Audley Capital Urges Stockholders to Support Important Change at Walter Energy and Vote for New Directors on April 25, 2013
Audley Capital Advisors LLP (including certain related funds and
investment vehicles, “Audley Capital”) today urged stockholders to vote
the GOLD proxy card to elect its five highly-qualified
experienced nominees for election to the Board of Directors of Walter
Energy, Inc. (NYSE: WLT) (TSX: WLT) (“Walter Energy” or “the Company”)
at the Company’s upcoming 2013 Annual Meeting of Stockholders on April
25, 2013. In addition, Audley Capital reminds stockholders of some of
the decisions of the current Board that it believes have proven
extremely harmful to stockholder value. Audley Capital urges
stockholders to vote to remove certain Walter Energy Board members,
including Chairman Michael T. Tokarz, Jerry W. Kolb, Joseph B. Leonard,
Bernard G. Rethore and A.J. Wagner, to restore confidence in the
direction of the Company.
We remind stockholders of some of the recent Board decisions that we
believe have damaged shareholder value:
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STRUCTURE OF THE WESTERN COAL TRANSACTION
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We believe that the structure of the Western Coal transaction – in
large part to avoid a stockholder vote on the matter – was
disadvantageous to the Company. The structure saddled Walter Energy
with unprecedented levels of debt that it continues to struggle with
today. If stockholders of Walter Energy had had the opportunity to
vote on the transaction, we believe it is likely that a higher
proportion of shares would have been provided as consideration
rather than the reduced number of shares that were issued. Do you
trust that the Company would not pursue such value-destructive
transactions in the future without consulting stockholders?
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INEFFECTIVE FINANCIAL MANAGEMENT
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Even before the Company’s recently announced issuance of $450
million of new high yield debt, we believed Walter Energy was
significantly overleveraged with $2.3 billion of debt. A net debt to
book value of equity ratio of 228% for a mining company with a high
level of operational risk and a high level of commodity price risk
is unacceptable in our view, particularly when the Company’s peers’
net debt/stockholders’ equity ratios range from 47% to 144%. We
believe stockholders would prefer to invest in a mining company with
a net debt to book value of equity ratio of less than 100% given the
commodity price risk in the current macro environment. Do you
trust in the Company’s ability to manage its burdensome debt load
and avoid a highly dilutive capital raise?
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STRATEGIC PLAN PREDICATED ON MET COAL RECOVERY
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The Company has been pushing a plan that is entirely predicated on
the recovery of met coal pricing in the very near future. We believe
that the Company has grossly miscalculated expectations for met coal
pricing recovery, as demonstrated by the downward pressure on met
coal pricing and recently disclosed Chinese growth data, and that
there is a very real possibility that prices will fall further. We
think the Company is out of touch with market realities. We believe
that the current Board is ill-prepared to respond to continued price
deterioration, and consequently, could face a liquidity crisis in
the foreseeable future that could force the Board to pursue
financing that could severely impact stockholders. Do you trust
that the Company's apparent reliance exclusively on the uncertain
possibility of increasing met coal prices is sound strategic
planning?
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MISGUIDED CAPEX ALLOCATION
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We believe the current Board’s use of cash is wasteful, misguided
and detrimental to shareholder value. For example, the Company has
spent approximately $500 million on capital expenditures in Western
Canada with very little effect on production. This is on top of the
$1.1 billion write-down that the Company took on the assets in
October 2012. Do you trust that the Company can deliver an
appropriate return on invested capital?
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BOARD MEMBERS LACKING INDUSTRY AND MARKET EXPERIENCE AND
INDEPENDENT VIEWS
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We believe that there is a substantial lack of mining and public
market experience among the current Board members. We believe the
five directors we seek to replace have been on the Board for too
long, with an average tenure of 12 years, and lack independent
views. Notably, Mr. Tokarz has served on the Walter Energy Board for
26 years. Furthermore, four of these five directors are members of a
group of interlocking directors with Mueller Water Products, Inc. We
believe these longstanding Board members’ on-going inability to
reverse the serious loss of stockholder value must come to an end. Do
you trust that the current Board members have the necessary skills
to navigate a further deterioration of met coal prices and unlock
additional value?
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Julian Treger, Managing Partner of Audley Capital Advisors, said, “We
believe the current Board lacks the overall qualifications and relevant
experience to effect constructive and positive changes at the Company.
We think the track record of poor financial, operational and strategic
decisions speaks for itself. With a market capitalization nearing $1
billion and a debt load of approximately $2.5 billion, Walter Energy is
starting to look to us like a leveraged buyout gone awry. There are
significant problems, but there can be solutions. Once elected, our
director nominees will bring to bear all of their knowledge and
experience in managing multi-jurisdictional coal operations and their
financing in an effort to reduce risk in the near-term. They will work
with the reconstituted Board and current management to put forth new
innovative ideas and provide immediate independent and sophisticated
oversight of the Company.”
Mr. Treger concluded, “As a group, our nominees have created billions of
dollars of realized value for investors and stockholders. Although their
past accomplishments in other situations are no guarantee, they will
work hard to do the same for the long-suffering stockholders of Walter
Energy. We urge stockholders to vote for important change on the gold
proxy today.”
Audley Capital urges stockholders to vote FOR its five director nominees
by immediately completing and returning the GOLD
proxy card or by submitting proxies by telephone or through the
Internet. Investors that have any questions or need assistance voting
their shares should call Audley Capital’s proxy solicitor, Okapi
Partners LLC, at (877) 208-8903.
Additional Information
Further information regarding the director nominees and other persons
who may be deemed participants, and other matters, are set forth in a
definitive proxy statement filed with the Securities and Exchange
Commission (“SEC”). SHAREHOLDERS OF THE COMPANY ARE STRONGLY ADVISED TO
READ THAT PROXY STATEMENT, BECAUSE IT INCLUDES IMPORTANT INFORMATION.
THE PROXY STATEMENT IS BEING SENT TO SHAREHOLDERS BY OR ON BEHALF OF
PARTICIPANTS, AND IS ALSO AVAILABLE AT NO CHARGE ON THE SEC’S WEBSITE AT http://www.sec.gov.
