding the foregoing, the subordination period will end on the first business day after the Partnership has paid an aggregate amount of at least $2.025 per unit (150.0% of the MQD on an annualized basis) on the outstanding common and subordinated units and the Partnership has paid the related distribution on the incentive distribution rights, for any four-quarter period and there are no outstanding arrearages on the common units."

I take that to mean they can make a lump sum payment of $2 + outstanding arrearages($1.32/year) and convert the subs.

As for the MQD part question. Since these are normal distribution,they should be restricted by the notes's covenants.
Title: Re: FELP - Foresight Energy
Post by: Patmo on January 16, 2017, 07:26:00 PM
Patmo where are you getting a $3B EV? 

Assuming they pay for all $350 million at $7.34, that would add the 47 million common units on top of the 6 million warrants issued as part of that redemption plus the existing 130 million common + subs.  183 million units total @ $.734 = $1.3B.  But debt will drop down to $1B plus FELP itself has a decent amount of cash and will generate more going into the refi (some of which will pay down the senior debt).  That's an EV around $2.3B or so. 

If Cline was buying in the open market at $6.74, then he's probably a buyer for his 60% of that $7.34 and Murray would be handing out a lot of value at that price? 

I'm in agreement with you guys that there shouldn't be a lot of downside here.  I haven't sold anything and it makes up at least 95% of my net worth.  But if it started trading with more liquidity in the $10-12 area I'd probably sell some of it down.  There's still some interesting optionality like killing the CPP, something with Deer Run, restarting distributions, maybe some drop down and so on.  Right now Cline and the remaining common units stand between Bob Murray and a lot of free cash flow so I imagine we'll get some conclusion to the situation when the capital markets allow it.  The 2017 PIK debt is at 104 and the 2021 debt is at 102.  If that continues to firm up (I imagine the 2021 debt will trade tighter once the PIK refi is over) then you do open up a lot of options for both FELP and Murray.  API 2 is holding up nicely, we had a cold winter, nat gas pricing in the Marcellus has gone up a lot.  I think we have decent visibility into that refinance unless something weird comes out of left field.

I included all LT liabilities and didn't remove the PIK or warrants which I should have, that should roughly explain the difference

EDIT the warrant liability is just carved out from the other debt and amortized, kind of a smoke show if I understand correctly (where the warrant liab is carved out and left there while LT debt is amortized for 34mil to "warrant exp" or something like that). So I still have to account for it by adding # of units and remove the warrant exercise price. I also removed the $300 PIK that will invariably be extinguished in the swap. Result is 2.55bil EV at 7.34, which includes  $250mil in ARO's, sale-leaseback accrued and other LT liabs and now reconciles exactly with your 2.3 figure. Probably a lucky coincidence though....................

I get to $11 value to fully diluted equity if we think 3bil EV is fair value. 2016 being a barrell-bottom year and still on track to yield 10%+ in FCF to enterprise and DCF to unitholders at that level makes it a reasonably conservative valuation, I'd argue it's worth a good deal more than that. Although not a pure comparable, Teck Resources was in a similar pickle and is now valued 2.5x more expensively than FELP, so clearly some people will be willing to pay a higher than current price soon enough.


Title: Re: FELP - Foresight Energy
Post by: Patmo on January 16, 2017, 09:00:03 PM

I'm in agreement with you guys that there shouldn't be a lot of downside here.  I haven't sold anything and it makes up at least 95% of my net worth.

Gnarly. I think you do OPM as well, right? Is it all in one pot or did you go a different route with their $? How have they reacted throughout?
Title: Re: FELP - Foresight Energy
Post by: Patmo on January 16, 2017, 09:12:37 PM

Good bit on the MQD, totally flew over my head. These shares do need to be accounted for at some point since they do end up grabbing some of the profits. But put a 10% yield on the distribution and it stays irrelevant until the 20's, and that's without accounting for arrears... Although it looks like the MQD is 1.35 annually and the $2 mark is a threshold to allow the subs to be converted to common? I'm not clear on this, the writings are confusing.

Question: The terms for the credit facilities don't allow any "restricted payments including discretionary dividends" until the later of June 2018 or some other crap, after which they can pay up to 25mil. Do the MQD's get lumped into "discretionary dividends" or is the company in the clear for those distributions? I figure some common holders with a lot of clout in the company might want to drive share price up before that happens. You're not the only person who is evil that way !

Here is from their 10K

"All subordinated units are currently held by Murray Energy. The principal difference between our common units and subordinated units is that subordinated unitholders are not entitled to receive a distribution from operating surplus until the holders of common units have received the minimum quarterly distribution (“MQD”) from operating surplus. The MQD is $0.3375 per unit for such quarter plus any cumulative arrearages of previously unpaid MQDs from previous quarters. Subordinated unitholders are not entitled to receive arrearages. The subordination period will end, and the subordinated units will convert to common units, on a one-for-one basis, on the first business day after the Partnership has paid the MQD for each of three consecutive, non-overlapping four-quarter periods ending on or after March 31, 2017 and there are no outstanding arrearages on the common units. Notwithstanding the foregoing, the subordination period will end on the first business day after the Partnership has paid an aggregate amount of at least $2.025 per unit (150.0% of the MQD on an annualized basis) on the outstanding common and subordinated units and the Partnership has paid the related distribution on the incentive distribution rights, for any four-quarter period and there are no outstanding arrearages on the common units."

I take that to mean they can make a lump sum payment of $2 + outstanding arrearages($1.32/year) and convert the subs.

As for the MQD part question. Since these are normal distribution,they should be restricted by the notes's covenants.

I see, then would it be fair to account for the sub units fully, but also reduce EV by the $3.32*# units? Fair middle ground valuation imo

That's not what I hoped on MQD, but that's what I thought...
Title: Re: FELP - Foresight Energy
Post by: Picasso on January 16, 2017, 10:43:31 PM
Well I think I mentioned this before but I got lucky in terms of timing.  I was up a fair amount going into the summer from other holdings but FELP hadn't moved very much yet (remember all the extension/tender angst?) even when the risk/reward changed a lot.  I was able to plow more and more into it when the downside became negligible and worst case maybe I'd end the year flat.  And it was still under $4 when the tender was done.  That didn't make much sense, especially with API 2 ripping.

It's different doing that with OPM.  Some investors would pop blood vessels or keep a lawyer on standby.  But if you've done well for them for a while and they've been down this road before it's easier to take those positions.  i.e., say you turned $20 million into $60 million over several years and then take a $10 million bet on FELP at $2 for maybe $30-40 million of upside.  If it goes tits up, you still have $50 million and hopefully you don't lose your head and turn into a crappy investor trying to make back that $10 million.  The key is sticking with your process if it's a good process.  But if someone just hands you $60 million, do you want to plow $10 million into FELP?  Man you better be right because fresh capital isn't going to be too happy about a mistake even if the odds were well in your favor (say Cline got hit by a bus).  I think it's bad business to just put "new" OPM into "risky" bets.  You have to grind it out for a while and show your process and give them a cushion.  But I'm also lucky in that I have pretty good clients.  I can't concentrate the same way for OPM as my PA but it's still pretty concentrated.  It does seem like they've had some fun tracking the whole FELP saga (Bob Murray is hilarious).  A lot of funny moments... But it's not over yet, we'll see how this refinance plays out. 
Title: Re: FELP - Foresight Energy
Post by: awindenberger on January 16, 2017, 11:24:40 PM

I'm in agreement with you guys that there shouldn't be a lot of downside here.  I haven't sold anything and it makes up at least 95% of my net worth.

Gnarly. I think you do OPM as well, right? Is it all in one pot or did you go a different route with their $? How have they reacted throughout?

I thought I was half nuts putting 60% of my PA into GLBL when it was a $3.00. Really hoping that FELP remains in this trading range through April so I can roll some of my GLBL position in it once I hit 1-yr mark, but have a feeling Q4 results will make that harder.

Picasso you haven't kept us updated with Bob Murray's recent excitement, if any.
Title: Re: FELP - Foresight Energy
Post by: Patmo on January 16, 2017, 11:26:47 PM
Well I think I mentioned this before but I got lucky in terms of timing.  I was up a fair amount going into the summer from other holdings but FELP hadn't moved very much yet (remember all the extension/tender angst?) even when the risk/reward changed a lot.  I was able to plow more and more into it when the downside became negligible and worst case maybe I'd end the year flat.  And it was still under $4 when the tender was done.  That didn't make much sense, especially with API 2 ripping.

It's different doing that with OPM.  Some investors would pop blood vessels or keep a lawyer on standby.  But if you've done well for them for a while and they've been down this road before it's easier to take those positions.  i.e., say you turned $20 million into $60 million over several years and then take a $10 million bet on FELP at $2 for maybe $30-40 million of upside.  If it goes tits up, you still have $50 million and hopefully you don't lose your head and turn into a crappy investor trying to make back that $10 million.  The key is sticking with your process if it's a good process.  But if someone just hands you $60 million, do you want to plow $10 million into FELP?  Man you better be right because fresh capital isn't going to be too happy about a mistake even if the odds were well in your favor (say Cline got hit by a bus).  I think it's bad business to just put "new" OPM into "risky" bets.  You have to grind it out for a while and show your process and give them a cushion.  But I'm also lucky in that I have pretty good clients.  I can't concentrate the same way for OPM as my PA but it's still pretty concentrated.  It does seem like they've had some fun tracking the whole FELP saga (Bob Murray is hilarious).  A lot of funny moments... But it's not over yet, we'll see how this refinance plays out.

Haha yeah he's been a riot, not sure he's being a great ambassador for coal though. At least not in the public eye, but I guess he'll jive well with the next presidency
Title: Re: FELP - Foresight Energy
Post by: heth247 on January 18, 2017, 10:04:01 AM
Hi, Guys, I have a question regarding the new shares that will be issued to redeem the $350M PIK. Would they be considered as sub units?  Otherwise, wouldn't the MQD apply to them as well and further delay Murray's pay day? Thanks.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on January 18, 2017, 11:55:32 AM
Hi, Guys, I have a question regarding the new shares that will be issued to redeem the $350M PIK. Would they be considered as sub units?  Otherwise, wouldn't the MQD apply to them as well and further delay Murray's pay day? Thanks.

I imagine they would be considered common units, which is a reason why Murray will probably try to take company private ASAP.
Title: Re: FELP - Foresight Energy
Post by: Patmo on January 18, 2017, 12:55:25 PM
Hi, Guys, I have a question regarding the new shares that will be issued to redeem the $350M PIK. Would they be considered as sub units?  Otherwise, wouldn't the MQD apply to them as well and further delay Murray's pay day? Thanks.

I imagine they would be considered common units, which is a reason why Murray will probably try to take company private ASAP.

Has anybody talked to someone affiliated with Murray about this or are we inferring based on the incentives perceived?
Title: Re: FELP - Foresight Energy
Post by: awindenberger on January 18, 2017, 02:33:00 PM
Hi, Guys, I have a question regarding the new shares that will be issued to redeem the $350M PIK. Would they be considered as sub units?  Otherwise, wouldn't the MQD apply to them as well and further delay Murray's pay day? Thanks.

I imagine they would be considered common units, which is a reason why Murray will probably try to take company private ASAP.

Has anybody talked to someone affiliated with Murray about this or are we inferring based on the incentives perceived?

I imagine Picasso could comment on this.
Title: Re: FELP - Foresight Energy
Post by: Picasso on January 18, 2017, 02:49:31 PM
Murray said it in an interview, but I think it could be interpreted different ways such as owning most of the GP.  I don't know where the link to the interview is, but it was sometime in September or August.

Quote
Murray says now Foresight's debt is shored up and Murray Energy is operating the mines and marketing the coal. Murray said he hopes in coming months his company "will have a path to control Foresight Energy and bring it under Murray Energy, a private corporation."
Title: Re: FELP - Foresight Energy
Post by: roark33 on January 18, 2017, 03:20:07 PM
Umm, probably the only way picasso gets out of his position given the volume.... ;)
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on January 18, 2017, 05:49:16 PM
http://www.snl.com/web/client?auth=inherit#news/article?id=37836430&cdid=A-37836430-11058

Interview with Murray back in Sept

Title: Re: FELP - Foresight Energy
Post by: Patmo on January 18, 2017, 06:52:24 PM
http://www.snl.com/web/client?auth=inherit#news/article?id=37836430&cdid=A-37836430-11058

Interview with Murray back in Sept

Thanks PTT
Title: Re: FELP - Foresight Energy
Post by: heth247 on January 24, 2017, 09:36:21 PM
Preliminary data: Coal surge in Q3'16 slowed down in Q4'16

http://www.snl.com/web/client?auth=inherit#news/article?id=39137358&cdid=A-39137358-12073 (http://www.snl.com/web/client?auth=inherit#news/article?id=39137358&cdid=A-39137358-12073)

In the third figure shown in the above article, it shows that MC NO.1 mine of Foresight increased the production from 2.86M tons in Q3'16 to 2.91M tons in Q4'16 (not sure why the table shows a -1.6%). When compared to Q4'15 (2.25M tons), that is a 29% increase!


Title: Re: FELP - Foresight Energy
Post by: Patmo on January 25, 2017, 05:04:58 AM
Preliminary data: Coal surge in Q3'16 slowed down in Q4'16

http://www.snl.com/web/client?auth=inherit#news/article?id=39137358&cdid=A-39137358-12073 (http://www.snl.com/web/client?auth=inherit#news/article?id=39137358&cdid=A-39137358-12073)

In the third figure shown in the above article, it shows that MC NO.1 mine of Foresight increased the production from 2.86M tons in Q3'16 to 2.91M tons in Q4'16 (not sure why the table shows a -1.6%). When compared to Q4'15 (2.25M tons), that is a 29% increase!

The calculations for the 2016 QoQ chg, they all have the wrong operator in front but otherwise the calculation is correct. So -1.6 is really 1.6 and 8.9 is really -8.9. Weird mistake...
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on January 25, 2017, 06:33:07 AM
Accipiter sold about 14,000 shares.
Title: Re: FELP - Foresight Energy
Post by: valcont on January 25, 2017, 06:53:58 AM
Just thinking about the possible scenarios to tackle the PIK debt. My understanding is that there are three ways to deal with them when they come due:

1. No payment in which case the note holders gets 75% of the common + subs. Everyone is screwed in that case.

2. Payment via equity offering Or Murray buys the debt: In this case, the Reserves(i.e. Cline group) would have an option to convert their $180m into commons vs $120m for remaining PIKs, not a great option for Murray if the price is lower.

3. Refinance the debt :Refinance the debt on better terms considering FELP's improved situation.

I am not clear on what will happen in scenario 3. Since there is no equity conversion , wouldn't reserves lose their option to convert? If that is the case, then shouldn't Murray opt for 3? No dilution of equity so the MQD will be lower to activate the subs and Cline's stake gets taken out. The only downside for him in this scenario is that the market will price the equity higher since the dilution risk is gone. So it'll be harder for Murray to buyout the whole enterprise.But it will be an attractive asset for the drop ins. Any thoughts?
Title: Re: FELP - Foresight Energy
Post by: heth247 on January 25, 2017, 01:26:54 PM
Just thinking about the possible scenarios to tackle the PIK debt. My understanding is that there are three ways to deal with them when they come due:

1. No payment in which case the note holders gets 75% of the common + subs. Everyone is screwed in that case.

2. Payment via equity offering Or Murray buys the debt: In this case, the Reserves(i.e. Cline group) would have an option to convert their $180m into commons vs $120m for remaining PIKs, not a great option for Murray if the price is lower.

3. Refinance the debt :Refinance the debt on better terms considering FELP's improved situation.

I am not clear on what will happen in scenario 3. Since there is no equity conversion , wouldn't reserves lose their option to convert? If that is the case, then shouldn't Murray opt for 3? No dilution of equity so the MQD will be lower to activate the subs and Cline's stake gets taken out. The only downside for him in this scenario is that the market will price the equity higher since the dilution risk is gone. So it'll be harder for Murray to buyout the whole enterprise.But it will be an attractive asset for the drop ins. Any thoughts?

Regarding scenario 3, previous discussion on this thread seems to indicate that they cannot simply refi the $350MM PIK debt part for better terms. They will need to refi the 2021 notes as well. Picasso had his lawyer friend once looked into the credit agreement, not sure what was the conclusion....
Title: Re: FELP - Foresight Energy
Post by: Picasso on January 25, 2017, 02:29:20 PM
They can refinance the PIK note with debt but it will involve refinancing out the 2021 debt as well.  Which they probably should given the 10% cost on that debt is probably well above market.  Those notes are trading over par so it's entirely possible.  That said the make whole on the 2021 debt is expensive at 105.50.  $19 million to retire it early plus whatever other refinance expenses.  Could they issue $600 million at 8% and get the cost back in savings? Seems like it but Murray and Cline will do just as well by taking more common units.

But I sort of like that they're being forced to develer.  It's not the end of the world if they issue some stock to pay down the PIK notes, they also have a decent amount of cash on the balance sheet + cash coming in before the refinance is due.
Title: Re: FELP - Foresight Energy
Post by: valcont on January 25, 2017, 02:31:17 PM
Just thinking about the possible scenarios to tackle the PIK debt. My understanding is that there are three ways to deal with them when they come due:

1. No payment in which case the note holders gets 75% of the common + subs. Everyone is screwed in that case.

2. Payment via equity offering Or Murray buys the debt: In this case, the Reserves(i.e. Cline group) would have an option to convert their $180m into commons vs $120m for remaining PIKs, not a great option for Murray if the price is lower.

3. Refinance the debt :Refinance the debt on better terms considering FELP's improved situation.

I am not clear on what will happen in scenario 3. Since there is no equity conversion , wouldn't reserves lose their option to convert? If that is the case, then shouldn't Murray opt for 3? No dilution of equity so the MQD will be lower to activate the subs and Cline's stake gets taken out. The only downside for him in this scenario is that the market will price the equity higher since the dilution risk is gone. So it'll be harder for Murray to buyout the whole enterprise.But it will be an attractive asset for the drop ins. Any thoughts?

Regarding scenario 3, previous discussion on this thread seems to indicate that they cannot simply refi the $350MM PIK debt part for better terms. They will need to refi the 2021 notes as well. Picasso had his lawyer friend once looked into the credit agreement, not sure what was the conclusion....

Well that would be a weird clause. As long as the debt is PIK and junior to the 2021, I don't think 2021 noteholders should object. Do you know where that clause is where they HAVE to refinance the 2021 if they refinance the PIKs? The only one I could find says that the refinanced debt should mature later than 91 days of 2021 maturity.

Anyways my question was assuming Murray can refinance the debt as PIKs payable later than 91 days from 2021, he can get rid of this dilutive covenants and let the price rise. Now he has a better access to capital markets and opportunity to pay those PIKs at his choosing. Why wouldn't he want to do that? I just don't see any clause that prevents him from handling these PIKs in  two steps. These notes are already trading on the par so its not like he is creating uncertainty to get better terms.

Title: Re: FELP - Foresight Energy
Post by: Picasso on January 25, 2017, 02:34:39 PM
I imagine there isn't much appetite for debt that would fit the 2021 debt restrictions.  The cost would be so high that you might as well refinance out everything or pay with stock.
Title: Re: FELP - Foresight Energy
Post by: valcont on January 25, 2017, 03:06:05 PM
I imagine there isn't much appetite for debt that would fit the 2021 debt restrictions.  The cost would be so high that you might as well refinance out everything or pay with stock.

Not disagreeing with that but it seems like the equity issuance is so much more favorable to Cline that Murray would rather buy out the whole enterprise or refinance. Atleast the buyout would not trigger the change of control like the last time. I would prefer the dilution and using FELP as a vehicle for drop ins.
Title: Re: FELP - Foresight Energy
Post by: jrallen81 on January 25, 2017, 04:44:33 PM
What are people's opinions about how it plays out for passive holders -- other than debt maturity dates are there any calendar event catalysts?
Title: Re: FELP - Foresight Energy
Post by: heth247 on January 25, 2017, 07:21:10 PM
valcont, here is waht Aqul posted back in Nov 2016:

Is there any chance of a re-fi for the Exchangeable PIK? The new 2021 notes don't allow the refinancing debt to pay cash, or have more favorable maturity terms (see below), so it's going to be difficult to re-fi, to say the least. Are you all assuming full dilution for the PIK in your valuations?

From the Indenture (Exhibit 4.1 from the 9-6-16 8-K):
With respect to (i) any Debt Incurred pursuant to this Section 4.06 to refinance the Exchangeable PIK Notes and all subsequent refinancings thereof (collectively, the “Exchangeable PIK Notes Refinancing Debt”) and (ii) any Debt Incurred pursuant to this Section 4.06 after the Issue Date more than a majority of which is loaned or otherwise provided by an Affiliate (other than the Issuers and any Restricted Subsidiary) (which, for the avoidance of doubt, does not apply to any Debt outstanding on the Issue Date, including the Exchangeable PIK Notes, or any Debt outstanding (whether Incurred before, on or after the Issue Date) that is acquired by an Affiliate after the initial Incurrence thereof), in each case of clauses (i) and (ii) other than Excluded Debt, such Debt must: (a) be unsecured or constitute Junior Lien Obligations, (b) have a maturity date no earlier than 91 days later than the earlier of (i) the Notes Maturity Date and (ii) the date on which the Notes are no longer outstanding, (c) have no issuer, obligor or guarantor thereof other than the Issuers and the Guarantors, (d) not provide for any cash payments while the Notes are outstanding and (e) not contain any negative covenants or events of default that are more restrictive than the negative covenants and Events of Default (as applicable) in this Indenture unless this Indenture is amended to contain such more restrictive negative covenants or events of default (as applicable).
Title: Re: FELP - Foresight Energy
Post by: valcont on January 26, 2017, 06:48:15 AM
valcont, here is waht Aqul posted back in Nov 2016:

Is there any chance of a re-fi for the Exchangeable PIK? The new 2021 notes don't allow the refinancing debt to pay cash, or have more favorable maturity terms (see below), so it's going to be difficult to re-fi, to say the least. Are you all assuming full dilution for the PIK in your valuations?

