SunCoke Energy cut consolidated debt by $145 million in 2016

By Paul Deckelman

New York, Jan. 26 – SunCoke Energy Inc. reduced its consolidated debt load by $145 million in 2016, company executives said Thursday.

And the Lisle, Ill.-based producer of metallurgical coke used in the steelmaking process and coal logistics provider ended the year with consolidated liquidity of some $330 million of cash and revolver availability at the parent company level and at its SunCoke Energy Partners, LP publicly traded master limited partnership subsidiary.

SunCoke, which was spun off from Sunoco, Inc. in 2011, set up the latter entity in 2013. It currently owns a 2% general partnership interest, a 54% limited partnership interest and all incentive distribution rights.

SunCoke’s chaiman, president and chief executive officer, former General Motors Corp. CEO Frederick A. “Fritz” Henderson, who also holds the same positions at the limited partnership entity, told analysts on a conference call following the release of the two companies’ results for the 2016 fourth quarter and fiscal year ended Dec. 31 that despite “significant headwinds” facing its steel and coal industry customers, SunCoke was able to accomplish many of its objectives, including “reducing debt at the combined enterprise level by over $145 million, leaving the parent actually in a net cash position.”

At Dec. 31, the company had consolidated gross debt of $858 million, $813 million of which was attributable to the partnership and $45 million of which was at the parent company level.

Consolidated cash was $134 million, $42 million of it at the partnership and $92 million at the parent, for consolidated net debt of $724 million – $771 million at the partnership and a $47 million net cash position at the parent level.

During the year, SunCoke repurchased $90 million face amount of its partnership’s outstanding 7 3/8% senior notes due 2020 via open market purchases at an average of just under 72.6 cents on the dollar, spending $65 million on those repurchases.

It also improved its balance sheet by entirely paying down the $60.4 million that was outstanding on the parent company’s revolving credit facility, plus $10 million of outstanding borrowings on the partnership’s revolver.

The $858 million of gross debt at year-end consisted of $463 million of the SunCoke Energy Partners 2020 notes, out of the $600 million the partnership originally issued along with SunCoke Energy Partners Finance Corp. in three tranches, one in 2013, one in 2014 and one in 2015, along with $172 million of remaining partnership revolver debt due in 2019, $50 million of partnership term loan debt, most of which is due in 2019, and $113 million of partnership promissory notes, most of that due in 2021.

The only debt at the parent company level is the remaining $45 million of its 7 5/8% senior notes due 2019, out of the $400 million originally sold in 2011.

Year-end liquidity stood at $330 million – $119 million of revolver availability at the parent and $77 million at the partnership, for $196 million total, and $134 million of consolidated cash – $92.2 million at the parent and $41.8 million at the partnership.

Henderson noted that SunCoke is currently in the midst of negotiations with its SunCoke Energy Partners’ unit holders on what it terms a simplification transaction that would give the parent all of their units in exchange for its own stock. Unit holders would receive 1.65 SunCoke shares for each unit. The company said its simplified corporate and capital structure would, among other things, give it improved capital markets access.

© 2015 Prospect News.
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