Coronado Resources has locked in a $150 million asset-based lending facility with Oaktree affiliates, refinancing existing debt and funding key coal production expansions amid a challenging market.
- Entered $150 million three-year asset-based lending facility with Oaktree
- Initial $75 million drawn to refinance debt and support working capital
- Facility offers fixed mid-teens interest rate, lower than existing notes yield
- Supports Mammoth and Buchanan expansion projects and cost reduction plans
- Covenant testing begins June 2025 with flexible thresholds for current market
Strategic Financing Amid Market Pressures
Coronado Resources Inc. (ASX, CRN) has taken a significant step to strengthen its financial footing by entering into a binding $150 million asset-based lending (ABL) facility with affiliates of Oaktree Capital Management. This move is designed to refinance existing debt and provide liquidity to fund ongoing coal production and cost reduction initiatives, crucial as the company navigates a sustained period of low coal prices.
The three-year facility allows an initial drawdown of $75 million, with the remaining $75 million available in increments, subject to borrowing base tests. The fixed interest rate in the mid-teens is notably below the current 18% yield on Coronado’s high-yield notes, offering a more manageable cost of capital. Importantly, the facility includes no prepayment penalties after 18 months, giving Coronado flexibility to repay early if conditions improve.
Backing Expansion and Cost Efficiency
Funds from the ABL facility will support capital expenditure on the Mammoth and Buchanan projects, which are on track and expected to increase production volumes significantly by the end of 2025. These expansions are complemented by ongoing cost reduction programs aimed at improving operational efficiency and sustaining profitability in a challenging commodity price environment.
Coronado’s Chief Financial Officer, Barrie Van Merwe, emphasized that the facility not only injects immediate liquidity but also provides the company with the covenant flexibility needed to manage through current market volatility. The covenant thresholds, starting with testing in June 2025, are structured to afford operational breathing room, reflecting a pragmatic approach to financial management.
Financial Position and Outlook
As of May 2025, Coronado reported a cash balance of approximately $160 million, bolstered by the new facility and ongoing capital management efforts. The company remains committed to its broader balance sheet and liquidity management program, which includes careful oversight of capital expenditure and cost control measures.
This financing arrangement signals confidence from a credible lender in Coronado’s underlying asset value and business fundamentals. It also positions the company to continue executing its growth and efficiency plans despite the headwinds posed by low coal prices.
Looking ahead, Coronado will need to demonstrate progress on its expansion projects and maintain compliance with the new covenant structure to sustain investor confidence and financial stability.
Bottom Line?
Coronado’s new lending facility offers a vital financial lifeline, but execution on expansion and cost targets will be key to weathering ongoing market challenges.
Questions in the middle?
- How will covenant testing impact Coronado’s operational flexibility if coal prices remain depressed?
- What is the timeline and expected production uplift from the Mammoth and Buchanan expansions?
- Could further refinancing or capital raises be necessary if market conditions worsen?