From the Indenture (Exhibit 4.1 from the 9-6-16 8-K):
With respect to (i) any Debt Incurred pursuant to this Section 4.06 to refinance the Exchangeable PIK Notes and all subsequent refinancings thereof (collectively, the “Exchangeable PIK Notes Refinancing Debt”) and (ii) any Debt Incurred pursuant to this Section 4.06 after the Issue Date more than a majority of which is loaned or otherwise provided by an Affiliate (other than the Issuers and any Restricted Subsidiary) (which, for the avoidance of doubt, does not apply to any Debt outstanding on the Issue Date, including the Exchangeable PIK Notes, or any Debt outstanding (whether Incurred before, on or after the Issue Date) that is acquired by an Affiliate after the initial Incurrence thereof), in each case of clauses (i) and (ii) other than Excluded Debt, such Debt must: (a) be unsecured or constitute Junior Lien Obligations, (b) have a maturity date no earlier than 91 days later than the earlier of (i) the Notes Maturity Date and (ii) the date on which the Notes are no longer outstanding, (c) have no issuer, obligor or guarantor thereof other than the Issuers and the Guarantors, (d) not provide for any cash payments while the Notes are outstanding and (e) not contain any negative covenants or events of default that are more restrictive than the negative covenants and Events of Default (as applicable) in this Indenture unless this Indenture is amended to contain such more restrictive negative covenants or events of default (as applicable).

I see. All this means is that they can't make interest payments in cash i.e. the debt has to be PIK if they refinance the debt. Murray has lots of levers to play with today compared to last year this time. He may refinance all the debt in one big swoop or just take it private.

Title: Re: FELP - Foresight Energy
Post by: Patmo on January 26, 2017, 09:00:37 AM
valcont, here is waht Aqul posted back in Nov 2016:

Is there any chance of a re-fi for the Exchangeable PIK? The new 2021 notes don't allow the refinancing debt to pay cash, or have more favorable maturity terms (see below), so it's going to be difficult to re-fi, to say the least. Are you all assuming full dilution for the PIK in your valuations?

From the Indenture (Exhibit 4.1 from the 9-6-16 8-K):
With respect to (i) any Debt Incurred pursuant to this Section 4.06 to refinance the Exchangeable PIK Notes and all subsequent refinancings thereof (collectively, the “Exchangeable PIK Notes Refinancing Debt”) and (ii) any Debt Incurred pursuant to this Section 4.06 after the Issue Date more than a majority of which is loaned or otherwise provided by an Affiliate (other than the Issuers and any Restricted Subsidiary) (which, for the avoidance of doubt, does not apply to any Debt outstanding on the Issue Date, including the Exchangeable PIK Notes, or any Debt outstanding (whether Incurred before, on or after the Issue Date) that is acquired by an Affiliate after the initial Incurrence thereof), in each case of clauses (i) and (ii) other than Excluded Debt, such Debt must: (a) be unsecured or constitute Junior Lien Obligations, (b) have a maturity date no earlier than 91 days later than the earlier of (i) the Notes Maturity Date and (ii) the date on which the Notes are no longer outstanding, (c) have no issuer, obligor or guarantor thereof other than the Issuers and the Guarantors, (d) not provide for any cash payments while the Notes are outstanding and (e) not contain any negative covenants or events of default that are more restrictive than the negative covenants and Events of Default (as applicable) in this Indenture unless this Indenture is amended to contain such more restrictive negative covenants or events of default (as applicable).

I see. All this means is that they can't make interest payments in cash i.e. the debt has to be PIK if they refinance the debt. Murray has lots of levers to play with today compared to last year this time. He may refinance all the debt in one big swoop or just take it private.

Or interest payable in lump sum at maturity date.

There's plenty of room to handle this here, these guys managed to pull a rabbit out of their hat on the default, this is child's play in comparison. The 2021 are structured to not be cut in line for their meal, not prohibit the 2017's from ever being taken care of. I don't think it'll even require much creativity
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on January 26, 2017, 05:42:04 PM
The latest form 4 isn't exactly clear, but it looks like the CEO got about $1 M in stock issued to him.

Title: Re: FELP - Foresight Energy
Post by: gadfly on January 30, 2017, 02:53:54 PM
What'd everyone think of ARLP's release and call?

Their costs per ton were down big time from 2015 4Q. Still nowhere near FELP, but down from 33.19 to 27.72 per ton.

Price per ton in ILB was down from 4Q last year 49.96 to 45.56.

On the call mgmt seemed confident that 2016 was the floor for gas and coal.

Not much info on exports, really interested to see how FELP is doing on that front...
Title: Re: FELP - Foresight Energy
Post by: jrallen81 on February 02, 2017, 03:48:53 PM
is this recent pullback enough to get anyone interested in adding?
Title: Re: FELP - Foresight Energy
Post by: doc75 on February 02, 2017, 04:18:00 PM
is this recent pullback enough to get anyone interested in adding?

I bought some in the 6.30s today.
Title: Re: FELP - Foresight Energy
Post by: valcont on February 02, 2017, 07:18:57 PM
What'd everyone think of ARLP's release and call?

Their costs per ton were down big time from 2015 4Q. Still nowhere near FELP, but down from 33.19 to 27.72 per ton.

Price per ton in ILB was down from 4Q last year 49.96 to 45.56.

On the call mgmt seemed confident that 2016 was the floor for gas and coal.

Not much info on exports, really interested to see how FELP is doing on that front...

Here is my take on it that is relevant to FELP.

1. Lenders are still leery about the fundamentals but this may improve with DT victory.

2. Prices are down 12-13% but coal production declined 18% in 2016.

3. They are front loading the export volume which makes sense since API2 is sitting at $85

4.Inventories seems higher since the Utilities are buying on a monthly and quarter basis rather than stockpiling for longer term but supply demand is matched.

Overall it was not a bad report. The sales prices were down since the higher prices contract were renegotiated with lower ones. FELP's sale price last qtr was $37 and they had booked ~4m tons already. ILB is at $35 now. I think FELP will continue to do well this year. At this time,it is a part commodity price
and part financial engineering story. Most likely the non reserve will be cashed out and Cline will receive part cash part equity as part of refinancing.
Title: Re: FELP - Foresight Energy
Post by: heth247 on February 03, 2017, 11:50:52 AM
Anybody knows when will be FELP's earnings release?
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on February 03, 2017, 12:56:33 PM
Last year was 3/15.

Per IR (Jason Margherio) sent to me yesterday:

Quote
We have not set a date yet.  Based on our filing status we have up to 90 days following the end of the year to file our annual 10-K.  It is likely that we’ll do our earnings announcement concurrently with that filing, but we haven’t decided yet when that will occur.
 
Thanks,
Jason
Title: Re: FELP - Foresight Energy
Post by: gadfly on February 07, 2017, 01:37:28 PM
Could someone please walk me through an exported ton from FELP. I've looked at SXCP presentation on Convent Marine Terminal, but I'm still a little fuzzy on few things:

Say they lock in $70 per metric ton for coal to Europe

According to SXCP you have then adjust:

Sulfur Content (-3)
BTU Premium (+5)
Metric Conversion (-9)

So now u have $63 coal and u gotta get it to CMT

SXCP says $18 dollars to get the coal from the ILB and loaded into a ship. That seems really high to me. Doe anyone know if that's suppose to be illustrative of FELP or Murray's inland cost? I thought there was minimal rail travel and most of this was on river barges

Ocean freight seems reasonable at $9

Lastly, what's the the most FELP could switch to the export market if prices remain high. Could FELP do something like 7.5mm tons in 2017 and 10mm tons in 2018 or do they have domestic customers that they have to cater to?

Thanks
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on February 08, 2017, 07:27:51 AM
Coal companies settle suit alleging they excluded women from working in mines

http://legalnewsline.com/stories/511079185-coal-companies-settle-suit-alleging-they-excluded-women-from-working-in-mines

Quote
The U.S. Equal Employment Opportunity Commission (EEOC) has resolved two lawsuits against coal mining companies that allegedly conducted hiring practices that excluded women from working in mines.
 

To settle the allegations, the group of mining companies agreed to pay a collective $4.25 million to women applicants who were denied jobs because of the alleged sex discrimination.

The companies involved in the lawsuits were Mach Mining and various affiliates – Foresight Energy Services LLC, Foresight Energy LLC, Foresight Energy LP, Foresight Energy Labor LLC, Hillsboro Energy LLC, Macoupin Energy LLC, MaRyan Mining LLC, M-Class Mining LLC, Patton Mining LLC, Sugar Camp Energy LLC, Viking Mine LLC, and Williamson Energy LLC. These are all part of St. Louis-based Foresight Energy.

C'mon Murray. Hire some women.

Title: Re: FELP - Foresight Energy
Post by: wachtwoord on February 08, 2017, 08:16:48 AM
I'm thinking they are avoiding to hire women for the same reason the navy does.
Title: Re: FELP - Foresight Energy
Post by: roark33 on February 09, 2017, 06:21:08 PM
Please hold the tar and feathers, but....

https://www.bloomberg.com/news/articles/2016-04-05/one-thing-california-texas-have-in-common-is-negative-power


This is such an interesting trend.....
Title: Re: FELP - Foresight Energy
Post by: awindenberger on February 10, 2017, 09:31:37 AM
Please hold the tar and feathers, but....

https://www.bloomberg.com/news/articles/2016-04-05/one-thing-california-texas-have-in-common-is-negative-power


This is such an interesting trend.....

Why would we tar and feather you? This isn't Yahoo or SeekingAlpha.

I fully expect renewables to take over the lions share of electricity generation within 15-20 years. The only thing preventing this today is cheap enough storage. Battery prices are too high today in most places, but they are coming down at 10-15% a year, a trend which could accelerate as more money is poured into R&D.

States need to move to a Time-of-Use electricity pricing model. This will incentivize use when the power is available. As we shift to electric cars, this will become easier, as these vehicles will use a lot of juice, and have the potential to be plugged in 60-95% of the time, charging mainly when rates are lowest.

All of this is negative for coal long term, but in the medium term I actually think we see higher demand as EV use increases faster than new renewable capacity.

Title: Re: FELP - Foresight Energy
Post by: awindenberger on February 13, 2017, 02:23:56 PM
Priliminary Results released by Foresight today.
http://investor.foresight.com/file/Index?KeyFile=38013878

Revenue of $251M on 5.2MT sold. Adjusted EBITDA of $98M for Q4 is solid and they also announced they retained Goldman Sachs to look into refinance some or all of existing debt. I'm very curious how the market will respond to this tomorrow.
Title: Re: FELP - Foresight Energy
Post by: heth247 on February 13, 2017, 02:32:29 PM
Priliminary Results released by Foresight today.
http://investor.foresight.com/file/Index?KeyFile=38013878

Revenue of $251M on 5.2MT sold. Adjusted EBITDA of $98M for Q4 is solid and they also announced they retained Goldman Sachs to look into refinance some or all of existing debt. I'm very curious how the market will respond to this tomorrow.

That's an average of ~$50/ton.  I am curious what is the break down between domestic and export.
Title: Re: FELP - Foresight Energy
Post by: brendanb22 on February 14, 2017, 10:24:39 AM
Hopefully this PIK can be refi'd ASAP!
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on February 16, 2017, 06:42:28 PM
https://www.sec.gov/Archives/edgar/data/1211729/000092189517000424/xslF345X03/form406588014_02162017.xml

Accipiter sold another 200,000.
Title: Re: FELP - Foresight Energy
Post by: valcont on February 16, 2017, 06:55:43 PM
https://www.sec.gov/Archives/edgar/data/1211729/000092189517000424/xslF345X03/form406588014_02162017.xml

Accipiter sold another 200,000.

 Does he know something that we don't know? He's buddy with Cline so I don't know what's cooking over there. But considering that his timing on the stock may be the worst ever , this may be a bullish sign.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on February 16, 2017, 07:41:14 PM
Probably redemptions.

Why sell right before Trump high fives Murray before signing the repeal of the stream protection Rule?
Title: Re: FELP - Foresight Energy
Post by: Patmo on February 17, 2017, 09:27:19 AM
Accipiter started selling a while ago I believe. Probably wants to get off mr. Bone's wild ride...
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on February 17, 2017, 12:21:12 PM
They still have 7.6 M shares. They won't get out of their position quickly
Title: Re: FELP - Foresight Energy
Post by: gadfly on February 17, 2017, 01:04:59 PM
What's up with the anemic volume and price action since the prelim results and potential refi? Bob Murray is in the media again and hanging out

with Trump in the WH. Murray's bonds are now $83 and trading decent volume...

If you take away that 200k Accipiter sale on the prelim results day, no one is really trading FELP.
Title: Re: FELP - Foresight Energy
Post by: valcont on February 17, 2017, 01:35:13 PM
What's up with the anemic volume and price action since the prelim results and potential refi? Bob Murray is in the media again and hanging out

with Trump in the WH. Murray's bonds are now $83 and trading decent volume...

If you take away that 200k Accipiter sale on the prelim results day, no one is really trading FELP.

Everyone is waiting for the 10K and hopefully a CC. I did speak with Jason from the IR about the earnings date and he told me it hadn't been finalized yet. Surprisingly they released the preliminary the next day.
Title: Re: FELP - Foresight Energy
Post by: Patmo on February 17, 2017, 02:28:17 PM
Reddit not in love with coal today, ayaye... Can't say I am too excited either, I doubt the incremental profits short term are going to be worth all the other costs...
Title: Re: FELP - Foresight Energy
Post by: Green King on February 17, 2017, 06:30:59 PM
Reddit not in love with coal today, ayaye... Can't say I am too excited either, I doubt the incremental profits short term are going to be worth all the other costs...

Good they can sell more of the imaginary coal stock that they own so i can become a imaginary billionaire.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on February 18, 2017, 08:42:26 AM
Reddit not in love with coal today, ayaye... Can't say I am too excited either, I doubt the incremental profits short term are going to be worth all the other costs...

Do you have a link to this? Whats going on?
Title: Re: FELP - Foresight Energy
Post by: Patmo on February 18, 2017, 09:26:16 AM
https://www.reddit.com/r/news/comments/5un458/donald_trump_overturns_law_preventing_companies/

It was top of first page yesterday.


I've been growing pretty nervous these past couple weeks about where the markets are headed. This one is a tough stock to sell because the only true downside risk left is if the crap hits the fan, essentially. Stock price should double quickly after stabilizing the capital structure, looking at TECK as a blueprint that is roughly what I expect to happen...
Title: Re: FELP - Foresight Energy
Post by: awindenberger on February 18, 2017, 04:05:10 PM
The market does seem ready to have at least a small correction, but I think it will affect stocks that have raged up recently on a lack of company specific news, but rather due to the rising tide. This doesn't exactly apply to FELP.
Title: Re: FELP - Foresight Energy
Post by: Patmo on February 21, 2017, 11:16:15 AM
I agree, just a bit scared, seeing lots of bad signs about the American economy/stock market valuation that makes me feel very uneasy. I'm fully invested with a relatively big % in FELP (not Picasso level though), and don't want to be that guy caught with my wiener out in the open if all hell breaks loose, you know? Every rational fiber of me says to stay put, so I'm following that, but I'm just not feeling as good about it as 6 months ago.

I mean the prelim results confirm the $200mil free cash flow to equity (or distributable cash flow? never figured out the difference) that others hinted at, and 2017 will be closer to $300mil... That's coming off the bottom with a coal-friendly government for possibly the next few years, yet still just trading for a 3x multiple. Even coming off a multibagger price increase it's way too cheap, so long as the capital structure gets stabilized.

I think we could see a price jump just as the 10k comes out, if the company simply issues guidance for 2017. Look at CYH today, that's what happened and the situation is in somewhat the same ballpark as FELP's.

Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on February 23, 2017, 07:22:59 PM
http://investor.foresight.com/file/Index?KeyFile=38209976

Q4 next Wednesday
Title: Re: FELP - Foresight Energy
Post by: gadfly on February 24, 2017, 03:21:10 PM
redeeming 54 million of 2021 notes:

http://stocknewsflow.com/1540729_000156459017002421_0001564590-17-002421ppp2
Title: Re: FELP - Foresight Energy
Post by: roark33 on February 24, 2017, 04:09:12 PM
What's the rational for redeeming a portion of the 2021 notes, don't they have to take them all out to deal with the 2017 PIK notes? 

Disclaimer...could be a stupid question...mainly here to troll picasso.
Title: Re: FELP - Foresight Energy
Post by: gadfly on February 24, 2017, 04:17:13 PM
Question: Why 54.5 million and not the entire 35% clawback? Can they do multiple equity offerings to keep chipping away until they hit 35%?

Who in the heck participates in this equity offering and at what price?
Title: Re: FELP - Foresight Energy
Post by: Green King on February 24, 2017, 04:48:19 PM
What's the rational for redeeming a portion of the 2021 notes, don't they have to take them all out to deal with the 2017 PIK notes? 

Disclaimer...could be a stupid question...mainly here to troll picasso.

+1
Reddit's sentiment on Coal has not been positive either. Sell Sell Sell. 
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on February 24, 2017, 05:41:54 PM
What's the rationale to sell?
Title: Re: FELP - Foresight Energy
Post by: heth247 on February 24, 2017, 05:52:46 PM
What's the rational for redeeming a portion of the 2021 notes, don't they have to take them all out to deal with the 2017 PIK notes? 

Disclaimer...could be a stupid question...mainly here to troll picasso.

It seems to me that the $54MM part will be funded by equity offer, but they also mentioned that it is conditioned by "the pricing of an offering of senior secured debt securities of the Issuers prior to the Redemption Date".  What is this new senior secured debt for and how much will it be? Will it be used to take out the 2017 PIK notes?

Title: Re: FELP - Foresight Energy
Post by: heth247 on February 24, 2017, 08:00:36 PM
Question: Why 54.5 million and not the entire 35% clawback? Can they do multiple equity offerings to keep chipping away until they hit 35%?

Who in the heck participates in this equity offering and at what price?

Maybe they think the current stock price of $6.5 is still a bit too low for taking out the entire 35%?  As a common unit holder, I really want them to issue as less ass possible shares at this price.
Title: Re: FELP - Foresight Energy
Post by: valcont on February 25, 2017, 07:28:00 AM
It seems to me that the $54MM part will be funded by equity offer, but they also mentioned that it is conditioned by "the pricing of an offering of senior secured debt securities of the Issuers prior to the Redemption Date".  What is this new senior secured debt for and how much will it be? Will it be used to take out the 2017 PIK notes?

It may refer to the pricing of the equity offering. If they are planning to take out the 2017 PIK , don't they have to give a 30 day notice to the reserve group according to this section?

Financing Letter Agreement
On the Closing Date, FELP, Reserves, certain investors in Reserves (together with Reserves, the “Reserves Investor Group”) and Murray Energy entered into a letter agreement (“Financing Letter Agreement”) that grants certain rights and imposes certain obligations on the Reserves Investor Group, Murray Energy and the Partnership with respect to the redemption of all of the Exchangeable PIK Notes.
Pursuant to the Financing Letter Agreement, if the Partnership proposes to consummate an Exchangeable PIK Note Retirement, the Partnership must deliver to the Reserves Investor Group notice of the proposed Exchangeable PIK Note Retirement, along with the expected material terms thereof, no less than 30 days prior to the consummation of such Exchangeable PIK Note Retirement. No later than 15 business days prior to the consummation of such Exchangeable PIK Note Retirement, the Partnership must deliver a second notice to the Reserves Investor Group that must include all the material terms of the Exchangeable PIK Note Retirement and copies of any agreements to be entered into with respect thereto, which may be delivered in draft form. Within 10 business days of receipt of the second notice described in the preceding sentence, each member of the Reserves Investor Group shall have the right to make an election with respect to the Exchangeable PIK Note Retirement (an “Election”) which shall entitle such person or entity to: (i) continue to hold all of the Exchangeable PIK Notes then held by such person or entity and receive payment in full in connection with the Exchangeable PIK Note Retirement on the same terms as the holders of Exchangeable PIK Notes who are not members of the Reserves Investor Group; (ii) exchange the Exchangeable PIK Notes then held by such person or entity (subject to an aggregate cap on all Exchangeable PIK Notes held by the Reserves Investor Group of $180.0 million in principal plus an amount of additional principal issued in consideration of accrued and unpaid interest (the “Reserves Investor Group Amount”)) for the securities or other instruments to be issued in the Exchangeable PIK Note Retirement in an aggregate principal amount equal to the Exchangeable PIK Notes held by such person or entity (subject to the Reserves Investor Group Amount); or (iii) any combination of (i) and (ii) immediately above. To the extent any member of the Reserves Investor Group elects to exchange any portion of the Exchangeable PIK Notes held by such person or entity under the terms described in the preceding sentence, the Partnership and Murray Energy must promptly enter into, and subsequently perform, such agreements or arrangements, and to cause each of their financing providers to enter to such agreement or arrangements as may be necessary or advisable to effectuate such exchange.
Title: Re: FELP - Foresight Energy
Post by: heth247 on February 25, 2017, 09:37:27 AM
It seems to me that the $54MM part will be funded by equity offer, but they also mentioned that it is conditioned by "the pricing of an offering of senior secured debt securities of the Issuers prior to the Redemption Date".  What is this new senior secured debt for and how much will it be? Will it be used to take out the 2017 PIK notes?

It may refer to the pricing of the equity offering. If they are planning to take out the 2017 PIK , don't they have to give a 30 day notice to the reserve group according to this section?

