By Greg Johnson
Gillette News Record
Via Wyoming News Exchange
GILLETTE — The New York Stock Exchange has suspended trading of Cloud Peak Energy stock effective immediately due “abnormally low” price levels.
It's the next step in delisting the thermal coal producer from the exchange, according to a statement from Cloud Peak announcing the suspension.
The statement says Cloud Peak was notified Tuesday "that the NYSE had determined to commence proceedings to delist the company's common stock as a result of the NYSE's determination that the company's common stock was no longer suitable for listing ... based on 'abnormally low' price levels.”
The suspension and pending delisting "will not affect the company's business operations," according to the statement.
The move was announced Tuesday after the company’s stock opened at 16.2 cents per share and closed upon the suspension at 15.565 cents, according to the NYSE.
Along with the suspension, the NYSE has informed Cloud Peak it will apply to the Securities and Exchange Commission to delist its stock and the company said in its announcement that it "does not intend to appeal the delisting determination."
Suspending Cloud Peak’s stock wasn’t an unexpected move and is another indication the company is close to potentially filing for Chapter 11 bankruptcy reorganization, said Rob Godby, director and associate professor for the Department of Economics and Finance at the University of Wyoming.
“This was to be totally expected,” he said of the NYSE's move. “An abnormally low price level is just that — abnormally low. Any ownership equity is very uncertain. (The exchange) is really just exercising its rights. They’re also trying to ensure the integrity of what’s trading on the market.”
The NYSE warned Cloud Peak on Dec. 26 it could be delisted because its stock had fallen below $1 a share for at least 30 consecutive days. With that notice, the company had six months to pull its stock above the threshold or it could be delisted.
Tuesday’s suspension comes three months to the day from that notice and suspends its stock at a point where its market cap is just $12.07 million, according to the exchange. That’s only 3.9 percent of $4.10 per share Cloud Peak stock hit its 52-week high point on May 1, 2018, and it’s a 87.1 percent loss from the $5.50 per share the stock hit 14 months ago on Jan. 17, 2018.
While the suspension is another public black eye for a company on the brink of bankruptcy, it doesn’t change the overall outlook for Cloud Peak, Godby said.
“It’s just symbolic at this point,” he said. “It’s a black eye for the company, for sure. It’s another indignity they’re suffering, but there’s very little they can do.”
The suspension comes less than two weeks from Cloud Peak’s 2018 year-end report filed with the Securities and Exchange Commission, where it says there is “substantial doubt about our ability to continue as a going concern.”
That’s the legal boilerplate language that unless another financial solution presents itself, Cloud Peak is on the verge of filing for bankruptcy, most likely Chapter 11 reorganization, Godby said.
In that same March 15 SEC filing, Cloud Peak said it’s exercising a 30-day grace period on a $1.8 million interest payment, which means that by April 15, the company either must make the payment or default.
The company is likely to announce a bankruptcy before allowing a default to go through, he said.
“All indications are (Cloud Peak Energy) is not a going concern,” he said, and Chapter 11 “is looking very likely right now.”
While trading of Cloud Peak stock is suspended on the New York Stock Exchange, the company anticipates its stock will begin trading on the OTC Pink exchange Wednesday under the symbol "CLDP." OTC Pink (formerly Pink Sheets) is generally considered the most speculative of the three main financial markets for trading stocks.
Cloud Peak's stock was listed on the OTC Pink website Wednesday morning at 13 cents a share.
A phone call and email to the company’s manager of public affairs and community relations were not returned.
Cloud Peak’s March 15 report also revealed how devastating financially 2018 was for the company, which operates three coal mines in the Powder River Basin, including the Cordero Rojo and Antelope mines in Campbell County.
Along with a $718 million loss for the year, the company failed to renegotiate with its creditors. Cloud Peak announced in November it’s examining its financial options, including selling the company, but hasn’t found a buyer.
Perhaps the largest threat to the company’s ability to continue mining operations is a demand from bond-holders for more collateral to guarantee Cloud Peak’s reclamation obligations, Godby said.
According to the March 15 filing, the company has $407.6 million of reclamation bonds backed by $25.7 million worth of letters of credit. It also has more than $350 million of debt, with about two-thirds coming due in the next few years.
Along with a weak market for coal, Cloud Peak Energy took a number of hits that affected its bottom line in 2018.
The first came early in the year when a group of nesting golden eagles delayed a crucial dragline move at the company’s flagship Antelope mine south of Wright. At 28.5 million tons of coal, Antelope alone accounted for nearly half of the 57.8 million tons Cloud Peak produced as a company in 2017.
Instead of taking four weeks, the dragline move took nine weeks, putting the mine behind schedule to meet its production and contract goals.
Then an unusually rainy spring caused spoil failure at the Antelope mine, putting it behind even more and running into this year.
Between the eagles and mine repair, Antelope produced 23.1 million tons of coal last year, a 19 percent drop from 2017. Cordero Rojo was down 23 percent.
Cloud Peak also eliminated 15 full-time positions away from the mines, ended health benefits for retirees, closed its Gillette office and moved local administration to the Cordero Rojo mine and sold its building on Gillette Avenue to Campbell County for $2.9 million.