Belly Up: Why Walter Energy Will Be The Next Coal Industry Casualty

By Nathan Yates, M.S.F.

The Background:

In the summer of 2013, I predicted that James River Coal, a company then using the JRCC ticker, would file for Chapter 11 within a year. James River's symbol became RCCQ a few months ago-the Q noting that the ticker is attached to a bankrupt company. The James River bankruptcy call was easy to make because the company had a mountain of debt and only mediocre operations. When the last coal industry boom finally collapsed, it was only a matter of time until James River went under. Total liquidation of the corporation now seems likely.

At the time that I forecast James River's demise, I also stated that Walter Energy (NYSE: WLT) would be the next coal company to enter Chapter 11. Here at Forward View, we continue to believe that WLT is unlikely to survive beyond mid-2016 unless the coal market improves dramatically or the company is acquired. The latter two outcomes are unlikely, though. There is no catalyst for a significant surge in coal prices, and Walter's high-cost metallurgical coal portfolio shouldn't be particularly appealing to other struggling coal companies. (Around 90% all of Walter's 12.7M tons of annual coal production is met coal, putting it in a particularly difficult position.) Thus, Walter Energy is left staring bankruptcy in the face. As you'll see the chart below, the price of WLT shares is definitely moving in the wrong direction:

Nathan Yates

Nathan Yates has been fascinated by technology and finance since he was young. He was the kid devouring the business section of the newspaper (remember those?) while others read everything else. Nathan believes that the American economy is built from the bottom-up, meaning that small businesses and local nonprofits are the foundation of our nation's success. These organizations are the lifeblood of towns and cities across the U.S. Unfortunately, most consulting firms overlook companies or organizations that don't have eight-figure budgets. Nathan thought Forward View Consulting should be different. And we are. As Lead Consultant, Nathan works with each client to deliver only the best financial and/or website development services. Nathan's years of web design experience and his business degrees ensure that professional expertise is brought to each project. Our network of contacts can offer additional specialized guidance if needed. Before creating Forward View Consulting, Nathan worked for an independent equity research firm as a Research Associate covering the industrial and energy sectors. This work involved preparing quarterly 15-40 page reports on multi-billion dollar corporations along with timely analysis of M&A activity and industry-wide news. He also managed research distribution and the company's online presence. Nathan also spent a summer serving as a local financial adviser's Research Intern. Nathan earned a Bachelor's degree in Economics and Finance from Southern New Hampshire University, graduating summa cum laude. He then earned a Master's degree in Finance from Southern New Hampshire University, where he was named the Outstanding Student in his particular concentration. Now, Nathan is an adjunct professor teaching economics and finance for his alma mater. In his spare time, Nathan enjoys fishing, reading, time with family and serving as a volunteer webmaster for the Clintwood United Methodist Church.