Financing Letter Agreement
On the Closing Date, FELP, Reserves, certain investors in Reserves (together with Reserves, the “Reserves Investor Group”) and Murray Energy entered into a letter agreement (“Financing Letter Agreement”) that grants certain rights and imposes certain obligations on the Reserves Investor Group, Murray Energy and the Partnership with respect to the redemption of all of the Exchangeable PIK Notes.
Pursuant to the Financing Letter Agreement, if the Partnership proposes to consummate an Exchangeable PIK Note Retirement, the Partnership must deliver to the Reserves Investor Group notice of the proposed Exchangeable PIK Note Retirement, along with the expected material terms thereof, no less than 30 days prior to the consummation of such Exchangeable PIK Note Retirement. No later than 15 business days prior to the consummation of such Exchangeable PIK Note Retirement, the Partnership must deliver a second notice to the Reserves Investor Group that must include all the material terms of the Exchangeable PIK Note Retirement and copies of any agreements to be entered into with respect thereto, which may be delivered in draft form. Within 10 business days of receipt of the second notice described in the preceding sentence, each member of the Reserves Investor Group shall have the right to make an election with respect to the Exchangeable PIK Note Retirement (an “Election”) which shall entitle such person or entity to: (i) continue to hold all of the Exchangeable PIK Notes then held by such person or entity and receive payment in full in connection with the Exchangeable PIK Note Retirement on the same terms as the holders of Exchangeable PIK Notes who are not members of the Reserves Investor Group; (ii) exchange the Exchangeable PIK Notes then held by such person or entity (subject to an aggregate cap on all Exchangeable PIK Notes held by the Reserves Investor Group of $180.0 million in principal plus an amount of additional principal issued in consideration of accrued and unpaid interest (the “Reserves Investor Group Amount”)) for the securities or other instruments to be issued in the Exchangeable PIK Note Retirement in an aggregate principal amount equal to the Exchangeable PIK Notes held by such person or entity (subject to the Reserves Investor Group Amount); or (iii) any combination of (i) and (ii) immediately above. To the extent any member of the Reserves Investor Group elects to exchange any portion of the Exchangeable PIK Notes held by such person or entity under the terms described in the preceding sentence, the Partnership and Murray Energy must promptly enter into, and subsequently perform, such agreements or arrangements, and to cause each of their financing providers to enter to such agreement or arrangements as may be necessary or advisable to effectuate such exchange.


True, but  can they just issue the senior debt for now and take out 2017 PIK later?  Maybe they saw an opportunity in the debt market and want to take advantage of it. That might be also why they have to issue $54MM more equity for now at ~$6.50. Just some speculations. I am not an expert of these things.
Title: Re: FELP - Foresight Energy
Post by: valcont on February 25, 2017, 10:11:10 AM

True, but  can they just issue the senior debt for now and take out 2017 PIK later?  Maybe they saw an opportunity in the debt market and want to take advantage of it. That might be also why they have to issue $54MM more equity for now at ~$6.50. Just some speculations. I am not an expert of these things.

They can't. There are indentures in place to not assume more debt unless its a payment/refinance of an existing one.
Title: Re: FELP - Foresight Energy
Post by: gadfly on February 25, 2017, 10:15:48 AM

True, but  can they just issue the senior debt for now and take out 2017 PIK later?  Maybe they saw an opportunity in the debt market and want to take advantage of it. That might be also why they have to issue $54MM more equity for now at ~$6.50. Just some speculations. I am not an expert of these things.

If you assume the repriced YTM on the 2021 notes should be something like 6%, it looks like they are only saving about 5 million dollars doing this. That seems strange to do if Murray isn't participating in the equity offering. Why offer more common units to save 5 million dollars and screw Murray if it's done at current prices?

So hopefully this meanings something bigger is happening...

They can commence the "Murray Purchase" without refinancing the 2021 notes right?
Title: Re: FELP - Foresight Energy
Post by: Picasso on February 25, 2017, 11:02:59 AM
It's tricky to figure out what exactly is being refinanced here. 

Here's what I do know....

The 2021 debt doesn't allow for cash coupons or any maturities before 2021 when addressing the 2017 refinance.  They could refinance all $300+ million of the 2021 debt but it's pretty steep ($115 with accrued interest).  They did add previously missed coupon payments in new 2021 debt, so total leverage has gone up a bit as well as higher accruals from the bump in coupon payments.

If I were running Foresight I guess what I could attempt to do (or in this case what Goldman might be recommending), is use some combination of equity and cash on the balance sheet to reduce total leverage.  With $50 million of equity issuance and $100 million on the balance sheet you could do a few things... 1) pay down the PIK by $100 million and work on refinancing the remaining $200 million + accrued, 2) pay down $50 million of the 2021 at $110 by clawing it back in.  Anyone who owns that 2021 will now have to worry about losing an 11% note.  So maybe it would make them amenable to some waiver on the cash coupon/maturity.  Instead of getting called in this year or next year, maybe they'll take some $6 consent fee.  I'd probably take another $6 if it meant holding onto that 2L at 11% with some nice call premium in 2018 and 2019.  And total leverage has been taken down by $150 million or so which improves the credit of it anyway, 3) now you can issue $200 million or so in new secured 2022 secured notes with some cash coupon (actually a market for that right now) and total dilution would be somewhere around $50 million which only adds 9 million units.  That's a decent outcome for Murray.

Otherwise without that consent you're looking at new convertible PIK debt with 2022 debt or something where only Murray and Cline participate (who else would buy that kind of paper?).  You don't need Goldman to market that security, I'll tell you right now that no one would buy it.  Plus they mention in the 8-K some new senior secured bond as part of the 2021 clawback.  Or they just issue a bunch of equity for $200 million, but why do it now and not closer to maturity if they'll generate another $100 million by October?  Equity issuance at $6 sucks for Murray.  And some new convertible PIK note might keep a lid on price appreciation which prevents Murray from selling anything down into Foresight for a long time.  Cline will take 60% of it and then Cline will get $2.90 of accrued distributions on it.  Hypothetically that would be another 20 million units going to Cline, or another $58 million of cash that would need to be generated for those units on top of the already exiting common units before Murray could convert his subs.  Would seem like an unusual decision for Murray to let that happen.  Plus they wouldn't even need to do any of this 2021 clawback if they were going to suck it up and issue that much equity.

We won't know for a month and it's probably not worth the time to speculate until we get more details...

By the way, this is probably my last post on FELP on this board.  It's been a blast but I'd like to post on other ideas :)
Title: Re: FELP - Foresight Energy
Post by: Patmo on February 25, 2017, 01:26:06 PM

By the way, this is probably my last post on FELP on this board.  It's been a blast but I'd like to post on other ideas :)

At first I was like... https://www.youtube.com/watch?v=q3ZcX1JNju4 (https://www.youtube.com/watch?v=q3ZcX1JNju4)

But then I was like... https://www.youtube.com/watch?v=-A4prtgQEEQ (https://www.youtube.com/watch?v=-A4prtgQEEQ)

Can't wait to see what you have up your sleeve, your ideas are super flavorful and it's a treat to even just follow the stories as they develop
Title: Re: FELP - Foresight Energy
Post by: heth247 on February 25, 2017, 03:42:28 PM

By the way, this is probably my last post on FELP on this board.  It's been a blast but I'd like to post on other ideas :)

At first I was like... https://www.youtube.com/watch?v=q3ZcX1JNju4 (https://www.youtube.com/watch?v=q3ZcX1JNju4)

But then I was like... https://www.youtube.com/watch?v=-A4prtgQEEQ (https://www.youtube.com/watch?v=-A4prtgQEEQ)

Can't wait to see what you have up your sleeve, your ideas are super flavorful and it's a treat to even just follow the stories as they develop

Picasso, Hope it is just "probably", not "definitely", your last post here. We will miss you, but look forward to your new ideas. thanks.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on February 25, 2017, 04:45:04 PM

By the way, this is probably my last post on FELP on this board.  It's been a blast but I'd like to post on other ideas :)

At first I was like... https://www.youtube.com/watch?v=q3ZcX1JNju4 (https://www.youtube.com/watch?v=q3ZcX1JNju4)

But then I was like... https://www.youtube.com/watch?v=-A4prtgQEEQ (https://www.youtube.com/watch?v=-A4prtgQEEQ)

Can't wait to see what you have up your sleeve, your ideas are super flavorful and it's a treat to even just follow the stories as they develop

Picasso, Hope it is just "probably", not "definitely", your last post here. We will miss you, but look forward to your new ideas. thanks.

I'm definitely looking forward to these new ideas Picasso, but it seems to me that the FELP story is nowhere near finished.
Title: Re: FELP - Foresight Energy
Post by: Picasso on February 25, 2017, 05:55:09 PM
Agreed, still a ways to go but I'll probably have to file my ownership in FELP in the future and for other compliance/OPM issues it's probably better to keep quiet on this position.
Title: Re: FELP - Foresight Energy
Post by: roark33 on March 01, 2017, 06:33:10 AM
https://www.sec.gov/Archives/edgar/data/1540729/000095014217000446/eh1700349_8k.htm

In the event the foregoing transactions are consummated, Murray Energy is also expected to exercise its option (“FEGP Option”) to acquire an additional 46% voting interest in Foresight Energy GP LLC, a Delaware limited liability company and the general partner of the Company (“FEGP”), from Foresight Reserves LP (“Reserves”) and Michael J. Beyer (“Beyer”) pursuant to the terms of that certain option agreement, dated April 16, 2015, among Murray Energy, Reserves and Beyer, as amended, thereby increasing Murray Energy’s voting interest in FEGP to 80%.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 01, 2017, 06:37:46 AM
It looks like FELP is working to refinance all their long term debt, but I'm a bit confused by one aspect. If we add up the total of their current debt outstanding, its $1,350M. Yet the new debt totals only $1,000M.

Does this mean the convertible PIK is going to be converted into new shares? I was hoping it would simply be fully refinanced.
Title: Re: FELP - Foresight Energy
Post by: valcont on March 01, 2017, 06:52:44 AM
It looks like FELP is working to refinance all their long term debt, but I'm a bit confused by one aspect. If we add up the total of their current debt outstanding, its $1,350M. Yet the new debt totals only $1,000M.

Does this mean the convertible PIK is going to be converted into new shares? I was hoping it would simply be fully refinanced.

No it clearly says the PIKs are going to be refinanced (except the $50m part)

the Issuers’ approximately $300 million in aggregate principal amount of Second Lien Senior Secured Exchangeable PIK Notes due 2017 (the “Exchangeable PIK Notes”), including accrued and unpaid interest thereon; and
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 01, 2017, 06:57:28 AM
It looks like FELP is working to refinance all their long term debt, but I'm a bit confused by one aspect. If we add up the total of their current debt outstanding, its $1,350M. Yet the new debt totals only $1,000M.

Does this mean the convertible PIK is going to be converted into new shares? I was hoping it would simply be fully refinanced.

They are only refinancing the PIK's and revolver. There's 300mil in term loans due 2020 and 135mil total in AR financing, longwall financing, and capital leases that are not being refinanced.

Seems structured so they can start dishing out distributions again since they're not refinancing the 2020 loans and I don't think these loans restricted that, plus the interest rate and maturity date on the 2020 loans are also pretty manageable so it might not be worth refinancing if there is no distribution restriction

God I'm tired this morning I can't collect my thoughts...  5 edits on this post

And another edit, the term loans are being refinanced too... Just adding this comment won't bother to update the rest of the post... This means there is a shortfall in financing of at least 380mil?
Title: Re: FELP - Foresight Energy
Post by: valcont on March 01, 2017, 07:11:43 AM
They are only refinancing the PIK's and revolver. There's 300mil in term loans due 2020 and 135mil total in AR financing, longwall financing, and capital leases that are not being refinanced.

Seems structured so they can start dishing out distributions again since they're not refinancing the 2020 loans and I don't think these loans restricted that, but the interest rate on the 2020 loans is also pretty good so it might just be to lower the cost of borrowing too... Or two birds with one stone

*Note that the revolver had lower effective interest than the 2020 loans  so probably intent is to extend maturity dates moreso than lower cost, which makes more sense overall right now

So no equity dilution which the market was dreading. And the reaction is pretty muted.
Title: Re: FELP - Foresight Energy
Post by: sampr01 on March 01, 2017, 07:22:48 AM
Murray is contributing $60m directly or indirectly. I think previous agreement requires him to pay $15 mill to obtain additional voting power. So, we expecting common dilution for $45m.


They are only refinancing the PIK's and revolver. There's 300mil in term loans due 2020 and 135mil total in AR financing, longwall financing, and capital leases that are not being refinanced.

Seems structured so they can start dishing out distributions again since they're not refinancing the 2020 loans and I don't think these loans restricted that, but the interest rate on the 2020 loans is also pretty good so it might just be to lower the cost of borrowing too... Or two birds with one stone

*Note that the revolver had lower effective interest than the 2020 loans  so probably intent is to extend maturity dates moreso than lower cost, which makes more sense overall right now

So no equity dilution which the market was dreading. And the reaction is pretty muted.
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 01, 2017, 07:25:10 AM
They are only refinancing the PIK's and revolver. There's 300mil in term loans due 2020 and 135mil total in AR financing, longwall financing, and capital leases that are not being refinanced.

Seems structured so they can start dishing out distributions again since they're not refinancing the 2020 loans and I don't think these loans restricted that, but the interest rate on the 2020 loans is also pretty good so it might just be to lower the cost of borrowing too... Or two birds with one stone

*Note that the revolver had lower effective interest than the 2020 loans  so probably intent is to extend maturity dates moreso than lower cost, which makes more sense overall right now

So no equity dilution which the market was dreading. And the reaction is pretty muted.

Yeah, I think the real catalyst (at least in stock price, not so much in stock value) will come the day they start distributing again, stock will shoot up to 12-14 out of nowhere when the yield guys somersault back into the pool. They'll distribute at a floor amount of $1.35/unit per year (what's that, $90mil per year before the subs kick in? With $250mil in FCF coming in 2017, hardly a tough task)

Also the refinance is not completed yet, just being announced, but I doubt it matters, with the results FELP produced, debt guys should be pretty at ease with this?
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 01, 2017, 07:27:30 AM
Murray is contributing $60m directly or indirectly. I think previous agreement requires him to pay $25 mill to obtain additional voting power. So, we expecting common dilution for $35m.


They are only refinancing the PIK's and revolver. There's 300mil in term loans due 2020 and 135mil total in AR financing, longwall financing, and capital leases that are not being refinanced.

Seems structured so they can start dishing out distributions again since they're not refinancing the 2020 loans and I don't think these loans restricted that, but the interest rate on the 2020 loans is also pretty good so it might just be to lower the cost of borrowing too... Or two birds with one stone

*Note that the revolver had lower effective interest than the 2020 loans  so probably intent is to extend maturity dates moreso than lower cost, which makes more sense overall right now

So no equity dilution which the market was dreading. And the reaction is pretty muted.

I thought the $60mil was meant for the increased GP stake, just not directly mentioned. Would that be too cheap? What is the exercise price on his option?

Found it, option is $15mil, so I guess the "directly or indirectly" part means that $15mil will come from the option and $45mil from equity issuance to Murray?
Title: Re: FELP - Foresight Energy
Post by: sampr01 on March 01, 2017, 07:31:56 AM
No idea about strike price, but 8K clearly states directly or indirectly contribute $60m. But based on 2015 purchase agreement, Murray can acquire additional control by paying $15m. Thanks Patmo

Murray is contributing $60m directly or indirectly. I think previous agreement requires him to pay $25 mill to obtain additional voting power. So, we expecting common dilution for $35m.


They are only refinancing the PIK's and revolver. There's 300mil in term loans due 2020 and 135mil total in AR financing, longwall financing, and capital leases that are not being refinanced.

Seems structured so they can start dishing out distributions again since they're not refinancing the 2020 loans and I don't think these loans restricted that, but the interest rate on the 2020 loans is also pretty good so it might just be to lower the cost of borrowing too... Or two birds with one stone

*Note that the revolver had lower effective interest than the 2020 loans  so probably intent is to extend maturity dates moreso than lower cost, which makes more sense overall right now

So no equity dilution which the market was dreading. And the reaction is pretty muted.

I thought the $60mil was meant for the increased GP stake, just not directly mentioned. Would that be too cheap? What is the exercise price on his option?
Title: Re: FELP - Foresight Energy
Post by: valcont on March 01, 2017, 10:06:15 AM
So after this refinancing, Murray will still need to pay the MQD to the unit holders to get the subs converted. If I remember correctly there were some arrearages + $2.025 that he needs to pay out after March 31st . That would get the total outstanding units to 130m. They didn't talk about the outstanding warrants but that would dilute the unit holders further. They did $308m EBITDA last year, if you assume $100m interest expense and $50-60m maintenance , you are getting roughly $1 of DCF with 130m units. What do you guys think?
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 01, 2017, 11:32:52 AM
So after this refinancing, Murray will still need to pay the MQD to the unit holders to get the subs converted. If I remember correctly there were some arrearages + $2.025 that he needs to pay out after March 31st . That would get the total outstanding units to 130m. They didn't talk about the outstanding warrants but that would dilute the unit holders further. They did $308m EBITDA last year, if you assume $100m interest expense and $50-60m maintenance , you are getting roughly $1 of DCF with 130m units. What do you guys think?

Say FELP comes out with $1.35 distribution for the first year. ARLP is currently 13x its distribution. Say FELP is 8x to account for the subs.. then you're looking at $10.8 share price and that will cost something like $105 million for FELP (I think) if you include the warrants and the new commons from the refi.

Also, the beginning of 2016 was the bottom in export prices so $308 Adjusted EBITDA might be low going forward if things stay as they are currently. So if DCF going forward is more like $200 million then the MQD is no sweat.

Currently the commons don't have worry about subs or IDRs and we get all the money. Because we get all the money it creates an incentive for Murray to do something to get his...

Anyone have any idea when or how we'll find out if Reserves Group is taking their 60% of the new securities from the refi? If Cline doesn't take any equity at these prices that'd worry me...
Title: Re: FELP - Foresight Energy
Post by: valcont on March 01, 2017, 11:36:58 AM
Anyone have any idea when or how we'll find out if Reserves Group is taking their 60% of the new securities from the refi? If Cline doesn't take any equity at these prices that'd worry me...

What do you mean? There is no equity being exchanged here. There are notes and credit facilities for all the outstanding PIKs
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 01, 2017, 11:47:20 AM
Anyone have any idea when or how we'll find out if Reserves Group is taking their 60% of the new securities from the refi? If Cline doesn't take any equity at these prices that'd worry me...

What do you mean? There is no equity being exchanged here. There are notes and credit facilities for all the outstanding PIKs

From this mornings 8K

"In connection with the foregoing, Murray Energy Corporation (“Murray Energy”) intends to contribute approximately $60.6 million in cash directly or indirectly to FELP in the form of common equity, with such proceeds further contributed to the Issuer (the “Murray Investment”).  On February 24, 2017, the Issuers issued a conditional notice of redemption to redeem $54.5 million aggregate principal amount of the Second Lien Notes on the business day immediately prior to the closing of the offering of the New Notes (as defined below) at a redemption price equal to 110% of the principal thereof, plus accrued and unpaid interest to, but excluding, the redemption date (the “Equity Claw Redemption”).  The Equity Claw Redemption is expected to be funded using the net proceeds from the Murray Investment.
Title: Re: FELP - Foresight Energy
Post by: valcont on March 01, 2017, 12:03:36 PM
From this mornings 8K

"In connection with the foregoing, Murray Energy Corporation (“Murray Energy”) intends to contribute approximately $60.6 million in cash directly or indirectly to FELP in the form of common equity, with such proceeds further contributed to the Issuer (the “Murray Investment”).  On February 24, 2017, the Issuers issued a conditional notice of redemption to redeem $54.5 million aggregate principal amount of the Second Lien Notes on the business day immediately prior to the closing of the offering of the New Notes (as defined below) at a redemption price equal to 110% of the principal thereof, plus accrued and unpaid interest to, but excluding, the redemption date (the “Equity Claw Redemption”).  The Equity Claw Redemption is expected to be funded using the net proceeds from the Murray Investment.

Right, that is to redeem the 2021s partially. The 2017 PIKs are being refinanced fully and thus reserves can not exercise equity exchange. Am I reading this right. I hate this f.. lawyer speak.

"Furthermore, if Murray Energy elects to exercise its right to effect a Murray Purchase of: (i) all of the Exchangeable PIK Notes; or (ii) a portion of the Exchangeable PIK Notes in combination with an Exchangeable PIK Note Retirement of the remainder of the Exchangeable PIK Notes, in either case prior to October 2, 2017, each member of the Reserves Investor Group may elect to decline to have his or its Exchangeable PIK Notes purchased by Murray Energy and such Exchangeable PIK Notes shall instead exchange into Common Units in accordance with the Exchangeable PIK Notes Indenture."
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 01, 2017, 12:05:05 PM
Anyone have any idea when or how we'll find out if Reserves Group is taking their 60% of the new securities from the refi? If Cline doesn't take any equity at these prices that'd worry me...

What do you mean? There is no equity being exchanged here. There are notes and credit facilities for all the outstanding PIKs

From this mornings 8K

"In connection with the foregoing, Murray Energy Corporation (“Murray Energy”) intends to contribute approximately $60.6 million in cash directly or indirectly to FELP in the form of common equity, with such proceeds further contributed to the Issuer (the “Murray Investment”).  On February 24, 2017, the Issuers issued a conditional notice of redemption to redeem $54.5 million aggregate principal amount of the Second Lien Notes on the business day immediately prior to the closing of the offering of the New Notes (as defined below) at a redemption price equal to 110% of the principal thereof, plus accrued and unpaid interest to, but excluding, the redemption date (the “Equity Claw Redemption”).  The Equity Claw Redemption is expected to be funded using the net proceeds from the Murray Investment.

Maybe that is the reason of the less exciting response by Market today? Market doesn't know at what price Murray participate.
Title: Re: FELP - Foresight Energy
Post by: valcont on March 01, 2017, 12:08:53 PM

Maybe that is the reason of the less exciting response by Market today? Market doesn't know at what price Murray participate.

Ok there are two separate issues that we are talking here.

1. Murray injecting $60m to payoff some 2021 in exchange of common equity.

2. Reserves opting for equity exchange in lieu of refinance.

I am only talking about point (2). That is not happening. That was $180m dilution.
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 01, 2017, 12:17:45 PM

Maybe that is the reason of the less exciting response by Market today? Market doesn't know at what price Murray participate.

Ok there are two separate issues that we are talking here.

1. Murray injecting $60m to payoff some 2021 in exchange of common equity.

2. Reserves opting for equity exchange in lieu of refinance.

I am only talking about point (2). That is not happening. That was $180m dilution.

