US coal producer Peabody Energy said financing of its proposed $3.8bn purchase of metallurgical coal assets from Anglo American was on hold until there was further clarity on the deal’s centrepiece asset.
BusinessLive cited Peabody Energy CFO Mark Spurbeck as saying underwriters were reticient to support the transaction until the outlook for Anglo’s Moranbah North mine – suspended since an underground fire in March – was certain.
“We kicked off our marketing across 50 firms and had strong interest in underwriting the transaction,” Spurbeck is quoted as saying.
“Unfortunately, we were scheduled to kick off our meetings and discussions with these investors the same day the incident happened.
“It is clear now that with all the uncertainty around Moranbah North — which is the most significant piece of the transaction — investors like us are unwilling to underwrite that uncertainty. So, until further clarity is noted, our financing is on hold,” he said.
The deal with Peabody comprises an upfront cash portion of $2.05bn and deferred payment of $725m. The balance of the consideration comprises a $550m price-linked earnout and a contingent cash consideration of $450m which is linked to the reopening of another mine, called Grosvenor.
The sale of the metallurgical coal assets is a major piece in Anglo CEO Duncan Wanblad’s restructuring plans for the group, unveiled in May last year. The group is due to demerge its platinum unit Amplats later this month and will either sell or spin out its 85% stake in De Beers, the diamond miner.
Peabody on Monday issued a material adverse change notice to Anglo which indicates it may terminate the agreement. Anglo contests whether the fire constitutes an MAC.
“A substantial share of the acquisition value was associated with Moranbah North, yet there is no known timetable for resuming longwall production,” said Peabody CEO Jim Grech in a statement on Monday.
