Murray Energy lowered its 2019 EBITDA and capex guidance at its restricted subsidiaries even while posting a 16% spike in EBITDA year-over-year for 2Q19, according to two sources familiar with the matter.

For the quarter ended 30 June, Murray reported USD 122.4m of adjusted EBITDA at the restricted US subsidiaries backing its debt stack, compared to USD 105.1m generated the same time last year, the sources said.

The coal producer also booked negative USD 12.1m of adjusted EBITDA versus positive USD 18m YoY at its specified restricted subsidiaries, consisting of Murray’s Kentucky mines (former Armstrong Energy assets) and Murray Colombian Resources, they added. On a combined basis—taking its restricted, specified restricted and unrestricted subsidiaries into consideration—the issuer’s consolidated 2Q19 EBITDA amounted to USD 118.9m, marking a 3.4% drop from USD 123.1m recorded in 2Q18.

Leverage at the restricted subsidiaries stood at 5.24x through USD 2.75bn in total debt and based on USD 524.4m of LTM adjusted EBITDA. Including the specified restricted subs, leverage came in at 4.9x after accounting for largely the same debt load and USD 562.7m in total adjusted EBITDA.

The weaker results at the specified restricted subs were driven by declines at the Colombian mines, which historically have been the leading source of cash flow to facilitate discounted debt buybacks, as reported. The overall earnings were attributed to weak natural gas prices, which led to lower power prices.

Murray also lowered its 2019 adjusted EBITDA guidance for its restricted subsidiaries to USD 500m–USD 540m from the USD 515m–USD 565m outlook provided three months ago, the sources continued. Meanwhile, capex guidance for the year edged down to USD 210m from USD 220m.

As of 30 June, liquidity stood at USD 63.8m, comprising USD 48.2m of revolver capacity and USD 15.6m of cash.

Nearer term, the company noted expectations to bring in USD 97.5m–USD 112.5m in consolidated adjusted EBITDA at the restricted subs for 3Q19, the sources said.

Murray has an upcoming bond maturity in 2021 and a corresponding springing maturity on its TLB2 due 2022 that would push up the due date on the loan to December 2020. The leap in the maturity specifically kicks in 91 days ahead of the bond maturity if the principal value on the second lien notes is not below USD 175m at that time.

On the call, management said that the coal producer has a few options for dealing with the looming maturities, one of the sources noted, adding that Murray intends to utilize some combination of its USD 175m first lien capacity and USD 50m equipment financing capacity to address the debt.

The borrower’s USD 295m 11.25% second lien notes due 2021 last traded in size at 27 on 24 July, according to MarketAxess, while quotes from today place the bonds at 24, the first source said.

Murray’s higher-ranking USD 491m 12% 1.5 lien notes due 2024 last changed hands at 19.25 on 24 July, according to MarketAxess. The notes are quoted today in the same context, the same source added.

Its USD 1.6bn Libor+ 725bps super-priority TLB2 due 2022 is quoted 57.4/59.4, down from quotes at 62/64 on 12 August before the earnings report, according to Markit.

Murray declined to comment.

2019 Debtwire