My reading is that they are related issues. Reserves group is given the chance to participate in whatever new securities (including equity) that are created as a result of a refi of the 2017 PIK. Are you sure that thr 60.6 of Murray investments is going to the 2021 notes? I'm not. I give up until the 5pm call!

from the restructuring docs:

"If, after exchanging the entire Reserves Investor Group Amount, the Reserves Investor Group would not be the lender or holder of at least
60% of the total amount of the securities, debt or other instruments to be issued in the Exchangeable PIK Note Retirement, the Reserves Investor
Group has the option under the Financing Letter Agreement to fund an additional amount in cash to purchase additional securities or interests on
the same terms as other investors as may be necessary to make the Reserves Investor Group the holders of up to 60% of the total amount of such
securities, debt or instruments, as applicable." 
Title: Re: FELP - Foresight Energy
Post by: valcont on March 01, 2017, 12:26:26 PM

My reading is that they are related issues. Reserves group is given the chance to participate in whatever new securities (including equity) that are created as a result of a refi of the 2017 PIK. Are you sure that thr 60.6 of Murray investments is going to the 2021 notes? I'm not.

"In connection with the foregoing, Murray Energy Corporation (“Murray Energy”) intends to contribute approximately $60.6 million in cash directly or indirectly to FELP in the form of common equity, with such proceeds further contributed to the Issuer (the “Murray Investment”).  On February 24, 2017, the Issuers issued a conditional notice of redemption to redeem $54.5 million aggregate principal amount of the Second Lien Notes on the business day immediately prior to the closing of the offering of the New Notes (as defined below) at a redemption price equal to 110% of the principal thereof, plus accrued and unpaid interest to, but excluding, the redemption date (the “Equity Claw Redemption”).  The Equity Claw Redemption is expected to be funded using the net proceeds from the Murray Investment."
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 01, 2017, 12:54:10 PM
OK my previous posts were all messed up, here's what I think we're looking at:

2024 secured senior notes: 238.5mil (backed into, net of 78mil cash)
New term loan: 750 mil
New revolver: 170mil
Commons issued to Murray: 45.6mil (about 6.5mil units issued out)
Option on GP stake: 15mil

Total 1.3bil refi'd, 12.5mil units dilution including warrants, new debt 1.16bil

There is $1.5/unit in arrears before Murray can start getting distributions. Afterwards, if he chooses to convert to common units, will either have to wait for .3375/unit MQD's to have been steadily paid 3 years in a row, or "pay" a $2 fee to common holders. At least that's my understanding of it. Murray probably wants to "pay" out the $2 fee on top of arrears, 3 years straight of MQD's is not a done deal on 140mil total units... Unless he is actually going to take the co private, but he'll still have to true that up to unitholders on top of the going-forward value and the premium for take-out...


Note: This trade had tons of appeal to me at the beginning, but not for the right reasons. It's slowly seeping in my thick skull, bit by bit, how genius it really was.  At a price of $1.6 when the restructuring was virtually complete,  this stock was essentially an unlocked ATM machine out in the open... It's ridiculous...
Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 01, 2017, 01:24:11 PM
Note: This trade had tons of appeal to me at the beginning, but not for the right reasons. It's slowly seeping in my thick skull, bit by bit, how genius it really was.  At a price of $1.6 when the restructuring was virtually complete,  this stock was essentially an unlocked ATM machine out in the open... It's ridiculous...

Yeah I think most of us, except for Picasso, didn't truly believe how cheap it was.

Assuming things play out as you've laid out, it seems like another double from here is very much on the table. The only question is time-frame.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 01, 2017, 02:15:47 PM
No Freaking questions taken on call! Grrrr.
Title: Re: FELP - Foresight Energy
Post by: awindenberger on March 01, 2017, 02:38:30 PM
No Freaking questions taken on call! Grrrr.

Why even have the call then. They could put their remarks in a press release.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 01, 2017, 02:52:29 PM
It seemed like they more or less just read the press release. Waste of time.
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 01, 2017, 03:40:35 PM

My reading is that they are related issues. Reserves group is given the chance to participate in whatever new securities (including equity) that are created as a result of a refi of the 2017 PIK. Are you sure that thr 60.6 of Murray investments is going to the 2021 notes? I'm not.

"In connection with the foregoing, Murray Energy Corporation (“Murray Energy”) intends to contribute approximately $60.6 million in cash directly or indirectly to FELP in the form of common equity, with such proceeds further contributed to the Issuer (the “Murray Investment”).  On February 24, 2017, the Issuers issued a conditional notice of redemption to redeem $54.5 million aggregate principal amount of the Second Lien Notes on the business day immediately prior to the closing of the offering of the New Notes (as defined below) at a redemption price equal to 110% of the principal thereof, plus accrued and unpaid interest to, but excluding, the redemption date (the “Equity Claw Redemption”).  The Equity Claw Redemption is expected to be funded using the net proceeds from the Murray Investment."

Gotcha thanks, so what is the rationale for Murray taking any equity? Is it required for the refi? If they are refinancing 1.4 billion in debt (750 Term, 170 revolver and 500 2024 Notes) it seems like the credit demand is there so why bother with $60.6 million from Murray, especially if 15 mill of that is the Murray Option. Could Foresight have refinanced without this $60.6 from Murray, was it required?

And yes that call was useless, I thought at the end Moore was going to say that magic word, "distributions", but no; I'll take, "extremely beneficial for our unit-holders"... for now. 
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 01, 2017, 04:13:39 PM
Note: This trade had tons of appeal to me at the beginning, but not for the right reasons. It's slowly seeping in my thick skull, bit by bit, how genius it really was.  At a price of $1.6 when the restructuring was virtually complete,  this stock was essentially an unlocked ATM machine out in the open... It's ridiculous...

Yeah I think most of us, except for Picasso, didn't truly believe how cheap it was.

Assuming things play out as you've laid out, it seems like another double from here is very much on the table. The only question is time-frame.

If I recollection is correct, in one of his post, Picasso did say something like "this is like free money laying on the ground, but nobody is taking it"....  ;)
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 01, 2017, 05:26:50 PM

My reading is that they are related issues. Reserves group is given the chance to participate in whatever new securities (including equity) that are created as a result of a refi of the 2017 PIK. Are you sure that thr 60.6 of Murray investments is going to the 2021 notes? I'm not.

"In connection with the foregoing, Murray Energy Corporation (“Murray Energy”) intends to contribute approximately $60.6 million in cash directly or indirectly to FELP in the form of common equity, with such proceeds further contributed to the Issuer (the “Murray Investment”).  On February 24, 2017, the Issuers issued a conditional notice of redemption to redeem $54.5 million aggregate principal amount of the Second Lien Notes on the business day immediately prior to the closing of the offering of the New Notes (as defined below) at a redemption price equal to 110% of the principal thereof, plus accrued and unpaid interest to, but excluding, the redemption date (the “Equity Claw Redemption”).  The Equity Claw Redemption is expected to be funded using the net proceeds from the Murray Investment."

Gotcha thanks, so what is the rationale for Murray taking any equity? Is it required for the refi? If they are refinancing 1.4 billion in debt (750 Term, 170 revolver and 500 2024 Notes) it seems like the credit demand is there so why bother with $60.6 million from Murray, especially if 15 mill of that is the Murray Option. Could Foresight have refinanced without this $60.6 from Murray, was it required?

And yes that call was useless, I thought at the end Moore was going to say that magic word, "distributions", but no; I'll take, "extremely beneficial for our unit-holders"... for now.

Where'd you get the 2024 notes amount?
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 01, 2017, 05:52:45 PM

My reading is that they are related issues. Reserves group is given the chance to participate in whatever new securities (including equity) that are created as a result of a refi of the 2017 PIK. Are you sure that thr 60.6 of Murray investments is going to the 2021 notes? I'm not.

"In connection with the foregoing, Murray Energy Corporation (“Murray Energy”) intends to contribute approximately $60.6 million in cash directly or indirectly to FELP in the form of common equity, with such proceeds further contributed to the Issuer (the “Murray Investment”).  On February 24, 2017, the Issuers issued a conditional notice of redemption to redeem $54.5 million aggregate principal amount of the Second Lien Notes on the business day immediately prior to the closing of the offering of the New Notes (as defined below) at a redemption price equal to 110% of the principal thereof, plus accrued and unpaid interest to, but excluding, the redemption date (the “Equity Claw Redemption”).  The Equity Claw Redemption is expected to be funded using the net proceeds from the Murray Investment."

Gotcha thanks, so what is the rationale for Murray taking any equity? Is it required for the refi? If they are refinancing 1.4 billion in debt (750 Term, 170 revolver and 500 2024 Notes) it seems like the credit demand is there so why bother with $60.6 million from Murray, especially if 15 mill of that is the Murray Option. Could Foresight have refinanced without this $60.6 from Murray, was it required?

And yes that call was useless, I thought at the end Moore was going to say that magic word, "distributions", but no; I'll take, "extremely beneficial for our unit-holders"... for now.

Where'd you get the 2024 notes amount?


It was from an S&P leveraged loan reporter via twitter:

https://twitter.com/JakemaLewis/status/837006803221229569

Maybe she spoke with someone at the bondholder meeting today, not sure where she got it from..
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 01, 2017, 05:54:18 PM
Note: This trade had tons of appeal to me at the beginning, but not for the right reasons. It's slowly seeping in my thick skull, bit by bit, how genius it really was.  At a price of $1.6 when the restructuring was virtually complete,  this stock was essentially an unlocked ATM machine out in the open... It's ridiculous...

Yeah I think most of us, except for Picasso, didn't truly believe how cheap it was.

Assuming things play out as you've laid out, it seems like another double from here is very much on the table. The only question is time-frame.

If I recollection is correct, in one of his post, Picasso did say something like "this is like free money laying on the ground, but nobody is taking it"....  ;)

Keep in mind Murray will now have 80% of the GP vote so he will control the board (as well as over 50% of LP units but no voting power at this layer)
Title: Re: FELP - Foresight Energy
Post by: Green King on March 01, 2017, 05:57:03 PM
It was from an S&P leveraged loan reporter via twitter:

https://twitter.com/JakemaLewis/status/837006803221229569

Maybe she spoke with someone at the bondholder meeting today, not sure where she got it from..
[/quote]

https://fred.stlouisfed.org/series/BAMLH0A3HYC/

Man has these moved.
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 01, 2017, 05:57:15 PM
Note: This trade had tons of appeal to me at the beginning, but not for the right reasons. It's slowly seeping in my thick skull, bit by bit, how genius it really was.  At a price of $1.6 when the restructuring was virtually complete,  this stock was essentially an unlocked ATM machine out in the open... It's ridiculous...

Yeah I think most of us, except for Picasso, didn't truly believe how cheap it was.

Assuming things play out as you've laid out, it seems like another double from here is very much on the table. The only question is time-frame.

I wouldn't assume anything I say will play out, I always shoot crap out my posterior like I had mexican food the night before...
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 01, 2017, 06:00:23 PM
It was from an S&P leveraged loan reporter via twitter:

https://twitter.com/JakemaLewis/status/837006803221229569

Maybe she spoke with someone at the bondholder meeting today, not sure where she got it from..

https://fred.stlouisfed.org/series/BAMLH0A3HYC/

Man has these moved.
[/quote]

That'd be like $150-200mil over the top, I guess to handle all redemption premiums?
Title: Re: FELP - Foresight Energy
Post by: valcont on March 01, 2017, 08:25:04 PM
Gotcha thanks, so what is the rationale for Murray taking any equity? Is it required for the refi? If they are refinancing 1.4 billion in debt (750 Term, 170 revolver and 500 2024 Notes) it seems like the credit demand is there so why bother with $60.6 million from Murray, especially if 15 mill of that is the Murray Option. Could Foresight have refinanced without this $60.6 from Murray, was it required?


Good question. Maybe he is trying to drum up the majority at the unit level for the eventual sale of the MLP. He has said in the past that he wants to take
it private.

Yeah the call was pretty useless. The only useful disclosure was that they already had contracted out 17m tonnes (77% of the 2016 coal volume) and expecting a lot more.
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 02, 2017, 01:25:35 PM
Not sure if this is news or recap of yesterday's 8k, but if anyone has WSJ Pro Bankrupcy access just saw this article:

https://www.wsj.com/articles/foresight-refinances-1-3-billion-in-debt-giving-murray-majority-stake-1488488115?mod=yahoo_hs&yptr=yahoo
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 03, 2017, 07:45:30 AM
Moody's upgrade:

https://www.moodys.com/research/Moodys-upgrades-Foresights-CFR-to-B3-assigns-new-ratings-to--PR_362824?WT.mc_id=AM~WWFob29fRmluYW5jZTQyX1NCX1JhdGluZyBOZXdzX0FsbF9Fbmc%3d~20170302_PR_362824&yptr=yahoo

Quote
New York, March 02, 2017 -- Moody's Investors Service, ("Moody's") today upgraded Foresight Energy, LLC's Corporate Family Rating (CFR) to B3 from Caa1, and its probability of default rating (PD) to B3-PD from Caa1-PD. At the same time, Moody's assigned ratings to the proposed debt offering, including a B2 rating to the new first lien term loan and a Caa2 rating to the new second lien notes, subject to final documentation being consistent with our expectations. Moody's also changed the Speculative Grade Liquidity rating to SGL-2 from SGL-3. The ratings outlook is stable.

And Potential Upgrade of MEC:

https://www.moodys.com/research/Moodys-places-the-ratings-of-Murray-Energy-Corporation-on-review--PR_362918?WT.mc_id=AM~WWFob29fRmluYW5jZV9TQl9SYXRpbmcgTmV3c19BbGxfRW5n~20170302_PR_362918&yptr=yahoo


Quote
New York, March 02, 2017 -- Moody's Investors Service, ("Moody's") today placed all ratings of Murray Energy Corporation on review for upgrade, including the Corporate Family Rating (CFR) of Caa2, Probability of Default Rating (PDR) of Caa2-PD, and the Caa1 rating on the first-lien term loan.

The review was initiated in response to the announcement that the company intends to contribute approximately $60 million in cash to Foresight Energy LLC (rated B3 stable) in the form of common equity, and upon consummation of Foresight's refinancing transaction, to exercise its option to acquire an additional 46% voting interest in Foresight Energy GP LLC, thereby increasing its voting interest to 80%.

On March 1, 2017 Foresight announced its plan to refinance its capital structure by issuing $750 million of new first lien term loan, as well as new second lien notes due 2024, the proceeds of which will be used to repay the company's existing revolver, first lien term loan, second lien notes, and second lien convertible PIK notes.

The review will be concluded once the above transactions are consummated and will focus on the effect of the increased ownership interest in Foresight on Murray's future cash flows.
Quote
Title: Re: FELP - Foresight Energy
Post by: valcont on March 07, 2017, 08:19:15 AM
Just thinking loud about possible outcomes for this stock. Murray has said previously that he wants to take this company private and the recent refinancing indicate as much.Now that Cline is out of the picture, I think its in Murray's interest to not let the price run up. Granted he has to pay the MQD before he can stake a majority claim but what prevents him now to issue $3.50 in MQD/arrears and the rest of the $3.50 as an offer to buy FELP? Why would the market rerate this stock simply because he started paying out distributions in arrears knowing that he wants to acquire the company?
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 07, 2017, 10:21:37 AM
Just thinking loud about possible outcomes for this stock. Murray has said previously that he wants to take this company private and the recent refinancing indicate as much.Now that Cline is out of the picture, I think its in Murray's interest to not let the price run up. Granted he has to pay the MQD before he can stake a majority claim but what prevents him now to issue $3.50 in MQD/arrears and the rest of the $3.50 as an offer to buy FELP? Why would the market rerate this stock simply because he started paying out distributions in arrears knowing that he wants to acquire the company?

If Murray really wants to take it private soon, shouldn't he wait until then to do it together with the refinance? Otherwise, when he take it private, doesn't he need to get financing again for the debt as well as for the common units? (I don't know if the upcoming new debt has any change-of-control provision like before or what terms it will be...)
Title: Re: FELP - Foresight Energy
Post by: valcont on March 07, 2017, 10:38:04 AM

If Murray really wants to take it private soon, shouldn't he wait until then to do it together with the refinance? Otherwise, when he take it private, doesn't he need to get financing again for the debt as well as for the common units? (I don't know if the upcoming new debt has any change-of-control provision like before or what terms it will be...)

Not according to this. The last change of control was triggered because Murray and Cline tried to negotiate a sale without paying/seeking consent from the note holders.

“Change in Control” means the occurrence of any of the following:
(a) Foresight ceases to own, directly, 100% of the issued and outstanding Capital Stock and all other equity interests of the Borrower;
(b) Foresight ceases to own, directly or indirectly, 100% of the issued and outstanding Capital Stock, membership interests or other equity interests of any Originator;
(c) Parent (or one or more Permitted Holders) ceases to own, directly or indirectly, 100% of the issued and outstanding Capital Stock, membership interests or other equity interests of Foresight;
(d) the occurrence of a “Change of Control” under and as defined in the Credit Agreement;
 
- 6 -
(e) any Subordinated Note shall at any time cease to be owned by an Originator; or
(f) with respect to the General Partner:
(i) any “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), excluding the Permitted Holders, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of thirty-five percent (35%) or more of the voting power of the then outstanding Capital Stock of the General Partner; or
(ii) Parent consolidates with or merges into another corporation (other than a Subsidiary of Parent or one or more Permitted Holders) or conveys, transfers or leases all or substantially all of its property to any person (other than a Subsidiary of Parent or one or more Permitted Holders), or any corporation (other than a Subsidiary of Parent or one or more Permitted Holders) consolidates with or merges into Parent, in either event pursuant to a transaction in which the outstanding Capital Stock of Parent is reclassified or changed into or exchanged for cash, securities or other property.
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 07, 2017, 02:56:58 PM
Just thinking loud about possible outcomes for this stock. Murray has said previously that he wants to take this company private and the recent refinancing indicate as much.Now that Cline is out of the picture, I think its in Murray's interest to not let the price run up. Granted he has to pay the MQD before he can stake a majority claim but what prevents him now to issue $3.50 in MQD/arrears and the rest of the $3.50 as an offer to buy FELP? Why would the market rerate this stock simply because he started paying out distributions in arrears knowing that he wants to acquire the company?

Cline isn't out of the picture, he still is the largest owner of FELP common units. Murray's transaction gives him control of the GP, which as things stand now is worth zilch. The GP doesn't get IDRs until LP distributions are over 1.35 per year.

Anyone know what to make of that Murray Form 4 today? Curious what the $40 exercise price was referring to. Also, I wish the 8k was a little more clear about the refi. To my eyes this all seems great for common unit holders
Title: Re: FELP - Foresight Energy
Post by: Green King on March 08, 2017, 06:08:32 PM
http://www.reuters.com/article/us-coal-loans-idUSKBN16A24I

It is all happening. :D

Quote
Arch Coal’s new US$300m term loan will refinance existing debt. The company emerged from bankruptcy in October 2016 after eliminating about US$4.8bn in debt. In addition to increasing the loan, Arch Coal was also able to cut the pricing to 400bp over Libor from initial guidance of 450bp.
Title: Re: FELP - Foresight Energy
Post by: valcont on March 09, 2017, 05:35:26 AM
I still can't figure out why this will trade at a large premium to MQD+ arrears (~ $4/share ) after the refinance is done. As a GP majority holder, Murray can offer $4 to convert the subs. That will raise his stake to 55% in the LP. What will stop him from buying the LP at say $2.30 (current price - mqd+arrears) now that he holds the majority at both GP and LP level ?
Why will the market value it in the multiples of DCF when the end game is a buy out? Can the conflict committee stop him from doing that?
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 09, 2017, 08:55:06 AM
I still can't figure out why this will trade at a large premium to MQD+ arrears (~ $4/share ) after the refinance is done. As a GP majority holder, Murray can offer $4 to convert the subs. That will raise his stake to 55% in the LP. What will stop him from buying the LP at say $2.30 (current price - mqd+arrears) now that he holds the majority at both GP and LP level ?
Why will the market value it in the multiples of DCF when the end game is a buy out? Can the conflict committee stop him from doing that?

They are probably going to generate $1/unit or more of DCF after the refinance and you are talking about a $2.30/unit of buyout?  Cline is still the chairman of the board and I don't think the board will approve it.  I think the current depressed share price is still due to the lack of dividend, lack of information about the refinance. Price should rise when they complete the refi and announce the date when they start to pay distribution again.
Title: Re: FELP - Foresight Energy
Post by: Green King on March 10, 2017, 09:23:51 AM
I still can't figure out why this will trade at a large premium to MQD+ arrears (~ $4/share ) after the refinance is done. As a GP majority holder, Murray can offer $4 to convert the subs. That will raise his stake to 55% in the LP. What will stop him from buying the LP at say $2.30 (current price - mqd+arrears) now that he holds the majority at both GP and LP level ?
Why will the market value it in the multiples of DCF when the end game is a buy out? Can the conflict committee stop him from doing that?

One Risk Management and mind set side of things. If you have already made money and you are really worried about blow up risk at this moment in time.

Cut your position in half, look at the cash, take a walk and sleep on it for a day see how you feel than. The future is a set of probability in outcomes. Size your bet accordingly based on your risk tolerance and psychological capabilities.
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 11, 2017, 01:43:22 PM
I still can't figure out why this will trade at a large premium to MQD+ arrears (~ $4/share ) after the refinance is done. As a GP majority holder, Murray can offer $4 to convert the subs. That will raise his stake to 55% in the LP. What will stop him from buying the LP at say $2.30 (current price - mqd+arrears) now that he holds the majority at both GP and LP level ?
Why will the market value it in the multiples of DCF when the end game is a buy out? Can the conflict committee stop him from doing that?

Here is a back of the envelope calculation that has me holding on to my shares and very positive about returns going forward (picture of excel sheet included)

Setup:

-Current common unit arrears are $1.86 and go up $.3375 every quarter there is no distribution
-If commons are paid $2.203 per unit after all arrears are paid, the subs convert to commons
-IDRs don't kick-in until distributions are over $2.203 per year.

If you build a simple model that assumes the second half of 2016 will be the run rate of FELP's business and assume the refi will save on interest you get something like:

EBITDA: 350
Maintenance Capex: 50
Interest Expense: 85

DCF :215

If you assume FELP distributes the MQD (1.35) this year to commons and retains the remainder of DCF to fund the $2.203 payment required for sub conversion, it will take until 2019 for Murray's subs to convert. AND DCF of 215 is not enough for any IDRs to be paid to the GP assuming there will be roughly 140 common units in 2019.

