WSJ – Hedge funds are betting that some of the largest U.S. coal companies are heading for the financial slag heap.
The coal industry is in a prolonged slump with a long list of causes topped by sluggish demand and competition from cheap natural gas, which have pushed prices to historic lows. Many investors have abandoned the sector. Eight coal-mining companies traded on the New York Stock Exchange are down an average of 29% in the last year. The conditions are ripe for hedge funds that target distressed investments. They are first betting against the stock and debt of mining firms such as Walter Energy Inc., then snapping up the bonds when their prices fall as low as 40 cents on the dollar.
