Walter Energy launches loan amendment to loosen financial covenants

By Sara Rosenberg

New York, Aug. 8 - Walter Energy Inc. launched a credit facility amendment on Wednesday, under which it is asking lenders to relax the total leverage covenant and to reset the interest coverage ratio, according to a market source.

The amended leverage requirement would be 3.75 times through the end of 2013, stepping down to 3.5 times thereafter, versus a current ratio of 3.25 times, stepping down to 3 times in the quarter ended Dec. 31, the source said.

The interest coverage ratio would be 3 times for the life of the loan, rather than the current 3 times with a step up to 3.5 times in the quarter ended Dec. 31.

Additionally, the amendment would provide for a 25 basis point increase in pricing if leverage is above 3.25 times.

Furthermore, the company would gain permission to issue senior secured bonds under its incremental basket. And, the way the leverage test is calculated would be revised to remove the option to net out up to $100 million of unrestricted cash.

Morgan Stanley Senior Funding Inc. is leading the transaction.

Lenders are being offered a 25 bps amendment fee, the source said.

Consents are due at noon ET on Aug. 15.

Walter Energy is a Birmingham, Ala.-based pure-play metallurgical coal producer.

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