If I assume a 10% required rate of return, and no growth in the 215 DCF, this situation makes FELP sub units worth roughly $12 today and common units worth roughly $18

On the other hand, if Murray could somehow come up with the money to take out the LPs, with the 10% required rate the value of FELP's cash flow stream would be worth $15 per share in the above scenario.

(Using a 15% required rate of return gives $12.82 for commons today, $7.45 for subs and $10.60 for the FELP CF stream)

If Murray offered to buyout most public common LP holders, I'm sure they would sell for something like $12, but who knows what the Reserves Group would sell their 46.8 million shares for...And I don't know how Murray would fund a buyout.

This makes me think, if Murray never buys out the common LPs, he's a long way from making money (assuming the 215 DCF number). I guess he could have recently paid 15 million to control the GP in order to save on Murray transportation costs or terminal access or something like that, but if he really thinks the IDRs have value then FELP shares are worth at least 3x their current price at some stage ($2.2 at 10x multiple)

Does anyone know anything about Murray Energy's tax situation? Like does it make sense for Murray, at some stage, to drop down all their assets into this MLP in order to make Murray more tax efficient?

What would be the cynics view of why Murray recently paid 15 million to control the GP, is there anyway he would fleece common holders to recover his original investment where we would be unable to stop it? I seem to doubt it given Reserves Group still has 46.8 million common units
Title: Re: FELP - Foresight Energy
Post by: jrallen81 on March 11, 2017, 03:07:51 PM
is the Reserves group Cline plus anyone else?

Thanks
Title: Re: FELP - Foresight Energy
Post by: valcont on March 12, 2017, 01:49:45 PM

Here is a back of the envelope calculation that has me holding on to my shares and very positive about returns going forward (picture of excel sheet included)

Setup:

-Current common unit arrears are $1.86 and go up $.3375 every quarter there is no distribution
-If commons are paid $2.203 per unit after all arrears are paid, the subs convert to commons
-IDRs don't kick-in until distributions are over $2.203 per year.

If you build a simple model that assumes the second half of 2016 will be the run rate of FELP's business and assume the refi will save on interest you get something like:

EBITDA: 350
Maintenance Capex: 50
Interest Expense: 85

DCF :215

If you assume FELP distributes the MQD (1.35) this year to commons and retains the remainder of DCF to fund the $2.203 payment required for sub conversion, it will take until 2019 for Murray's subs to convert. AND DCF of 215 is not enough for any IDRs to be paid to the GP assuming there will be roughly 140 common units in 2019.

If I assume a 10% required rate of return, and no growth in the 215 DCF, this situation makes FELP sub units worth roughly $12 today and common units worth roughly $18

On the other hand, if Murray could somehow come up with the money to take out the LPs, with the 10% required rate the value of FELP's cash flow stream would be worth $15 per share in the above scenario.

(Using a 15% required rate of return gives $12.82 for commons today, $7.45 for subs and $10.60 for the FELP CF stream)

If Murray offered to buyout most public common LP holders, I'm sure they would sell for something like $12, but who knows what the Reserves Group would sell their 46.8 million shares for...And I don't know how Murray would fund a buyout.

This makes me think, if Murray never buys out the common LPs, he's a long way from making money (assuming the 215 DCF number). I guess he could have recently paid 15 million to control the GP in order to save on Murray transportation costs or terminal access or something like that, but if he really thinks the IDRs have value then FELP shares are worth at least 3x their current price at some stage ($2.2 at 10x multiple)

Does anyone know anything about Murray Energy's tax situation? Like does it make sense for Murray, at some stage, to drop down all their assets into this MLP in order to make Murray more tax efficient?

What would be the cynics view of why Murray recently paid 15 million to control the GP, is there anyway he would fleece common holders to recover his original investment where we would be unable to stop it? I seem to doubt it given Reserves Group still has 46.8 million common units

Not to nitpick on your calculations but your EBITDA calc should deduct $30m that they received from the insurance for Hillsboro interruptions.

My point is very simple, if Murray offers to buy this up by paying out the distributions how would you value this entity? You can't do a cash flow valuation on it since the returns have finite period. It will be more like valuing a bond with a near term maturity. So if I buy this today knowing that it'll be eventually bought by Murray in a year, I know I'll receive $1.90(arrears) + $2.02(MQD fees) + $1.35(1 yr distribution)= $5.35 on it but what premium  will I get as a unit owner? Nothing or maybe a small one considering Murray controls the GP and 55% of the LP.

I don't know what the charter of the conflict committee is post refinance? It was created to protect the reserves against dilution by stuffing dropdowns or PIK conversion to equity. In general, as long as the conflict committee don't act in bad faith they are protected against legal liability. Also the GP has no fiduciary duty to protect the best interest of the unit holders.
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 12, 2017, 03:07:09 PM

Here is a back of the envelope calculation that has me holding on to my shares and very positive about returns going forward (picture of excel sheet included)

Setup:

-Current common unit arrears are $1.86 and go up $.3375 every quarter there is no distribution
-If commons are paid $2.203 per unit after all arrears are paid, the subs convert to commons
-IDRs don't kick-in until distributions are over $2.203 per year.

If you build a simple model that assumes the second half of 2016 will be the run rate of FELP's business and assume the refi will save on interest you get something like:

EBITDA: 350
Maintenance Capex: 50
Interest Expense: 85

DCF :215

If you assume FELP distributes the MQD (1.35) this year to commons and retains the remainder of DCF to fund the $2.203 payment required for sub conversion, it will take until 2019 for Murray's subs to convert. AND DCF of 215 is not enough for any IDRs to be paid to the GP assuming there will be roughly 140 common units in 2019.

If I assume a 10% required rate of return, and no growth in the 215 DCF, this situation makes FELP sub units worth roughly $12 today and common units worth roughly $18

On the other hand, if Murray could somehow come up with the money to take out the LPs, with the 10% required rate the value of FELP's cash flow stream would be worth $15 per share in the above scenario.

(Using a 15% required rate of return gives $12.82 for commons today, $7.45 for subs and $10.60 for the FELP CF stream)

If Murray offered to buyout most public common LP holders, I'm sure they would sell for something like $12, but who knows what the Reserves Group would sell their 46.8 million shares for...And I don't know how Murray would fund a buyout.

This makes me think, if Murray never buys out the common LPs, he's a long way from making money (assuming the 215 DCF number). I guess he could have recently paid 15 million to control the GP in order to save on Murray transportation costs or terminal access or something like that, but if he really thinks the IDRs have value then FELP shares are worth at least 3x their current price at some stage ($2.2 at 10x multiple)

Does anyone know anything about Murray Energy's tax situation? Like does it make sense for Murray, at some stage, to drop down all their assets into this MLP in order to make Murray more tax efficient?

What would be the cynics view of why Murray recently paid 15 million to control the GP, is there anyway he would fleece common holders to recover his original investment where we would be unable to stop it? I seem to doubt it given Reserves Group still has 46.8 million common units

Not to nitpick on your calculations but your EBITDA calc should deduct $30m that they received from the insurance for Hillsboro interruptions.

My point is very simple, if Murray offers to buy this up by paying out the distributions how would you value this entity? You can't do a cash flow valuation on it since the returns have finite period. It will be more like valuing a bond with a near term maturity. So if I buy this today knowing that it'll be eventually bought by Murray in a year, I know I'll receive $1.90(arrears) + $2.02(MQD fees) + $1.35(1 yr distribution)= $5.35 on it but what premium  will I get as a unit owner? Nothing or maybe a small one considering Murray controls the GP and 55% of the LP.

I don't know what the charter of the conflict committee is post refinance? It was created to protect the reserves against dilution by stuffing dropdowns or PIK conversion to equity. In general, as long as the conflict committee don't act in bad faith they are protected against legal liability. Also the GP has no fiduciary duty to protect the best interest of the unit holders.

No worries, it was just a rough attempt and my interest expense is probably on the low side as well, but we're in the ballpark. Anyway, point is, if the subs turn to commons you're looking at, on the low low low side, $1 distributions for the 140ish million unit holders. In a middle of the road case scenario those commons should be worth 8x or a 12.5 yield. So say this happens at the end of this year, It would be reasonable for a common holder to demand $5.35 + $8 = $13.35. Now, you could argue why would Murray pay $13.35 for a cash flow stream we just said is worth $8? It's like a house with a market value of 500k, but a tax lien that needs to be settled for 100k...you should only pay 400k for such a house, right...

But our situation is different because if Murray never converts his subs to commons, the common holders get outsized returns. Murray would be providing capital to the business, but not receiving anything in return. Using a little Sicilian reasoning...he knows we know that he can't get any money out until he pays us...and thus my assumption that arrears, MQD and conversion money will be paid.

Furthermore, say Murray never tries a buy out or can't afford it. That's still a fine scenario.  All the DCF will come in to the 75 million or so common holders. 140 DCF (as above) /75 common units is plenty of money to convert the subs to commons over a three year period. We would get paid back our $5.35 anyway plus pick up additional $1.35 MQDs along the way (20% yield at current prices) the longer Murray lets it go. After the 3 year period the cash flow stream to 140 unit holders would still be worth $8 to Murray. So it's essentially the same outcome as the buyout except the cash flows are drawn out so the present value of everything is diminished. However, this problem is more than offset by the commons picking up additional MQDs at juicy yields as we wait for the conversion.

And don't forget Deer Run, its capable of something like 10 million tons. If there's a 50% chance that it is running in 3 years that's worth around $2 per share today.
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 12, 2017, 06:14:01 PM

Here is a back of the envelope calculation that has me holding on to my shares and very positive about returns going forward (picture of excel sheet included)

Setup:

-Current common unit arrears are $1.86 and go up $.3375 every quarter there is no distribution
-If commons are paid $2.203 per unit after all arrears are paid, the subs convert to commons
-IDRs don't kick-in until distributions are over $2.203 per year.

If you build a simple model that assumes the second half of 2016 will be the run rate of FELP's business and assume the refi will save on interest you get something like:

EBITDA: 350
Maintenance Capex: 50
Interest Expense: 85

DCF :215

If you assume FELP distributes the MQD (1.35) this year to commons and retains the remainder of DCF to fund the $2.203 payment required for sub conversion, it will take until 2019 for Murray's subs to convert. AND DCF of 215 is not enough for any IDRs to be paid to the GP assuming there will be roughly 140 common units in 2019.

If I assume a 10% required rate of return, and no growth in the 215 DCF, this situation makes FELP sub units worth roughly $12 today and common units worth roughly $18

On the other hand, if Murray could somehow come up with the money to take out the LPs, with the 10% required rate the value of FELP's cash flow stream would be worth $15 per share in the above scenario.

(Using a 15% required rate of return gives $12.82 for commons today, $7.45 for subs and $10.60 for the FELP CF stream)

If Murray offered to buyout most public common LP holders, I'm sure they would sell for something like $12, but who knows what the Reserves Group would sell their 46.8 million shares for...And I don't know how Murray would fund a buyout.

This makes me think, if Murray never buys out the common LPs, he's a long way from making money (assuming the 215 DCF number). I guess he could have recently paid 15 million to control the GP in order to save on Murray transportation costs or terminal access or something like that, but if he really thinks the IDRs have value then FELP shares are worth at least 3x their current price at some stage ($2.2 at 10x multiple)

Does anyone know anything about Murray Energy's tax situation? Like does it make sense for Murray, at some stage, to drop down all their assets into this MLP in order to make Murray more tax efficient?

What would be the cynics view of why Murray recently paid 15 million to control the GP, is there anyway he would fleece common holders to recover his original investment where we would be unable to stop it? I seem to doubt it given Reserves Group still has 46.8 million common units

Not to nitpick on your calculations but your EBITDA calc should deduct $30m that they received from the insurance for Hillsboro interruptions.

My point is very simple, if Murray offers to buy this up by paying out the distributions how would you value this entity? You can't do a cash flow valuation on it since the returns have finite period. It will be more like valuing a bond with a near term maturity. So if I buy this today knowing that it'll be eventually bought by Murray in a year, I know I'll receive $1.90(arrears) + $2.02(MQD fees) + $1.35(1 yr distribution)= $5.35 on it but what premium  will I get as a unit owner? Nothing or maybe a small one considering Murray controls the GP and 55% of the LP.

I don't know what the charter of the conflict committee is post refinance? It was created to protect the reserves against dilution by stuffing dropdowns or PIK conversion to equity. In general, as long as the conflict committee don't act in bad faith they are protected against legal liability. Also the GP has no fiduciary duty to protect the best interest of the unit holders.

No worries, it was just a rough attempt and my interest expense is probably on the low side as well, but we're in the ballpark. Anyway, point is, if the subs turn to commons you're looking at, on the low low low side, $1 distributions for the 140ish million unit holders. In a middle of the road case scenario those commons should be worth 8x or a 12.5 yield. So say this happens at the end of this year, It would be reasonable for a common holder to demand $5.35 + $8 = $13.35. Now, you could argue why would Murray pay $13.35 for a cash flow stream we just said is worth $8? It's like a house with a market value of 500k, but a tax lien that needs to be settled for 100k...you should only pay 400k for such a house, right...

But our situation is different because if Murray never converts his subs to commons, the common holders get outsized returns. Murray would be providing capital to the business, but not receiving anything in return. Using a little Sicilian reasoning...he knows we know that he can't get any money out until he pays us...and thus my assumption that arrears, MQD and conversion money will be paid.

Furthermore, say Murray never tries a buy out or can't afford it. That's still a fine scenario.  All the DCF will come in to the 75 million or so common holders. 140 DCF (as above) /75 common units is plenty of money to convert the subs to commons over a three year period. We would get paid back our $5.35 anyway plus pick up additional $1.35 MQDs along the way (20% yield at current prices) the longer Murray lets it go. After the 3 year period the cash flow stream to 140 unit holders would still be worth $8 to Murray. So it's essentially the same outcome as the buyout except the cash flows are drawn out so the present value of everything is diminished. However, this problem is more than offset by the commons picking up additional MQDs at juicy yields as we wait for the conversion.

And don't forget Deer Run, its capable of something like 10 million tons. If there's a 50% chance that it is running in 3 years that's worth around $2 per share today.

I think that Valcont's point is that after truing up the arrears and stuff, Murray will have free reign to pay what he feels like to take out the business, rendering the fair value of the business meaningless.
Title: Re: FELP - Foresight Energy
Post by: Ismael on March 12, 2017, 06:23:42 PM
@Valcont,it looks like FELP has a fair price charter restriction.

If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner will have the right, but not the obligation, to purchase all of the remaining common units at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. Please read “The Partnership Agreement—Limited Call Right.”

see page 17 and 211
https://www.sec.gov/Archives/edgar/data/1540729/000119312514229380/d737973ds1a.htm
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 12, 2017, 06:33:09 PM
Patmo

I think that would be a pretty cynical view. I guess you never know, but I don't think the GP can just steamroll the LPs to the point where our economic interest going forward would be worth zero after settling up.  If that were the case, Reserves Group wouldn't have been holding on to 46.8 million common units for all these years since the initial Murray investment.  And they wouldn't have fought so hard to keep warrant issuance low during the long drawn out debt restructuring. Finally, if Murray wants to keep this as a public drop-down/yieldco vehicle, it behooves him to keep things above board with LPs
Title: Re: FELP - Foresight Energy
Post by: Patmo on March 12, 2017, 07:06:59 PM
Patmo

I think that would be a pretty cynical view. I guess you never know, but I don't think the GP can just steamroll the LPs to the point where our economic interest going forward would be worth zero after settling up.  If that were the case, Reserves Group wouldn't have been holding on to 46.8 million common units for all these years since the initial Murray investment.  And they wouldn't have fought so hard to keep warrant issuance low during the long drawn out debt restructuring. Finally, if Murray wants to keep this as a public drop-down/yieldco vehicle, it behooves him to keep things above board with LPs

If you flip the coin over, this very pessimistic scenario establishes the downside pretty clearly. You're virtually putting 20ish % of your money at risk for a business that's really profitable but where the outcome to equity depends a lot on game theory. I think this investment is plenty +EV in that framework but who knows, my gut is giving me mixed feelings honestly. I would be fine with losing 20% of my stake so I figure I got to ride along here and see what happens.
Title: Re: FELP - Foresight Energy
Post by: valcont on March 12, 2017, 08:15:34 PM
@Valcont,it looks like FELP has a fair price charter restriction.

If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner will have the right, but not the obligation, to purchase all of the remaining common units at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. Please read “The Partnership Agreement—Limited Call Right.”

see page 17 and 211
https://www.sec.gov/Archives/edgar/data/1540729/000119312514229380/d737973ds1a.htm

Thanks for the link Ismael. I am not saying that Murray will give the shaft to the unit holders, I am saying that I don't see a reason as to why this stock will be bid up based on the distributions considering there is a chance that Murray will take it private.

Murray has way too many options to take it private, here is one way he can do it.

"Our general partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general
 

partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no restriction in our partnership agreement that prevents our general partner from causing us to issue additional common units and exercising its call right. If our general partner exercised its limited call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no longer be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act. Upon consummation of this offering, and assuming no exercise of the underwriters’ option to purchase additional common units, Foresight Reserves and Michael J. Beyer will own an aggregate of 85.9% and 0.6%, respectively, of our common and subordinated units, respectively. At the end of the subordination period, assuming no additional issuances of units (other than upon the conversion of the subordinated units), Foresight Reserves and Michael J. Beyer will own an aggregate of 85.9% and 0.6%, respectively, of our common units. For additional information about the limited call right, please read “The Partnership Agreement—Limited Call Right.”"
Title: Re: FELP - Foresight Energy
Post by: valcont on March 12, 2017, 08:23:27 PM

I think that would be a pretty cynical view. I guess you never know, but I don't think the GP can just steamroll the LPs to the point where our economic interest going forward would be worth zero after settling up. 

I am not saying that.


If that were the case, Reserves Group wouldn't have been holding on to 46.8 million common units for all these years since the initial Murray investment.

What else would they do? BTW Cline already got $1.37B and 18% on PIKs , I don't think he has any reasons to complain.

And they wouldn't have fought so hard to keep warrant issuance low during the long drawn out debt restructuring.

This was done to protect their interest in case the dilution happens to pay out the PIKs.

 Finally, if Murray wants to keep this as a public drop-down/yieldco vehicle, it behooves him to keep things above board with LPs

I don't think he wants to. If he does then their is a substantial upside.
Title: Re: FELP - Foresight Energy
Post by: Ismael on March 12, 2017, 08:32:35 PM
I don't know why Murray and Cline wouldn't buy out the remaining 13% of equity for as low as a price as possible, given the chance. While they don't need a fairness opinion, they do need to abide by the limited call right clause.
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 12, 2017, 09:28:44 PM

I think that would be a pretty cynical view. I guess you never know, but I don't think the GP can just steamroll the LPs to the point where our economic interest going forward would be worth zero after settling up. 

I am not saying that.


If that were the case, Reserves Group wouldn't have been holding on to 46.8 million common units for all these years since the initial Murray investment.

What else would they do? BTW Cline already got $1.37B and 18% on PIKs , I don't think he has any reasons to complain.

And they wouldn't have fought so hard to keep warrant issuance low during the long drawn out debt restructuring.

This was done to protect their interest in case the dilution happens to pay out the PIKs.

 Finally, if Murray wants to keep this as a public drop-down/yieldco vehicle, it behooves him to keep things above board with LPs

I don't think he wants to. If he does then their is a substantial upside.



I think that would be a pretty cynical view. I guess you never know, but I don't think the GP can just steamroll the LPs to the point where our economic interest going forward would be worth zero after settling up. 

I am not saying that.


If that were the case, Reserves Group wouldn't have been holding on to 46.8 million common units for all these years since the initial Murray investment.

What else would they do? BTW Cline already got $1.37B and 18% on PIKs , I don't think he has any reasons to complain.

And they wouldn't have fought so hard to keep warrant issuance low during the long drawn out debt restructuring.

This was done to protect their interest in case the dilution happens to pay out the PIKs.

 Finally, if Murray wants to keep this as a public drop-down/yieldco vehicle, it behooves him to keep things above board with LPs

I don't think he wants to. If he does then their is a substantial upside.


Re Warrants: If I remember correctly, during the first debt restructuring the bond holders wanted warrants to purchase something like 9% of total units and it was fiercely contested and in the end they got 4.5%. Also, per the recent Form 4, Murray acquired 17,500 warrants for FELP commons. I think each warrant allows him to acquire 11.4 commons for $.89 each. So would be weird to do that if the commons were in trouble post FEGP change of control.

How much of that call right language do you think is boilerplate? I mean if we think Murray is capable of that then we're assuming he is going to screw Cline. I don't think Cline is stupid. He's been royally screwed legally with the change of control issues, so I don't think he'd be holding if there was a technicality Murray could get him on...

Also, Cline is still going to be on FEGP's board after this Murray transaction goes through, Robert Moore will be the Chairman of the FEGP's board and he owns 137,000 common units. Sure, it's not the 40.8 million that Cline owns, but if Moore is worth 10 million, that's 10% of his net worth in common FELP units. Not to mention all the other members of the FEGP board own common units in FELP except Murray's son (I assume that's who the 43 year old Robert E Murray is) who will FEGP's new board member.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 13, 2017, 04:40:49 AM
Cline will resign.

Should the FEGP Option be exercised (i) Christopher Cline has indicated that he will resign as a director of FEGP, (ii) Murray Energy has indicated that it will appoint Robert Edward Murray as a director of FEGP, (iii) it is expected that Robert D. Moore will become chairman of FEGP’s board of directors and (iv) it is expected that Paul Vining will remain on the board of directors of FEGP. Robert Edward Murray is 43 years old and since February 2015 has been the Executive Vice President—Marketing and Sales of Murray Energy.
Title: Re: FELP - Foresight Energy
Post by: Green King on March 13, 2017, 05:38:00 AM
Cline will resign.

Should the FEGP Option be exercised (i) Christopher Cline has indicated that he will resign as a director of FEGP, (ii) Murray Energy has indicated that it will appoint Robert Edward Murray as a director of FEGP, (iii) it is expected that Robert D. Moore will become chairman of FEGP’s board of directors and (iv) it is expected that Paul Vining will remain on the board of directors of FEGP. Robert Edward Murray is 43 years old and since February 2015 has been the Executive Vice President—Marketing and Sales of Murray Energy.

