Alliance Resource Partners, L.P. Announces Pricing of $400 Million Private Offering of Senior Notes

Rhea-AI Summary

Alliance Resource Partners (NASDAQ: ARLP) announced the pricing of a $400 million private offering of 8.625% senior unsecured notes due 2029.

The notes are set to be issued at par and the offering is expected to close by June 12, 2024, pending customary conditions.

Proceeds will be used to redeem outstanding 7.5% senior notes due 2025 and for general corporate purposes.

A conditional notice of redemption for the 2025 notes has already been delivered, with a redemption date expected around June 28, 2024.

The new notes will not be registered under the Securities Act and will be offered only to qualified institutional buyers and persons outside the U.S.

Positive

• ARLP successfully priced $400 million in senior notes at an 8.625% interest rate.
• The new notes will help redeem $202 million of outstanding senior notes due 2025.
• Redeeming higher-interest debt and extending maturities can improve financial stability.
• Proceeds will also serve general corporate purposes.

Negative

• The new notes carry a higher interest rate (8.625%) compared to the redeemed notes (7.5%), leading to higher interest expenses.
• The new notes are not registered under the Securities Act, limiting their availability to institutional buyers and foreign investors.
• Potential risks related to market conditions and customary closing conditions affecting the closing date.

Insights

Financial Analyst

Alliance Resource Partners, L.P. (ARLP) has announced the pricing of its $400 million private offering of senior unsecured notes with a 8.625% coupon rate due in 2029. This move has several implications for both the company's financial health and investors.

Firstly, it is worth noting that the 8.625% rate is notably higher than the 7.5% coupon rate on the notes due 2025. This indicates that ARLP might be facing higher borrowing costs, potentially due to perceived increased risk or market conditions.

However, redeeming the 7.5% notes due in 2025 with the proceeds from the new issuance is a strategic move to extend the debt maturity profile, thus improving liquidity and financial flexibility in the near term. The company is essentially opting to pay a higher rate but benefit from deferring the principal repayment by four more years.

From an investor's point of view, the funds raised will also go towards general corporate purposes, which means ARLP is not only addressing its debt but also potentially investing in growth or other strategic initiatives. This can be seen as a positive aspect, provided these investments yield a good return on investment.

In summary, while the higher interest rate is a drawback, the move to extend debt maturity and allocate funds for corporate use can be favorable in the long term.

Market Research Analyst

The announcement also contains details critical from a market perception standpoint. The decision to offer the notes only to qualified institutional buyers and not list them on any securities exchange suggests that ARLP is targeting a sophisticated investor base that is more likely to understand and bear the risks associated with high-yield debt.

This can have a dual impact on the market perception of ARLP. On one hand, it can be seen as a positive signal that the company has confidence in its ability to attract these buyers. On the other hand, it could imply that the wider market may not have a strong appetite for such debt, which could reflect concerns about ARLP's financial health or market conditions.

Furthermore, the company's communication strategy, through a private placement, might limit the immediate impact on the stock price, but it leaves room for market speculation, which could introduce volatility.

Ultimately, retail investors should consider these nuances when evaluating the impact on ARLP’s stock, especially in terms of market confidence and liquidity.

TULSA, Okla.--(BUSINESS WIRE)-- Alliance Resource Partners, L.P. (NASDAQ: ARLP) (“ARLP”) announced today that Alliance Resource Operating Partners, L.P. (“AROP”), the intermediate partnership of ARLP, and Alliance Resource Finance Corporation, AROP’s wholly owned subsidiary, priced the previously announced private placement of $400 million in aggregate principal amount of 8.625% senior unsecured notes due 2029 (the “New Notes”). The New Notes will be issued at par. The offering is expected to close on or about June 12, 2024, subject to customary closing conditions.

AROP expects to use a portion of the net proceeds from the offering of the New Notes to fund the redemption of its outstanding 7.5% Senior Notes due 2025 (the “2025 Notes”) and the remaining for general corporate purposes. On May 29, 2024, AROP delivered a conditional notice of redemption, subject to consummation of the offering of the New Notes, for all of the outstanding 2025 Notes. The redemption price for the 2025 Notes is 100% of the principal amount of the 2025 Notes outstanding, plus accrued and unpaid interest to the redemption date, which is expected to be June 28, 2024. This communication shall not constitute a notice of redemption under the indenture governing the 2025 Notes.

The New Notes have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or under the securities laws of any other jurisdiction. Thus, the New Notes may be offered only in transactions that are exempt from registration under the Securities Act and applicable state securities laws. The New Notes are offered only to qualified institutional buyers under Rule 144A and to persons outside the United States under Regulation S of the Securities Act. The New Notes will not be listed on any securities exchange or automated quotation system.

This press release does not constitute an offer to sell or a solicitation of an offer to buy the New Notes, nor shall there be any sale of the New Notes in any state or jurisdiction in which such an offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

About Alliance Resource Partners, L.P.

ARLP is a diversified energy company that is currently the largest coal producer in the eastern United States, supplying reliable, affordable energy domestically and internationally to major utilities, metallurgical and industrial users. ARLP also generates operating and royalty income from mineral interests it owns in strategic coal and oil & gas producing regions in the United States. In addition, ARLP is evolving and positioning itself as a reliable energy partner for the future by pursuing opportunities that support the advancement of energy and related infrastructure.

Cautionary Note Concerning Forward-Looking Statements

Certain statements and information in this news release constitute “forward-looking statements,” including statements regarding the intended use of proceeds. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could” or other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements represent ARLP’s expectations or beliefs concerning future events, and it is possible that the results described in this news release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of ARLP’s control, which could cause actual results to differ materially from the results discussed in the forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, ARLP does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for ARLP to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements found in ARLP’s filings with the Securities and Exchange Commission (“SEC”), including, but not limited to, ARLP’s Annual Report on Form 10-K for the year ended December 31, 2023, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. The risk factors and other factors noted in ARLP’s SEC filings could cause actual results to differ materially from those contained in any forward-looking statement.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240529737881/en/

Investor Relations Contact:

Cary P. Marshall

Senior Vice President and Chief Financial Officer

918-295-7673

investorrelations@arlp.com

Source: Alliance Resource Partners, L.P.

FAQ

What is ARLP's recent announcement about?

ARLP announced the pricing of a $400 million private offering of 8.625% senior unsecured notes due 2029.

What will ARLP use the proceeds from the new notes for?

The proceeds will be used to redeem outstanding 7.5% senior notes due 2025 and for general corporate purposes.

When is the expected closing date for ARLP's new notes offering?

The offering is expected to close on or about June 12, 2024, subject to customary closing conditions.

What is the interest rate on ARLP's new senior unsecured notes?

The new senior unsecured notes will have an interest rate of 8.625%.

Will ARLP's new senior notes be registered under the Securities Act?

No, the new notes will not be registered under the Securities Act and will be offered to qualified institutional buyers and persons outside the U.S.