Murray revises Foresight deal after struggling to raise debt
Murray Energy Corp., the closely held coal miner founded and run by Robert Murray, revised the terms of a deal to acquire a stake in rival producer Foresight Energy LP because it struggled to raise the required finances through taking on debt.
Murray will pay $1.37 billion for a 50 percent stake in Foresight, the St. Clairsville, Ohio-based company said Tuesday in a statement, down from $1.4 billion previously.
The takeover accord announced last month is terminated. Murray will now take on about $150 million less new debt to complete the transaction, and Foresight founder Christopher Cline will join its board.
The revised deal means Murray will take a smaller stake than previously envisaged in Foresight Energy GP, an associated company in which Cline will now keep a controlling interest. Murray has the opportunity to take control of Foresight Energy GP over the next five years.
Murray is trying to expand its presence in the Illinois basin coal region. It's targeting mines and reserves that can be low-cost suppliers to coal-fired power stations that the company is betting won't be closed down or converted to natural gas.
Investors were demanding more than the 10.25 percent to 11 percent yields that were being proposed on a two-part note offering by Murray last week, three people with knowledge of the situation said Monday.
Murray was pursuing the bond offering to refinance second-lien notes. The company is seeking new consents from bondholders to change its capital structure, including incurring the additional secured debt needed to complete the Foresight deal.
In connection with the consents, the company is offering to purchase the outstanding notes sold in 2013 and 2014 that are validly tendered by April 9, according to another statement from the company.
Murray's debt offering included $1.83 billion of loans on which the company strengthened covenants to entice more investors.
As part of the original deal, Foresight was raising a $650 million term loan. Under the revised agreement with Murray, Foresight's existing credit facility and senior notes will remain in place, as no change of control will result from the new structure, according to the statement announcing the new terms.
The revised Foresight deal will still be the largest in the U.S. coal industry since Murray's purchase of a unit of Consol Energy Inc. for $850 million in 2013, according to Bloomberg data.