Source please.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 13, 2017, 06:20:45 AM
https://www.sec.gov/Archives/edgar/data/1540729/000156459017003586/felp-8k_20170307.htm

Title: Re: FELP - Foresight Energy
Post by: gadfly on March 13, 2017, 06:38:31 AM
https://www.sec.gov/Archives/edgar/data/1540729/000156459017003586/felp-8k_20170307.htm

Thank you, I misread that as he was going to resign as chairman of FEGP, but remain as a board member.
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 13, 2017, 09:10:08 AM
Thanks for the link Ismael. I am not saying that Murray will give the shaft to the unit holders, I am saying that I don't see a reason as to why this stock will be bid up based on the distributions considering there is a chance that Murray will take it private.

Murray has way too many options to take it private, here is one way he can do it.

"Our general partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general
 

partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no restriction in our partnership agreement that prevents our general partner from causing us to issue additional common units and exercising its call right. If our general partner exercised its limited call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no longer be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act. Upon consummation of this offering, and assuming no exercise of the underwriters’ option to purchase additional common units, Foresight Reserves and Michael J. Beyer will own an aggregate of 85.9% and 0.6%, respectively, of our common and subordinated units, respectively. At the end of the subordination period, assuming no additional issuances of units (other than upon the conversion of the subordinated units), Foresight Reserves and Michael J. Beyer will own an aggregate of 85.9% and 0.6%, respectively, of our common units. For additional information about the limited call right, please read “The Partnership Agreement—Limited Call Right.”"

So the LP call right only can be exercised when Murray owns 80% of common units (FELP), not FEGP. Given that he only owns 55% (after the sub converts), why worry for now?  I would worry if Cline + Beyer start to sell their remaining 30% of FELP common units.
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 13, 2017, 09:36:42 AM
Heth, thanks for clarifying.

I must have read that 10 times and it was stuck in my head the limited call right was 80% of GP instead of 80% of common (probably because Murray is currently contributing $60M to get to 80% of GP currently).

It will be difficult for Murray to get 80% of the common unless Cline sells. Why would he sell now for less? It's currently at a 20% yield not even taking into account the arrears owed.
Title: Re: FELP - Foresight Energy
Post by: maybe4less on March 13, 2017, 09:58:59 AM
Thanks for the link Ismael. I am not saying that Murray will give the shaft to the unit holders, I am saying that I don't see a reason as to why this stock will be bid up based on the distributions considering there is a chance that Murray will take it private.

Murray has way too many options to take it private, here is one way he can do it.

"Our general partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general
 

partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no restriction in our partnership agreement that prevents our general partner from causing us to issue additional common units and exercising its call right. If our general partner exercised its limited call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no longer be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act. Upon consummation of this offering, and assuming no exercise of the underwriters’ option to purchase additional common units, Foresight Reserves and Michael J. Beyer will own an aggregate of 85.9% and 0.6%, respectively, of our common and subordinated units, respectively. At the end of the subordination period, assuming no additional issuances of units (other than upon the conversion of the subordinated units), Foresight Reserves and Michael J. Beyer will own an aggregate of 85.9% and 0.6%, respectively, of our common units. For additional information about the limited call right, please read “The Partnership Agreement—Limited Call Right.”"

So the LP call right only can be exercised when Murray owns 80% of common units (FELP), not FEGP. Given that he only owns 55% (after the sub converts), why worry for now?  I would worry if Cline + Beyer start to sell their remaining 30% of FELP common units.

I think the worry is that Murray could offer a bid for the LP with a minimal premium once he has control of the GP.

My reading of the partnership agreement is that he can do this if the GP's board simply approves the offer. The agreement states he can (but is not obligated to) seek approval from the conflicts committee or from a majority of the outstanding LP common units (excluding the nits owned by the GP or its affiliates).

I think Valcont is right and there is a risk that Murray makes a buyout offer with a minimal premium.

Not sure how easily Murray could come up with the money to do this though.
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 13, 2017, 10:07:05 AM
Heth, thanks for clarifying.

I must have read that 10 times and it was stuck in my head the limited call right was 80% of GP instead of 80% of common (probably because Murray is currently contributing $60M to get to 80% of GP currently).

It will be difficult for Murray to get 80% of the common unless Cline sells. Why would he sell now for less? It's currently at a 20% yield not even taking into account the arrears owed.

I think so too. I would think the resignation of Cline from the FEGP board is expected. They already granted Murray the right to purchase the remaining interest of FEGP in 2015 for $25MM if I remember correctly. Maybe that is all this Murray's talking of "bring Foresight under Murray Energy" about... and he did not really mean to take FELP private. I just don't see how that can be done in the short term given the reserve group's stake.
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 13, 2017, 10:21:17 AM
I think the worry is that Murray could offer a bid for the LP with a minimal premium once he has control of the GP.

My reading of the partnership agreement is that he can do this if the GP's board simply approves the offer. The agreement states he can (but is not obligated to) seek approval from the conflicts committee or from a majority of the outstanding LP common units (excluding the nits owned by the GP or its affiliates).

I think Valcont is right and there is a risk that Murray makes a buyout offer with a minimal premium.

Not sure how easily Murray could come up with the money to do this though.

I don't think so (but here is the disclamer: English is not my first language).  In general, GP can only have impact on the operation of the company, not the economic ownership of the company, which is LP.  Also, when a controlling shareholder acquires the company, due to the conflict of interest, I think there is some law that requires the "majority of the minority shareholder approval".
     https://www.davispolk.com/files/uploads/davis.polk.going.private.pdf (https://www.davispolk.com/files/uploads/davis.polk.going.private.pdf)

Title: Re: FELP - Foresight Energy
Post by: maybe4less on March 13, 2017, 10:55:12 AM
I think the worry is that Murray could offer a bid for the LP with a minimal premium once he has control of the GP.

My reading of the partnership agreement is that he can do this if the GP's board simply approves the offer. The agreement states he can (but is not obligated to) seek approval from the conflicts committee or from a majority of the outstanding LP common units (excluding the nits owned by the GP or its affiliates).

I think Valcont is right and there is a risk that Murray makes a buyout offer with a minimal premium.

Not sure how easily Murray could come up with the money to do this though.

I don't think so (but here is the disclamer: English is not my first language).  In general, GP can only have impact on the operation of the company, not the economic ownership of the company, which is LP.  Also, when a controlling shareholder acquires the company, due to the conflict of interest, I think there is some law that requires the "majority of the minority shareholder approval".
     https://www.davispolk.com/files/uploads/davis.polk.going.private.pdf (https://www.davispolk.com/files/uploads/davis.polk.going.private.pdf)

Generally, you are correct, but the rules are different because we have a partnership, not a corporation. FELP's partnership agreement specifically gives the GP the right to evaluate and accept merger proposals on behalf of LP unitholders.

The limited fiduciary duty typical of most GP-LP relationships in the MLP space has been tested a number of times and the Delaware courts appear to have generally upheld the agreements that give GPs wide discretion.

For example:

https://www.klgatesdelawaredocket.com/2016/04/chancery-court-reaffirms-the-ability-of-limited-partnerships-to-contract-around-fiduciary-duties/

http://www.ncpers.org/files/Conference%20Docs/Public%20Safety/2014%20Handouts/Robert%20Kriner_Tuesday.pdf
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 13, 2017, 11:34:49 AM
I think the worry is that Murray could offer a bid for the LP with a minimal premium once he has control of the GP.

My reading of the partnership agreement is that he can do this if the GP's board simply approves the offer. The agreement states he can (but is not obligated to) seek approval from the conflicts committee or from a majority of the outstanding LP common units (excluding the nits owned by the GP or its affiliates).

I think Valcont is right and there is a risk that Murray makes a buyout offer with a minimal premium.

Not sure how easily Murray could come up with the money to do this though.

I don't think so (but here is the disclamer: English is not my first language).  In general, GP can only have impact on the operation of the company, not the economic ownership of the company, which is LP.  Also, when a controlling shareholder acquires the company, due to the conflict of interest, I think there is some law that requires the "majority of the minority shareholder approval".
     https://www.davispolk.com/files/uploads/davis.polk.going.private.pdf (https://www.davispolk.com/files/uploads/davis.polk.going.private.pdf)

Generally, you are correct, but the rules are different because we have a partnership, not a corporation. FELP's partnership agreement specifically gives the GP the right to evaluate and accept merger proposals on behalf of LP unitholders.

The limited fiduciary duty typical of most GP-LP relationships in the MLP space has been tested a number of times and the Delaware courts appear to have generally upheld the agreements that give GPs wide discretion.

For example:

https://www.klgatesdelawaredocket.com/2016/04/chancery-court-reaffirms-the-ability-of-limited-partnerships-to-contract-around-fiduciary-duties/

http://www.ncpers.org/files/Conference%20Docs/Public%20Safety/2014%20Handouts/Robert%20Kriner_Tuesday.pdf

Thanks for the links. I think it is good to keep this in mind.  However, if Murray is going to make an offer when he has not yet owned 80% of LP, then I suppose that he will still be obligated to obtain a fairness opinion regarding the value of common units? I did not dig further into those deals in your links, was any of them bought out at 2X~3X DCF?

Title: Re: FELP - Foresight Energy
Post by: maybe4less on March 13, 2017, 12:02:33 PM
I think the worry is that Murray could offer a bid for the LP with a minimal premium once he has control of the GP.

My reading of the partnership agreement is that he can do this if the GP's board simply approves the offer. The agreement states he can (but is not obligated to) seek approval from the conflicts committee or from a majority of the outstanding LP common units (excluding the nits owned by the GP or its affiliates).

I think Valcont is right and there is a risk that Murray makes a buyout offer with a minimal premium.

Not sure how easily Murray could come up with the money to do this though.

I don't think so (but here is the disclamer: English is not my first language).  In general, GP can only have impact on the operation of the company, not the economic ownership of the company, which is LP.  Also, when a controlling shareholder acquires the company, due to the conflict of interest, I think there is some law that requires the "majority of the minority shareholder approval".
     https://www.davispolk.com/files/uploads/davis.polk.going.private.pdf (https://www.davispolk.com/files/uploads/davis.polk.going.private.pdf)

Generally, you are correct, but the rules are different because we have a partnership, not a corporation. FELP's partnership agreement specifically gives the GP the right to evaluate and accept merger proposals on behalf of LP unitholders.

The limited fiduciary duty typical of most GP-LP relationships in the MLP space has been tested a number of times and the Delaware courts appear to have generally upheld the agreements that give GPs wide discretion.

For example:

https://www.klgatesdelawaredocket.com/2016/04/chancery-court-reaffirms-the-ability-of-limited-partnerships-to-contract-around-fiduciary-duties/

http://www.ncpers.org/files/Conference%20Docs/Public%20Safety/2014%20Handouts/Robert%20Kriner_Tuesday.pdf

Thanks for the links. I think it is good to keep this in mind.  However, if Murray is going to make an offer when he has not yet owned 80% of LP, then I suppose that he will still be obligated to obtain a fairness opinion regarding the value of common units? I did not dig further into those deals in your links, was any of them bought out at 2X~3X DCF?

I actually don't think he needs a fairness opinion. In fact, it looks like the standard that the partnership agreement holds the GP too ("Good Faith") does not require a transaction to be "fair," just that the GP believes the transaction to be in the best interest of the LP. I think the requirement practically means that it has to be at or above the trading price over the last so-many days or some similar standard. I do not think he can in "good faith" make an offer below the then current stock price.

I don't know what multiples the other companies were bought out for. It is possible that a low valuation would preclude a bid with a minimal premium, if the valuation were so low that unitholders could sue and effectively argue it was in Bad Faith, but I'm not a lawyer.
Title: Re: FELP - Foresight Energy
Post by: valcont on March 13, 2017, 12:03:17 PM
Thanks for the links. I think it is good to keep this in mind.  However, if Murray is going to make an offer when he has not yet owned 80% of LP, then I suppose that he will still be obligated to obtain a fairness opinion regarding the value of common units? I did not dig further into those deals in your links, was any of them bought out at 2X~3X DCF?

Take a look at what I bolded earlier. They can always issue additional shares to their affiliates and bump up their ownership to 80%.

I am not saying this can happen. In fact Murray has a reputation of not fleecing his debtors so hopefully he'll be fair to the common unit holders too. I am trying to figure out what is the legal protection that an LP have that I can fall back on other than Murray's goodwill. I understood the protections when the PIKs were outstanding but I can't see any clause that protect us post refinance.

On the other side, Cline was buying up FELP shares at $6.75. Why would he do that unless he knows that its undervalued.

And I am not sure why would Murray take it private right off the bat ? I can see him doing that if the market doesn't give any credit to Felp's low cost structure and it trades at higher yield.

So its not as clear cut as "the price will be $12 once the refinancing is done."


"Our general partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general
 

partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no restriction in our partnership agreement that prevents our general partner from causing us to issue additional common units and exercising its call right. If our general partner exercised its limited call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no longer be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act. Upon consummation of this offering, and assuming no exercise of the underwriters’ option to purchase additional common units, Foresight Reserves and Michael J. Beyer will own an aggregate of 85.9% and 0.6%, respectively, of our common and subordinated units, respectively. At the end of the subordination period, assuming no additional issuances of units (other than upon the conversion of the subordinated units), Foresight Reserves and Michael J. Beyer will own an aggregate of 85.9% and 0.6%, respectively, of our common units. For additional information about the limited call right, please read “The Partnership Agreement—Limited Call Right.”
Title: Re: FELP - Foresight Energy
Post by: valcont on March 13, 2017, 12:11:59 PM
Since this is my 300th post , I'll ask a spiritual question

How do we break Picasso's silent fast?
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 13, 2017, 02:08:00 PM

Take a look at what I bolded earlier. They can always issue additional shares to their affiliates and bump up their ownership to 80%.


The following is what I found out from the prospectus, regarding when the GP can cause LP to issue more common units:

Quote
The holder or holders of our incentive distribution rights may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to the incentive distribution rights, without the approval of the conflicts committee of our general partner’s board of directors or the holders of our common units. This could result in lower distributions to holders of our common units.

The holder or holders of a majority of our incentive distribution rights (initially our general partner) have the right, at any time when there are no subordinated units outstanding and we have made cash distributions in excess of the then-applicable third target distribution for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our cash distribution levels at the time of the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution will be calculated equal to an amount equal to the prior cash distribution per common unit for the fiscal quarter immediately preceding the reset election (such amount is referred to as the “reset minimum quarterly distribution”) and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution. If our general partner elects to reset the target distribution levels, it will be entitled to receive a number of common units. The number of common units to be issued to our general partner will equal the number of common units that would have entitled the holder to an aggregate quarterly cash distribution for the quarter prior to the reset election equal to the distribution on the incentive distribution rights for the quarter prior to the reset election.

We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per unit without such conversion. However, our general partner may transfer the incentive distribution rights at any time. It is possible that our general partner or a transferee could exercise this reset election at a time when we are experiencing declines in our aggregate cash distributions or at a time when the holders of the incentive distribution rights expect that we will experience declines in our aggregate cash distributions in the foreseeable future. In such situations, the holders of the incentive distribution rights may be experiencing, or may expect to experience, declines in the cash distributions it receives related to the incentive distribution rights and may therefore desire to be issued our common units rather than retain the right to receive incentive distributions based on the initial target distribution levels. As a result, a reset election may cause our common unitholders to experience reduction in the amount of cash distributions that they would have otherwise received had we not issued new common units to the holders of the incentive distribution rights in connection with resetting the target distribution levels. Please read “How We Make Distributions To Our Partners—General Partner Interest—Incentive Distribution Right Holders’ Right to Reset Incentive Distribution Levels.”


It is related to resetting of target distribution, and has to be done when there are no sub units anymore and they have made cash distributions in excess of the then-applicable third target distribution for each of the prior four consecutive fiscal quarters.  I would think that, by that time the market would have already valued FELP at a much higher (and fair) price. Is there any other situation where the GP dilute LP? I have to admit that I haven't read the whole prospectus.
Title: Re: FELP - Foresight Energy
Post by: Paarslaars on March 13, 2017, 03:29:42 PM
Since this is my 300th post , I'll ask a spiritual question

How do we break Picasso's silent fast?

I suggest we don't and let the man come up with the next multibagger?  ;)
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 17, 2017, 08:55:19 AM
The pricing of the Second Lien Senior Notes is announced, at 11.5%. But it is not clear to me what pricing they agreed on the $825MM first priority term loan and $170MM credit facility.

Quote
Foresight Energy LP (NYSE:FELP) today announced that its wholly owned subsidiaries, Foresight Energy LLC (the “Company”) and Foresight Energy Finance Corporation (the “Co-Issuer” and, together with the Company, the “Issuers”) have priced their previously announced offering (the “Offering”) of 11.50% Second Lien Senior Secured Notes due 2023 (the “Notes”), in an aggregate principal amount of $425 million. The Notes will be guaranteed by the wholly-owned domestic restricted subsidiaries of the Company that guarantee the Credit Facilities (as defined below). The Offering of the Notes is expected to close on or about March 28, 2017, subject to certain closing conditions.

In addition to the Notes, the Company also announced that it has agreed to terms on an $825 million senior secured first-priority five-year term loan (the “Term Loan”), representing an increase of $75 million from the previously announced size, and a $170 million senior secured first-priority four-year revolving credit facility (the “Revolving Credit Facility” and, together with the Term Loan, the “Credit Facilities”).

The aggregate principal amount of the Notes represents a $75 million decrease from the previously announced aggregate principal amount of the Notes, corresponding to the increase in the Term Loan, and the maturity of the Notes represents a one-year reduction in the previously announced maturity of the Notes.

The Issuers intend to use the net proceeds from the Notes and borrowings under the Term Loan, together with an equity contribution from Murray Energy Corporation and cash on hand, to refinance the following indebtedness:

    the Issuers’ Second Lien Senior Secured PIK Notes due 2021;
    the Issuers’ Second Lien Senior Secured Exchangeable PIK Notes due 2017; and
    the Company’s outstanding credit facilities, including the revolving credit facility and the term loan.

Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on March 17, 2017, 08:59:14 AM
Yes, they didn't specify. Wasn't the existing at L + 5.5%?
Title: Re: FELP - Foresight Energy
Post by: roark33 on March 17, 2017, 09:03:33 AM
Multi-baggers only exist if you sell, so we will have to see where this ends up when everyone decides to sell. 

How's that for bait to bring Picasso back to the table....
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 17, 2017, 09:13:48 AM
Yes, they didn't specify. Wasn't the existing at L + 5.5%?

Arch coal was able to refinance to L + 4%, for $300MM.
Title: Re: FELP - Foresight Energy
Post by: Paarslaars on March 17, 2017, 11:44:22 AM
Multi-baggers only exist if you sell, so we will have to see where this ends up when everyone decides to sell. 

How's that for bait to bring Picasso back to the table....

You can sell right now for a 4-bagger (from 1.7$) :)
Title: Re: FELP - Foresight Energy
Post by: roark33 on March 17, 2017, 03:23:12 PM
could be the reason for the "quiet" and slight pressure on stock...:)

Will anything draw him out??????
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 18, 2017, 05:10:40 PM
With all this talk of nefarious Murray activity I was thinking…

There has been discussion of Murray taking FELP private at a "fair price" (20 day avg VWAP or something) when he has 80% of the common units.  A lot of people on here are worried he might issue common units and then force a buyout...

To me it seems like there is no reason Murray would want to do this. Imagine after owning the majority GP in a few weeks he wants to take it private this way. After the subs convert there will be around 140 million common units, of which Murray will have roughly 50%. In order to have 80% of common units he will need to issue and buy around 210 million units (280/350). So even if the shares traded down to a $3 20day VWAP (the “fair price”) after the sub to common conversion, it would still cost him a total of $1,120 million to take it private this way ($630 million new issuance + $210 million for current common holder buyout + $280 million for MQD and $2.02 distribution to convert subs). And that is assuming a $3 price post conversion. It would be totally uneconomical if prices were where they are today ($2,010 = $1,300 + $280 + 430)

So why would he do the above when he could alternatively do this: settle the MQDs and $2.02 distribution to convert the commons for roughly $280 million and offer something like $10 a share for the 70 million common units post conversion. The total cost of this would be cheaper ($980 million = $280 + $700).

Given that I don't think Murray can come up with a billion dollars anytime soon, this makes me think this will remain public for the foreseeable future, and trade up significantly when the distributions bring back institutional money and yield chasers.

Does that make sense or am I missing something?
Title: Re: FELP - Foresight Energy
Post by: valcont on March 23, 2017, 07:24:18 AM
Do any of you hold FELP in your 401K/IRA account? I have some in my 401K account and I'm getting ready to file taxes. Their K1 shows negative income on line 20v. My question is do you report negative income on your taxes to increase the cost basis? My understanding is that since the capital gains and distributions are not taxed in a tax efficient account, it wouldn't matter if you maintain the basis. We have to worry about the UBTI but I am not sure how that is tied to the basis. Anyone dealt with this?

BTW if its in the IRA then you don't have to worry about filing the taxes since your custodian will take care of this.
Title: Re: FELP - Foresight Energy
Post by: hyten1 on March 23, 2017, 08:39:12 AM
i have been trying to read up on MLP in IRAs, i guess specifically due to FELP. Should you hold FELP in IRA or a taxable account considering what is currently going on at FELP (no income, potential future distribution and a large cap gain.) I guess the more specific question is if you bought FELP in the past year and has a large cap gain, does it make sense to sell it now in your IRA account to capture the cap gain, assuming you don't have to pay cap gain tax because its held in IRA? and then buy back FELP in your taxable account  to potentially side step future UBTI you might have to pay in your IRA?????

Title: Re: FELP - Foresight Energy
Post by: valcont on March 23, 2017, 11:28:53 AM
i have been trying to read up on MLP in IRAs, i guess specifically due to FELP. Should you hold FELP in IRA or a taxable account considering what is currently going on at FELP (no income, potential future distribution and a large cap gain.) I guess the more specific question is if you bought FELP in the past year and has a large cap gain, does it make sense to sell it now in your IRA account to capture the cap gain, assuming you don't have to pay cap gain tax because its held in IRA? and then buy back FELP in your taxable account  to potentially side step future UBTI you might have to pay in your IRA?????

