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Imperial Capital Downgrades Peabody Energy (BTU) to Underperform

May 1, 2015 9:49 AM EDT
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Price: $24.26 +0.04%

Rating Summary:
    6 Buy, 11 Hold, 8 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 0 | Down: 0 | New: 0
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Imperial Capital downgraded Peabody Energy (NYSE: BTU) from In-Line to Underperform with a price target of $3.50 (from $6.50).

Analyst Matthew Farwell commented, "We are lowering our rating to Underperform from In-Line on BTU shares and also lowering our one-year price target to $3.50 from $6.50. Our relative ratings are based on 10pts downside on the BTU 2nd liens and 7.875s due 2026, and 20pts downside on the remaining unsecured notes. Given strong negative headwinds in coal due to sub-$3.00 natural gas, coal retirements, and oversupplied seaborne met coal, we are bearish on Peabody’s cap structure, and expect all securities but the term loan to trade lower in coming months. However, we believe the country’s largest coal producer will likely last multiple rounds in the coming shakeout in coal, as upcoming maturities roll into first or second lien debt, the company improves liquidity (asset sales, equity raise, MLP) and reduces cash outflows (SG&A, capex, LBA payments, Patriot settlements, hedge roll-off), keeping the option alive until the 9/24/20 term loan maturity. We are watching the events at Patriot closely, where $270mn of contingent liabilities could materialize."

For an analyst ratings summary and ratings history on Peabody Energy click here. For more ratings news on Peabody Energy click here.

Shares of Peabody Energy closed at $4.73 yesterday.



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