Citibank andPNC Bank have advised Massey Energy to hold off on a new $525 million credit facility until market conditions improve. "We were advised by our lead banks that it might be a tough sell in the marketplace," said Katharine Kenny, director of investor relations. "We can't disagree that the markets are pretty tough." Operational improvements in the third quarter further alleviated the company's immediate need for the proposed $275 million "B" term loan, one banker noted. "We feel like we have sufficient liquidity given our current internal operations," Kenny concurred, adding that Massey can afford to wait on the deal. Indeed, the coal producer's improved cost structure in the third quarter yielded $140.5 million of total liquidity, about $68 million more than in the second quarter.
The postponement leaves Massey unsure of when it will recommence plans for a new facility, although the banker said the Richmond, Va., company would most likely return to market some time next year. In the meantime, Massey will attempt to extend its $150 million 364-day revolver, which matures on Nov. 26. The banker suggested the company would most likely be able to extend the agreement with the same structure, but Kenny noted that pricing could change on the Citibank-led line. If it cannot extend the revolver, Massey may implement the line's one-year term-out option.
The company's other existing revolver, a $250 million line, expires in November 2003, leaving Massey just over one year to replace the entire $400 million facility. Kenny said it was uncertain if Massey would aim for the $525 million package again or propose a new deal altogether. The proposed $525 million credit, which was rated BBB- by Standard & Poor's, comprised a three-year, $250 million revolver and a $275 million "B" term loan (LMW, 10/14). A PNC banker declined to comment, and Citibank officials did not return calls.