Good question. If you don't expect any more cap gains then you should swap but even better , close the position :) . As for the UBTI (btw my sick mind conjures up UTI every time I read that word) , distributions and capital gains don't trigger UBTI. The only thing I worry about is the CODI due to refinancing. They exchanged a 18% near term debt to a 11.5% longer term. Not sure what kind of CODI is generated because of that but I guess its not worth selling before the date of debt exchange and buying after that since I don't know what kind of price movement there will be.

Just talked with the Fidelity rep who manage my solo 401K. The woman was trying to be helpful but didn't know much about 990-T and UBTI. She spoke with someone else and assured me that they are going to file 990-T on my behalf. I asked her if they will file in case of a negative UBTI to offset future gains.She mumbled yes. Not very reassuring.
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 23, 2017, 11:47:23 AM
Do any of you hold FELP in your 401K/IRA account? I have some in my 401K account and I'm getting ready to file taxes. Their K1 shows negative income on line 20v. My question is do you report negative income on your taxes to increase the cost basis? My understanding is that since the capital gains and distributions are not taxed in a tax efficient account, it wouldn't matter if you maintain the basis. We have to worry about the UBTI but I am not sure how that is tied to the basis. Anyone dealt with this?

BTW if its in the IRA then you don't have to worry about filing the taxes since your custodian will take care of this.

I have FELP in both taxable account and my Roth IRA, and when I tried to enter the K-1 for Roth account, TurboTax dismissed it after I tell it that it is for a Roth account.

For the taxable account K-1, I also have negative income in line 20v. But it does not make any impact on my final tax. So are you saying that we should keep track of this number by ourselves and add it back to the cost basis when we sell FELP in the future?  Isn't our broker or K-1 form issuer (FELP) supposed to track these and report in the K-1 issued in the future?

This is my first time to deal with K-1, I am not sure how these negative income matters. We didn't have distribution in 2016, but what I heard is that if there is any distribution in the future, it is supposed to be tax efficient, meaning that it will not be taxed immediately, but will be used to decrease your cost basis, and taxed as capital gain in the future when you sell.  But, I am not sure who is responsible to keep track of this and adjust the cost basis, is it ourselves, FELP, or our broker?

Title: Re: FELP - Foresight Energy
Post by: valcont on March 23, 2017, 01:24:35 PM


For the taxable account K-1, I also have negative income in line 20v. But it does not make any impact on my final tax. So are you saying that we should keep track of this number by ourselves and add it back to the cost basis when we sell FELP in the future?  Isn't our broker or K-1 form issuer (FELP) supposed to track these and report in the K-1 issued in the future?


Yes , since this is an MLP you can not offset this loss from other passive income sources like other MLPs. This loss should be carried forward to offset future income from Felp. If you still carry excess losses when you sell your units, you can use them to offset the portion of the gain that is taxable as an ordinary income like depreciation recapture.


This is my first time to deal with K-1, I am not sure how these negative income matters. We didn't have distribution in 2016, but what I heard is that if there is any distribution in the future, it is supposed to be tax efficient, meaning that it will not be taxed immediately, but will be used to decrease your cost basis, and taxed as capital gain in the future when you sell.  But, I am not sure who is responsible to keep track of this and adjust the cost basis, is it ourselves, FELP, or our broker?


Yes, distributions are not taxed since they are treated as return of capital and are used to lower cost basis. Once the cost basis is zero, distributions are taxable. If you sell, then the depreciation is recaptured at ordinary income rates while the rest is treated as capital gains.
If they are in the IRA , then your custodian is responsible for filing it. Not sure if the broker is responsible for the individual accounts. Either way you are ultimately responsible no matter what.
Title: Re: FELP - Foresight Energy
Post by: heth247 on March 23, 2017, 01:40:08 PM
Yes , since this is an MLP you can not offset this loss from other passive income sources like other MLPs. This loss should be carried forward to offset future income from Felp. If you still carry excess losses when you sell your units, you can use them to offset the portion of the gain that is taxable as an ordinary income like depreciation recapture.

Will TurboTax automatically carry this loss forward, or do I need to enter this loss into the software next year (when I have positive ordinary income reported in K-1)?

Quote
Yes, distributions are not taxed since they are treated as return of capital and are used to lower cost basis. Once the cost basis is zero, distributions are taxable. If you sell, then the depreciation is recaptured at ordinary income rates while the rest is treated as capital gains.
If they are in the IRA , then your custodian is responsible for filing it. Not sure if the broker is responsible for the individual accounts. Either way you are ultimately responsible no matter what.

In the k-1 form, they do reported my cost basis acquiring those shares, so I wonder if they will track it and adjust the basis based on distributions.
Title: Re: FELP - Foresight Energy
Post by: valcont on March 23, 2017, 01:51:08 PM

Will TurboTax automatically carry this loss forward, or do I need to enter this loss into the software next year (when I have positive ordinary income reported in K-1)?


Not sure. I use an accountant for my taxes.
Title: Re: FELP - Foresight Energy
Post by: gadfly on March 28, 2017, 01:52:40 PM
On the day that Foresight closes the refinancing of all their debt, Trump signs an executive order to dismantle CPP, Murray Energy holds their 4Q investor call, and a large cyclone threatens to disrupt global met coal supplies ...FELP closes down!

I was looking at the trading of the new 11.5% notes and they are $93 and have been steadily going down. Is that just a convergence of Murray's cost of capital and FELP's now that Murray is about to become the GP? If I remember correctly the notes where initially purchased for $99.25 so some bank or client of some bank is down pretty substantially in just a couple of weeks...
Title: Re: FELP - Foresight Energy
Post by: valcont on April 05, 2017, 10:58:32 AM
The new 8K is out and looks like FELP will not be able to pay the distributions for some more time.

Restrictive Covenants and Other Matters
 
The Indenture includes negative covenants, subject to certain exceptions, restricting or limiting the Issuers’ and their subsidiaries’ ability to, among other things:
 
·                  incur additional indebtedness;
 
·                  pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;
 


Amortization and Prepayments
 
The New Credit Facilities will require scheduled quarterly amortization payments on the Term Loan in an aggregate annual amount equal to 1.0% of the original principal amount of the Term Loan, with the balance to be paid at maturity.
 
In addition, the New Credit Facilities will require us to prepay outstanding borrowings, subject to certain exceptions, with:
 
·                  75% (which percentage will be reduced to 50%, 25% and 0% based on satisfaction of specified net secured leverage ratio tests) of our annual excess cash flow, as defined under the New Credit Facilities;
 
·                  100% of the net cash proceeds of non-ordinary course asset sales and other dispositions of property, in each case subject to certain exceptions and customary reinvestment rights;
 
·                  100% of the net cash proceeds of insurance (other than insurance proceeds relating to the Deer Run mine), in each case subject to certain exceptions and customary reinvestment rights; and
 
·                  100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the New Credit Facilities.
 
Title: Re: FELP - Foresight Energy
Post by: heth247 on April 05, 2017, 04:10:16 PM
Quote

Restrictive Covenants and Other Matters

The New Credit Facilities will require that, commencing as of the end of the second fiscal quarter in 2017, we comply on a quarterly basis with a maximum net first lien secured leverage ratio of 3.75:1.00, stepping down by 0.25x in each of the first quarters of 2019 and 2021, which financial covenant will be solely for the benefit of the lenders under the Revolving Facility.

The New Credit Facilities will contain certain customary affirmative covenants. The negative covenants in the New Credit Facilities will include, among other things, limitations on our ability to do the following, subject to certain exceptions and baskets to be agreed:
·                  incur additional debt;
·                  create liens on certain assets;
·                  make certain loans or investments (including acquisitions);
·                  pay dividends on or make distributions in respect of our capital stock or make other restricted junior payments;

I guess it will depend on the net leverage ratio and how fast it comes down. Do you know how close it is to 3.75:1 after refinance?
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 05, 2017, 06:13:06 PM
The new 8K is out and looks like FELP will not be able to pay the distributions for some more time.

Restrictive Covenants and Other Matters
 
The Indenture includes negative covenants, subject to certain exceptions, restricting or limiting the Issuers’ and their subsidiaries’ ability to, among other things:
 
·                  incur additional indebtedness;
 
·                  pay dividends on or make distributions in respect of capital stock or make certain other restricted payments or investments;
 


Amortization and Prepayments
 
The New Credit Facilities will require scheduled quarterly amortization payments on the Term Loan in an aggregate annual amount equal to 1.0% of the original principal amount of the Term Loan, with the balance to be paid at maturity.
 
In addition, the New Credit Facilities will require us to prepay outstanding borrowings, subject to certain exceptions, with:
 
·                  75% (which percentage will be reduced to 50%, 25% and 0% based on satisfaction of specified net secured leverage ratio tests) of our annual excess cash flow, as defined under the New Credit Facilities;
 
·                  100% of the net cash proceeds of non-ordinary course asset sales and other dispositions of property, in each case subject to certain exceptions and customary reinvestment rights;
 
·                  100% of the net cash proceeds of insurance (other than insurance proceeds relating to the Deer Run mine), in each case subject to certain exceptions and customary reinvestment rights; and
 
·                  100% of the net cash proceeds of any issuance or incurrence of debt, other than proceeds from debt permitted under the New Credit Facilities.
 


I was curious about this part, the language suggests limitations and restrictions around dividends/restricted payments, but not necessarily a full-blown blockade. Since it would be kind of game breaking for Murray, I dug a bit. I discovered that I can't read any of that crap. But more seriously, I found a small snippet:

Look at 7.06(b) in the credit agreement (exh 10.1), it states the exceptions to the restrictions against making "restricted payments", and (b) says:

Quote
(b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other Equity Interests of such Person or another Subsidiary;


I am not 100% what this means, but I think only subordinated units and/or the GP can't get distributions. If somebody who can actually read this kind of crap (saying this on a more serious tone this time) could clarify that would be great...
Title: Re: FELP - Foresight Energy
Post by: valcont on April 05, 2017, 07:35:13 PM

Look at 7.06(b) in the credit agreement (exh 10.1), it states the exceptions to the restrictions against making "restricted payments", and (b) says:

Quote
(b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other Equity Interests of such Person or another Subsidiary;


I am not 100% what this means, but I think only subordinated units and/or the GP can't get distributions. If somebody who can actually read this kind of crap (saying this on a more serious tone this time) could clarify that would be great...

Well the most restricted covenant will still apply. This one just allows them to make distribution should the excess cash flow exceeds all the covenant ratios.
Title: Re: FELP - Foresight Energy
Post by: valcont on April 05, 2017, 07:55:14 PM

Look at 7.06(b) in the credit agreement (exh 10.1), it states the exceptions to the restrictions against making "restricted payments", and (b) says:

Quote
(b) the Borrower and each Subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other Equity Interests of such Person or another Subsidiary;


I take back my previous comment. This refers to the distribution paid in common stock i.e. if Murray issues additional stock to pay out distribution to the unit holders. Don't know why would he do that.

Quote

I guess it will depend on the net leverage ratio and how fast it comes down. Do you know how close it is to 3.75:1 after refinance?

Here is how its defined:

Secured Leverage Ratio” means, on any date, the ratio of:
 
(1) the sum, without duplication, of (a) the aggregate principal amount of Secured Debt and Junior Lien Obligations representing Debt for borrowed money (less the amount of unrestricted cash and cash equivalents of the Company and its Restricted Subsidiaries, on a consolidated basis, as of such date) outstanding on such date (and, for this purpose, letters of credit will be deemed to have a principal amount equal to the amount drawn, and not reimbursed thereunder, if any), plus (b) the aggregate principal amount of Attributable Debt in respect of Capital Lease Obligations of the Company and its Restricted Subsidiaries, on a consolidated basis, outstanding on such date, plus (c) to the extent constituting Debt for borrowed money, the aggregate principal amount of Debt of the Company and its Restricted Subsidiaries Incurred to finance all or a part of the acquisition of any longwall equipment (or other mining equipment acquired after the Issue Date) and that is secured by a Lien on such equipment outstanding on such date, to:
 
(2) the aggregate amount of the Company’s EBITDA for the most recent four-quarter period for which financial statements have been delivered to the Trustee.
 
In addition, the Secured Leverage Ratio will be determined in accordance with such pro forma adjustments as are consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.

 and this

“Senior Secured Leverage Ratio” means, on any date, the ratio of:
 
(1) the sum, without duplication, of (a) the aggregate principal amount of Priority Lien Debt representing Debt for borrowed money (less the amount of unrestricted cash and cash equivalents of the Company and its Restricted Subsidiaries, on a consolidated basis, as of such date) outstanding on such date (and, for this purpose, letters of credit will be deemed to have a principal amount equal to the amount drawn, and not reimbursed thereunder, if any), plus (b) the aggregate principal amount of Attributable Debt in respect of Capital Lease Obligations of the Company and its Restricted Subsidiaries, on a consolidated basis, outstanding on such date, plus (c) to the extent constituting Debt for borrowed money, the aggregate principal amount of Debt of the Company and its Restricted Subsidiaries Incurred to finance all or a part of the acquisition of any longwall equipment (or other mining equipment acquired after the Issue Date) and that is secured by a Lien on such equipment outstanding on such date, to
 
(2) the aggregate amount of the Company’s EBITDA for the most recent four-quarter period for which financial statements have been delivered to the Trustee.
 
In addition, the Senior Secured Leverage Ratio will be determined in accordance with such pro forma adjustments as are consistent with the pro forma adjustment provisions set forth in the definition of Fixed Charge Coverage Ratio.



Their 2016 adjusted EBITDA was $306m. The total debt is $425m(notes) , $825m(term) and $170m(revolver) + lease obligations etc(no idea how much that is) = $1420m. I have to check if the revolver is drawn but did I miss anything?
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on April 06, 2017, 03:21:28 AM
I received a tax form for this (I'm a foreign investor). For MLPs I held in the past my broker (IB) charged me more than a year after receiving distributions very high charges. FELP does not have any distributions, is there a risk I will get charged for something?

I don't hold MLPs anymore for this very reason, but though FELP was okay as long as it doesn't distribute anything.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 06, 2017, 04:10:22 AM

I take back my previous comment. This refers to the distribution paid in common stock i.e. if Murray issues additional stock to pay out distribution to the unit holders. Don't know why would do that.

Well it's obvious now that you mention it. Thx
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 06, 2017, 04:34:52 AM
What is Murray's game plan then? He controls the GP but I think has no reason take it private because he can't even convert his subs to common. And forget about going private, if the common just accrue more distributions for 5 years, his units will be worthless to begin with... This deal would essentially be him nailing his own coffin, no? He wouldnt have let this refi happen if that were the case. What is his angle?
Title: Re: FELP - Foresight Energy
Post by: Green King on April 06, 2017, 04:48:58 AM
What is Murray's game plan then? He controls the GP but I think has no reason take it private because he can't even convert his subs to common. And forget about going private, if the common just accrue more distributions for 5 years, his units will be worthless to begin with... This deal would essentially be him nailing his own coffin, no? He wouldn't have let this refi happen if that were the case. What is his angle?

His game plan is to make money. He thinks this thing he owns is worth more than the market value it. Your questions should be, Is he going to steal from you and how much? Not how is he going to steal from you? How is easy they can always find a way. There are infinite numbers of ways.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 06, 2017, 05:20:11 AM
He plans to make money? Damn son that's some insight you got there

If the new debt doesnt allow distributions, then Murray's entire stake in the subs is virtually worthless AFAIK. He'd never be able to catch up on arrears. Bob Murray is also not an idiot, so this doesnt add up. This debt should be structured in a way that doesnt straight kill him, otherwise he is better off with any other outcome including staying with the PIK's. AKA this deal would never happen. So what is the crack here, where does he make his money? He has control of the GP so what can he do with it? Does it make sense for him to write off the subs and rely on GP distributions, or plain buy out the outstanding common? Seems far fetched to me
Title: Re: FELP - Foresight Energy
Post by: Green King on April 06, 2017, 05:39:12 AM
He plans to make money? Damn son that's some insight you got there

If the new debt doesnt allow distributions, then Murray's entire stake in the subs is virtually worthless AFAIK. He'd never be able to catch up on arrears. Bob Murray is also not an idiot, so this doesnt add up. This debt should be structured in a way that doesnt straight kill him, otherwise he is better off with any other outcome including staying with the PIK's. AKA this deal would never happen. So what is the crack here, where does he make his money? He has control of the GP so what can he do with it? Does it make sense for him to write off the subs and rely on GP distributions, or plain buy out the outstanding common? Seems far fetched to me

Here is the insight

" He thinks this thing he owns is worth more than the market value it." ;D

Worthless you say ?
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=FMRRE4232108&symbol=MRRE4232108
Title: Re: FELP - Foresight Energy
Post by: valcont on April 06, 2017, 06:12:49 AM
I received a tax form for this (I'm a foreign investor). For MLPs I held in the past my broker (IB) charged me more than a year after receiving distributions very high charges. FELP does not have any distributions, is there a risk I will get charged for something?

I don't hold MLPs anymore for this very reason, but though FELP was okay as long as it doesn't distribute anything.

Assuming you hold the MLPs in a taxable account, you shouldn't be charged for the distributions until those exceeds your cost basis. After that some fraction of income is charged at capital gain rates and rest at individual tax rate.

If you are holding them at tax efficient accounts, you will only be taxed for UBTI income.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on April 06, 2017, 06:20:59 AM
I received a tax form for this (I'm a foreign investor). For MLPs I held in the past my broker (IB) charged me more than a year after receiving distributions very high charges. FELP does not have any distributions, is there a risk I will get charged for something?

I don't hold MLPs anymore for this very reason, but though FELP was okay as long as it doesn't distribute anything.

Assuming you hold the MLPs in a taxable account, you shouldn't be charged for the distributions until those exceeds your cost basis. After that some fraction of income is charged at capital gain rates and rest at individual tax rate.

If you are holding them at tax efficient accounts, you will only be taxed for UBTI income.

Thanks for the response. I am a foreign (non-US) investor and hold it in a taxable account. For the MLPs I owned IB withheld 28% (iirc) of the distributions over a year af they occured because they 'forgot' (so irrespective of cost basis). I think I am allowed to ask it back but I dont know how and believe the fees to be higher than the proceeds.

Anyway if I understand you correctly I will normally not be charged until there are actual distributions?
Title: Re: FELP - Foresight Energy
Post by: valcont on April 06, 2017, 06:22:41 AM
What is Murray's game plan then? He controls the GP but I think has no reason take it private because he can't even convert his subs to common. And forget about going private, if the common just accrue more distributions for 5 years, his units will be worthless to begin with... This deal would essentially be him nailing his own coffin, no? He wouldnt have let this refi happen if that were the case. What is his angle?

I can only assume he is putting out one fire after the other so far. This refinancing lets him avoid the dilution and gives him control of the GP. He has already raised the management fees last week so that's some money in his pocket. Plus there is Hillsboro. They are inspecting it again and if that becomes operational than distributions will flow.

I don't understand the whole deal but I know that Cline still holds a significant amount and he was buying until recently. Unless Murray and Cline cut a deal to screw minority holders, Not sure if Murray will do anything  to screw Cline especially since he bailed him out last year.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 06, 2017, 06:48:57 AM
He plans to make money? Damn son that's some insight you got there

If the new debt doesnt allow distributions, then Murray's entire stake in the subs is virtually worthless AFAIK. He'd never be able to catch up on arrears. Bob Murray is also not an idiot, so this doesnt add up. This debt should be structured in a way that doesnt straight kill him, otherwise he is better off with any other outcome including staying with the PIK's. AKA this deal would never happen. So what is the crack here, where does he make his money? He has control of the GP so what can he do with it? Does it make sense for him to write off the subs and rely on GP distributions, or plain buy out the outstanding common? Seems far fetched to me

Here is the insight

" He thinks this thing he owns is worth more than the market value it." ;D

Worthless you say ?
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=FMRRE4232108&symbol=MRRE4232108

Why are you pointing to bonds when we are talking about the subs...
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 06, 2017, 06:57:29 AM
What is Murray's game plan then? He controls the GP but I think has no reason take it private because he can't even convert his subs to common. And forget about going private, if the common just accrue more distributions for 5 years, his units will be worthless to begin with... This deal would essentially be him nailing his own coffin, no? He wouldnt have let this refi happen if that were the case. What is his angle?

I can only assume he is putting out one fire after the other so far. This refinancing lets him avoid the dilution and gives him control of the GP. He has already raised the management fees last week so that's some money in his pocket. Plus there is Hillsboro. They are inspecting it again and if that becomes operational than distributions will flow.

I don't understand the whole deal but I know that Cline still holds a significant amount and he was buying until recently. Unless Murray and Cline cut a deal to screw minority holders, Not sure if Murray will do anything  to screw Cline especially since he bailed him out last year.

And Cline can't just dump his stake either even with losing control of GP and resigning from the board, it would take him a year to unload...

Good point on Hillsboro, it was 25% of total production  before going up in flames so the incremental cash flows would be pretty significant. Is there anything to read on the current status of this mine?
Title: Re: FELP - Foresight Energy
Post by: valcont on April 06, 2017, 07:00:07 AM
I received a tax form for this (I'm a foreign investor). For MLPs I held in the past my broker (IB) charged me more than a year after receiving distributions very high charges. FELP does not have any distributions, is there a risk I will get charged for something?

I don't hold MLPs anymore for this very reason, but though FELP was okay as long as it doesn't distribute anything.


Assuming you hold the MLPs in a taxable account, you shouldn't be charged for the distributions until those exceeds your cost basis. After that some fraction of income is charged at capital gain rates and rest at individual tax rate.

If you are holding them at tax efficient accounts, you will only be taxed for UBTI income.

Thanks for the response. I am a foreign (non-US) investor and hold it in a taxable account. For the MLPs I owned IB withheld 28% (iirc) of the distributions over a year af they occured because they 'forgot' (so irrespective of cost basis). I think I am allowed to ask it back but I dont know how and believe the fees to be higher than the proceeds.

Anyway if I understand you correctly I will normally not be charged until there are actual distributions?

Oh so it looks like they withheld the taxes on your behalf. Well if you are a US citizen then you can claim the tax credit for that amount when you file. If you are non US , then a lot of countries have tax treaties with US to avoid double taxation. You should be able to get a credit in your home country.

