Shares of embattled coal miner WHITEHAVEN COAL LIMITED (ASX: WHC) have soared as much as 8% today, following the announcement of a debt refinancing deal this morning.
In an announcement to the ASX, the miner said it had secured a fully underwritten offer for a new $1.4 billion Senior Secured Bank Facility from a syndicate of Australian and international banks.
"The new facility is on terms more favourable than the facility it will replace, resulting in a lower interest rate and increased headroom for Whitehaven," the company said.
The new facility will be a drawable line of credit and will be due July 2019.
Whitehaven's CEO, Paul Flynn, said, "We are delighted with the support we have received for this flexible, low cost facility. It demonstrates Whitehaven's improved creditworthiness and the increased confidence that lenders have in our growth plans and in our capacity to execute them ahead of expectations."
In the past five years, shares of Whitehaven have been on a downward spiral as coal prices fell. In fact, since the beginning of 2012 alone shares are down nearly 70%!
Despite the poor commodity prices; Whitehaven continues to press ahead with investment in project expansions. The company recently reported a half-year loss of $77.9 million, despite record sales.
The big problem for Whitehaven (and fellow producers) is China. China's cities are terribly polluted and as a result the country is now looking for cleaner energy sources.
Coal is a cheap energy source but it's dirty. So at the moment, we have two forces at play in the coal industry: falling demand and increasing supply.
The Motley Fool Pro investing team recently visited China and their findings were disturbing. Read more here.
Should you buy Whitehaven Coal shares?
The chances of the supply and demand problem rebalancing in the future are slim, in this Fool's opinion. Therefore given the forces at play, long-term investors should avoid Whitehaven coal shares for the foreseeable future. The same runs true for all coal producers.