Title: Re: FELP - Foresight Energy
Post by: valcont on April 06, 2017, 08:00:25 AM

And Cline can't just dump his stake either even with losing control of GP and resigning from the board, it would take him a year to unload...

Good point on Hillsboro, it was 25% of total production  before going up in flames so the incremental cash flows would be pretty significant. Is there anything to read on the current status of this mine?
Last update
It has submitted a plan for reentry of the Hillsboro mine and will work with MSHA moving forward, noting that it did not “anticipate any production from Hillsboro in the foreseeable future.”
Title: Re: FELP - Foresight Energy
Post by: Green King on April 06, 2017, 06:11:16 PM
He plans to make money? Damn son that's some insight you got there

If the new debt doesnt allow distributions, then Murray's entire stake in the subs is virtually worthless AFAIK. He'd never be able to catch up on arrears. Bob Murray is also not an idiot, so this doesnt add up. This debt should be structured in a way that doesnt straight kill him, otherwise he is better off with any other outcome including staying with the PIK's. AKA this deal would never happen. So what is the crack here, where does he make his money? He has control of the GP so what can he do with it? Does it make sense for him to write off the subs and rely on GP distributions, or plain buy out the outstanding common? Seems far fetched to me

Here is the insight

" He thinks this thing he owns is worth more than the market value it." ;D

Worthless you say ?
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=FMRRE4232108&symbol=MRRE4232108

Why are you pointing to bonds when we are talking about the subs...

let's leave it here. There are many layers to this game. Pricing information and volume provides important information if you know how to use them. It is not hard I am just lazy.
Title: Re: FELP - Foresight Energy
Post by: wachtwoord on April 07, 2017, 01:05:04 AM
I received a tax form for this (I'm a foreign investor). For MLPs I held in the past my broker (IB) charged me more than a year after receiving distributions very high charges. FELP does not have any distributions, is there a risk I will get charged for something?

I don't hold MLPs anymore for this very reason, but though FELP was okay as long as it doesn't distribute anything.


Assuming you hold the MLPs in a taxable account, you shouldn't be charged for the distributions until those exceeds your cost basis. After that some fraction of income is charged at capital gain rates and rest at individual tax rate.

If you are holding them at tax efficient accounts, you will only be taxed for UBTI income.

Thanks for the response. I am a foreign (non-US) investor and hold it in a taxable account. For the MLPs I owned IB withheld 28% (iirc) of the distributions over a year af they occured because they 'forgot' (so irrespective of cost basis). I think I am allowed to ask it back but I dont know how and believe the fees to be higher than the proceeds.

Anyway if I understand you correctly I will normally not be charged until there are actual distributions?

Oh so it looks like they withheld the taxes on your behalf. Well if you are a US citizen then you can claim the tax credit for that amount when you file. If you are non US , then a lot of countries have tax treaties with US to avoid double taxation. You should be able to get a credit in your home country.

Yeah I can do that for dividends. The treaty between US and NL causes the US to withhold only 15% which in turn I can deduct from my Dutch taxes. This tax I dont have a place for to deduct and for dividens I can't fill in more than 15%. On top of this they charged it for taxes from a year ago because IB appearently did it wrong ....

Anyway, maybe I'll look into this again thanks for the help. My main question here is though: they wont impose taxes like that for a holding like FELP with 0 distributions correct?
Title: Re: FELP - Foresight Energy
Post by: maybe4less on April 10, 2017, 12:51:35 PM

And Cline can't just dump his stake either even with losing control of GP and resigning from the board, it would take him a year to unload...

Good point on Hillsboro, it was 25% of total production  before going up in flames so the incremental cash flows would be pretty significant. Is there anything to read on the current status of this mine?
Last update
It has submitted a plan for reentry of the Hillsboro mine and will work with MSHA moving forward, noting that it did not “anticipate any production from Hillsboro in the foreseeable future.”

With the covenants in place on the new term loan, I don't see how they can pay any meaningful distributions for a number of years. Maybe a 4-5% distribution at current prices, which I think makes the stock overpriced given all the debt.

Of course, if Hillsboro comes back online, that changes things.

I spoke with IR last week and there is no additional news on progress for re-opening the mine. They know they are going to need to seal off permanently the problem part of the mine. The question they are grappling with at the moment is whether they will have to abandon the longwall equipment in that section or will they be able to retrieve it safely.

Anyone with mining expertise who can make an educated guess as to the timeline of reopening this mine?
Title: Re: FELP - Foresight Energy
Post by: valcont on April 10, 2017, 01:47:40 PM

Anyway, maybe I'll look into this again thanks for the help. My main question here is though: they wont impose taxes like that for a holding like FELP with 0 distributions correct?

Not a tax professional but my understanding is that you pay taxes if the ordinary  income on Part III , Line 1 is positive. This increases your cost basis too. The distributions on Line 19 are ROC and are not taxed until cost basis is zero. There are other items that are used to calculate passive losses. If you use a tax software you can just punch in the values and it can determine your liability.

Also you will pay taxes if you sold the units for a gain.
Title: Re: FELP - Foresight Energy
Post by: valcont on April 10, 2017, 01:53:40 PM

With the covenants in place on the new term loan, I don't see how they can pay any meaningful distributions for a number of years. Maybe a 4-5% distribution at current prices, which I think makes the stock overpriced given all the debt.

Of course, if Hillsboro comes back online, that changes things.

I spoke with IR last week and there is no additional news on progress for re-opening the mine. They know they are going to need to seal off permanently the problem part of the mine. The question they are grappling with at the moment is whether they will have to abandon the long wall equipment in that section or will they be able to retrieve it safely.

Anyone with mining expertise who can make an educated guess as to the timeline of reopening this mine?

Have you done any work on determining the cash flows this year? I just took the last year one to get a rough idea.Curious as to why do you think the stock is overpriced considering the arrearages that the FELP owes.

Title: Re: FELP - Foresight Energy
Post by: maybe4less on April 10, 2017, 03:16:45 PM

With the covenants in place on the new term loan, I don't see how they can pay any meaningful distributions for a number of years. Maybe a 4-5% distribution at current prices, which I think makes the stock overpriced given all the debt.

Of course, if Hillsboro comes back online, that changes things.

I spoke with IR last week and there is no additional news on progress for re-opening the mine. They know they are going to need to seal off permanently the problem part of the mine. The question they are grappling with at the moment is whether they will have to abandon the long wall equipment in that section or will they be able to retrieve it safely.

Anyone with mining expertise who can make an educated guess as to the timeline of reopening this mine?

Have you done any work on determining the cash flows this year? I just took the last year one to get a rough idea.Curious as to why do you think the stock is overpriced considering the arrearages that the FELP owes.

I don't have my work with me at the moment, but I based it on annualizing H2 of 2016. With all the required debt paydowns and high interest rates, I see smallish distributions for at least two years (likely more; I didn't extend the model any further) without a significant increase in coal prices or Hillsboro coming back online. We may be entitled to those arrearages, but we are not going to get them for a while. (As an aside, IR said they are most likely going to switch to doing annual distributions, as the excess cash flow convenant that determines how much they can distribute is calculated on an calendar-year basis.)

With most other coal MLPs trading at high single digit or even double digit yields, I don't see why this shouldn't trade lower, given the debt and the uncertainty around coal prices. Maybe the market is pricing in a quick re-opening of Hillsboro. I don't know, it's outside of my circle of competence.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 10, 2017, 08:00:25 PM
Even at the disappointingly high rates of interest, the annual expense is going to be about par with 2016 though. So the co will generate a floor of 200mil after int, 50 mil to capex, there is still 150mil to split 75/25 debt/distributions, is that roughly where you are at?
Title: Re: FELP - Foresight Energy
Post by: heth247 on April 10, 2017, 09:18:01 PM
So here is my back of napkin calculation: they have $475+825+170=1470MM secured debt, and for 2016, the bottom year, they did ~$320MM in EBITDA. Let's say they direct all of their excess cash flow into repaying the debt in 2017 and end up with $1300MM debt (or less) at 2017 year end, and achieve $350MM EBITDA (or more) for 2017. So at the end of 2017, the secured leverage ratio would be $1300/$350=3.71 (or less). This should qualify us for 50% "retained percentage" of excess cash flow for 2018. And for 65M+6M+9M=80M common units (excluding the sub units), I think we probably can get about $1 distribution per units. Anybody think this estimation is too aggressive?

Quote
“ Retained Percentage ” means, with respect to an Excess Cash Flow Period, 25%; provided that, commencing with the Excess Cash Flow Period for the fiscal year ending December 31, 2018, such percentage shall be (i) 50% if the Secured Leverage Ratio at the end of such Excess Cash Flow Period is less than or equal to 4.00 to 1.00 and greater than 3.00 to 1.00, (ii) 75% if the Secured Leverage Ratio at the end of such Excess Cash Flow Period is less than or equal to 3.00 to 1.00 and greater than 1.75 to 1.00 and (iii) 100% if the Secured Leverage Ratio at the end of such Excess Cash Flow Period is less than or equal to 1.75 to 1.00.
Title: Re: FELP - Foresight Energy
Post by: maybe4less on April 11, 2017, 08:58:46 AM
Even at the disappointingly high rates of interest, the annual expense is going to be about par with 2016 though. So the co will generate a floor of 200mil after int, 50 mil to capex, there is still 150mil to split 75/25 debt/distributions, is that roughly where you are at?

Here is what I see for 2017 without Hillsboro:

1) Total Secured Debt currently:

Term Loan - $825M
Revolver    - $170M
Second Lien Notes - $425M
Sugarcamp Longwall Financing - $39.22M
Hillsboro Longwall Financing - $41.25M
Capital Leases - $41.5M

Total - $1,542M

2) Cash Flow:

$300M EBITDA by annualizing H2 2016 (after removing $30M of insurance recoveries)

less $55M capex

less $122M in interest

less 4% mandatory annual prepayments to term loan of $33M

less principal payments on capital leases of $16M

plus stock option expense of $5M

= Excess Cash Flow of $79M

3) Debt paydown during 2017 of $49M

Secured Leverage Ratio at year-end of $1,493/ $300 = 4.98x

Required payment to Term Loan = 75% x $79M = $59.25

4) $19.75M available to common units
$66.9M diluted shares

$0.30 distribution per share

at a price of $5.96/share, that is less than 5% yield

5) For 2018, assuming the same EBITDA, I get a year-end secured leverage ratio of 4.54x and distributable cash per share of $0.31 cents

Assumptions are no Hillsboro, no refinancing, and floating rates don't move much.

See attached spreadsheet


Title: Re: FELP - Foresight Energy
Post by: valcont on April 11, 2017, 02:14:44 PM
Here is what I see for 2017 without Hillsboro:

1) Total Secured Debt currently:

Term Loan - $825M
Revolver    - $170M
Second Lien Notes - $425M
Sugarcamp Longwall Financing - $39.22M
Hillsboro Longwall Financing - $41.25M
Capital Leases - $41.5M

Total - $1,542M

2) Cash Flow:

$300M EBITDA by annualizing H2 2016 (after removing $30M of insurance recoveries)

less $55M capex

less $122M in interest

less 4% mandatory annual prepayments to term loan of $33M

less principal payments on capital leases of $16M

plus stock option expense of $5M

= Excess Cash Flow of $79M

3) Debt paydown during 2017 of $49M

Secured Leverage Ratio at year-end of $1,493/ $300 = 4.98x

Required payment to Term Loan = 75% x $79M = $59.25

4) $19.75M available to common units
$66.9M diluted shares

$0.30 distribution per share

at a price of $5.96/share, that is less than 5% yield

5) For 2018, assuming the same EBITDA, I get a year-end secured leverage ratio of 4.54x and distributable cash per share of $0.31 cents

Assumptions are no Hillsboro, no refinancing, and floating rates don't move much.

See attached spreadsheet

Thanks for sharing your work. How are you thinking about arrearages? The way I look at it, I am buying $3.90 worth of arrearages for the $6.00 price tag. That eliminate my risk against dilution and my share of the distributions increases as FELP pays out debt. That share would've gone to the IDR/Subs had there were no arrears.

So if you think FELP's situation will improve over time as the debt is paid off , then a 5% yielder today is not a bad deal.


Title: Re: FELP - Foresight Energy
Post by: heth247 on April 11, 2017, 07:47:57 PM

Here is what I see for 2017 without Hillsboro:
1) Total Secured Debt currently:

Term Loan - $825M
Revolver    - $170M
Second Lien Notes - $425M
Sugarcamp Longwall Financing - $39.22M
Hillsboro Longwall Financing - $41.25M
Capital Leases - $41.5M

Total - $1,542M

From their recent 10K, as of 12/31/2016, they have long-term debt and lease obligations as:

2021 Second line Notes     $349,100
2017 Exchange PIK notes  $299,859
Revolver                          $352,500
Term loan                        $295,667
Trade AR                             14,200
5.78% longwall financing       39,217
5.55% longwall financing       41.250
Capital lease                        41,457
Sub total =                     1,433,250

So after refinancing, this increases to $1,542M? Where does the extra $100M come from? The only thing I can think of is the $170MM revolver. I think it is unlikely that the $170M revolver will be completely drawn. In addition, they also have $103M cash at hand at 2016 year end. So their actual net leverage ratio is not as high as you calculated.

Title: Re: FELP - Foresight Energy
Post by: Beardog on April 12, 2017, 08:02:15 AM

So after refinancing, this increases to $1,542M? Where does the extra $100M come from? The only thing I can think of is the $170MM revolver. I think it is unlikely that the $170M revolver will be completely drawn. In addition, they also have $103M cash at hand at 2016 year end. So their actual net leverage ratio is not as high as you calculated.



Agree -- the company said in its 3/1 8-K that they expect the revolver will be completely undrawn, which makes sense considering the cash on the balance sheet plus the additional $60M from Murray.

https://www.sec.gov/Archives/edgar/data/1540729/000095014217000446/eh1700349_8k.htm
Title: Re: FELP - Foresight Energy
Post by: maybe4less on April 12, 2017, 11:19:49 AM

So after refinancing, this increases to $1,542M? Where does the extra $100M come from? The only thing I can think of is the $170MM revolver. I think it is unlikely that the $170M revolver will be completely drawn. In addition, they also have $103M cash at hand at 2016 year end. So their actual net leverage ratio is not as high as you calculated.



Agree -- the company said in its 3/1 8-K that they expect the revolver will be completely undrawn, which makes sense considering the cash on the balance sheet plus the additional $60M from Murray.

https://www.sec.gov/Archives/edgar/data/1540729/000095014217000446/eh1700349_8k.htm

You're right, I missed that. I confirmed with IR too this morning that the revolver is undrawn. So, we are still probably looking at a 30 something cent distribution early next year. Then, if coal prices stay where they are and Hillsboro is still out of commission, the company can probably pay enough debt down to get under 3x leverage by the end of 2018. In which, case 2018's distribution would be around 70 cents a share.
Title: Re: FELP - Foresight Energy
Post by: maybe4less on April 12, 2017, 11:23:07 AM
Here is what I see for 2017 without Hillsboro:

1) Total Secured Debt currently:

Term Loan - $825M
Revolver    - $170M
Second Lien Notes - $425M
Sugarcamp Longwall Financing - $39.22M
Hillsboro Longwall Financing - $41.25M
Capital Leases - $41.5M

Total - $1,542M

2) Cash Flow:

$300M EBITDA by annualizing H2 2016 (after removing $30M of insurance recoveries)

less $55M capex

less $122M in interest

less 4% mandatory annual prepayments to term loan of $33M

less principal payments on capital leases of $16M

plus stock option expense of $5M

= Excess Cash Flow of $79M

3) Debt paydown during 2017 of $49M

Secured Leverage Ratio at year-end of $1,493/ $300 = 4.98x

Required payment to Term Loan = 75% x $79M = $59.25

4) $19.75M available to common units
$66.9M diluted shares

$0.30 distribution per share

at a price of $5.96/share, that is less than 5% yield

5) For 2018, assuming the same EBITDA, I get a year-end secured leverage ratio of 4.54x and distributable cash per share of $0.31 cents

Assumptions are no Hillsboro, no refinancing, and floating rates don't move much.

See attached spreadsheet

Thanks for sharing your work. How are you thinking about arrearages? The way I look at it, I am buying $3.90 worth of arrearages for the $6.00 price tag. That eliminate my risk against dilution and my share of the distributions increases as FELP pays out debt. That share would've gone to the IDR/Subs had there were no arrears.

So if you think FELP's situation will improve over time as the debt is paid off , then a 5% yielder today is not a bad deal.

I agree that the arrearages are valuable, but we are still dependent on the cash flows to get those arrearages. I'm not sure I want to wait around for years in a highly levered commodity company before I can get paid.
Title: Re: FELP - Foresight Energy
Post by: bonkers on April 12, 2017, 01:26:07 PM
On another topic, I suppose also others than me are watching the coal price:
https://www.quandl.com/data/EIA/COAL-US-Coal-Prices-by-Region (https://www.quandl.com/data/EIA/COAL-US-Coal-Prices-by-Region)

Even if the prices move pretty closely in tandem, they do not move in the same direction all the time. E.g. for some reason when Central Appalachian price is going nicely upwards, for Illinois Basin the price dropped in Feb some -10 %. Moves like this have happened before, so perhaps the prices generally increase still 1-1½ yrs more if there is such a thing as a cycle.

- B
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 12, 2017, 06:03:34 PM
No lies, I'd rather have flipped my stock to yield pigs ASAP. But the company is only barred from issuing sizable distributions because of financial engineering and an incredulous debt market, not because the business went tits up. So to me it doesn't make sense to value the stock based on this year's yield. Until these covenants are handled, delevering the BS and time value are a pretty good price to pay to lock in a bunch of distributions at the LP level. The cash flow held up very strong in a gritty downturn, and so long as this remains true, I can't justify selling at these prices.
Title: Re: FELP - Foresight Energy
Post by: Patmo on April 12, 2017, 06:10:10 PM
Even at the disappointingly high rates of interest, the annual expense is going to be about par with 2016 though. So the co will generate a floor of 200mil after int, 50 mil to capex, there is still 150mil to split 75/25 debt/distributions, is that roughly where you are at?

Here is what I see for 2017 without Hillsboro:

1) Total Secured Debt currently:

Term Loan - $825M
Revolver    - $170M
Second Lien Notes - $425M
Sugarcamp Longwall Financing - $39.22M
Hillsboro Longwall Financing - $41.25M
Capital Leases - $41.5M

Total - $1,542M

2) Cash Flow:

$300M EBITDA by annualizing H2 2016 (after removing $30M of insurance recoveries)

less $55M capex

less $122M in interest

less 4% mandatory annual prepayments to term loan of $33M

less principal payments on capital leases of $16M

plus stock option expense of $5M

= Excess Cash Flow of $79M

3) Debt paydown during 2017 of $49M

Secured Leverage Ratio at year-end of $1,493/ $300 = 4.98x

Required payment to Term Loan = 75% x $79M = $59.25

4) $19.75M available to common units
$66.9M diluted shares

$0.30 distribution per share

at a price of $5.96/share, that is less than 5% yield

5) For 2018, assuming the same EBITDA, I get a year-end secured leverage ratio of 4.54x and distributable cash per share of $0.31 cents

Assumptions are no Hillsboro, no refinancing, and floating rates don't move much.

See attached spreadsheet

Very detailed work, thx for sharing.
Title: Re: FELP - Foresight Energy
Post by: valcont on April 13, 2017, 06:57:35 AM
No lies, I'd rather have flipped my stock to yield pigs ASAP. But the company is only barred from issuing sizable distributions because of financial engineering and an incredulous debt market, not because the business went tits up. So to me it doesn't make sense to value the stock based on this year's yield. Until these covenants are handled, delevering the BS and time value are a pretty good price to pay to lock in a bunch of distributions at the LP level. The cash flow held up very strong in a gritty downturn, and so long as this remains true, I can't justify selling at these prices.

This is  the lowest cost operator with the highest netbacks among its peers.ILB is hovering in the low 30s, if it goes below 30 a lot of competitor's coal mines will be unprofitable.With the tightening supplies,2018   As bad as these covenants are , they do restrict Murray by preventing drop down stuff ins and unfavorable asset transfer. 
Title: Re: FELP - Foresight Energy
Post by: valcont on April 21, 2017, 06:59:26 AM
Ocwen kept me busy yesterday, so just checked the SXCP earnings/Presentation today. They are maintaining the distribution which is nice but their CMT numbers caught my eye. They exported record coal volume in Q1 just as the CEO predicted in the last qtr earnings. That's great new for FELP since it uses the terminal for exporting coal. If I remember correctly, FELP exported 5m ton last year and looks like they are on target to add more this year. These incremental tons should be accretive to their top line.

"Turning to our Coal Logistics segment on the next slide. In the quarter, we had higher volumes in our coal logistics business year-over-year with approximately 3.4 million tons at KRT in Lake and 2.1 million tons at Convent.

On the domestic coal logistics side, volumes were slightly tampered due to mild winter weather, but we are tracking to our 2017 guidance of 15 million tons for the year. At Convent, we earned $11 million of adjusted EBITDA in this first quarter and this does not include the $3.2 million of deferred revenue recognized during the quarter. We are on track to achieve our 2017 guidance of 8.5 million tons at this facility."
Title: Re: FELP - Foresight Energy
Post by: PullTheTrigger on April 21, 2017, 11:55:12 AM
Here are a couple articles about coal courtesy of Taylor Kuykendall on Twitter:

Quote
Illinois Basin and Northern Appalachian barge coals contributed to squeezing OTC CAPP barge coal out of the market

http://www.platts.com/videos/2017/april/snapshot-us-capp-barge-coal-042017?hootpostid=0dbb67de2fd6148db3e0dc543503c1c3

Quote
Kansas City Southern reported that its utility coal revenue was up 88% in the first quarter compared to a year ago

http://www.snl.com/web/client?auth=inherit#news/article?id=40391716&cdid=A-40391716-13866

I was trying to find out if Kansas City Sourthern services FELP. Haven't figured that out, although they have lines into Illinois. I did find a very good article about FELP's access to rail and barge transportation. It's dated, but very detailed if you want to know how well they are set up to transport coal.

http://www.coalage.com/features/820-foresight-energy-invests-in-illinois.html#.W