I like his comments. Debt free is my kind of man.
UPDATE 1-Int'l Coal offer proceeds to fund capex, takeovers
Wed Dec 7, 2005 01:33 PM ET
(Recasts first paragraph, adds comment from Ross)
By Joseph A. Giannone
NEW YORK, Dec 7 (Reuters) - U.S. coal miner International Coal Group Inc. (ICO.N: Quote, Profile, Research) will use proceeds from a share offering to eliminate debt so it can focus on developing mines and making more coal acquisitions, ICG Chairman Wilbur Ross told Reuters on Wednesday.
Ross said in an interview that the Tuesday night offering had been increased to 21 million shares from 20 million, and yet was still four-times oversubscribed.
The shares were priced at $11.00, and underwriters were given the option to purchase an additional 3.15 million shares, raising the total offering value to about $265.7 million. The offering tapped into the market's frenzy for energy shares.
Ross, who makes investments through his private-equity firm WL Ross & Co., said proceeds would wipe about $250 million in bank debt off its books.
"That will leave us the only debt-free coal company," he said in a telephone interview from his New York office. "We have a very big capex program -- we plan to bring on stream quite a few mines this year -- and then the other use would be, obviously, for other acquisitions."
Last month International Coal, which previously traded on Pink Sheets, moved its listing to the New York Stock Exchange. The company also recently completed the acquisitions of Anker Coal Group and CoalQuest Development, setting aside about 31 million shares for those deals.
Ross said ICG will not necessarily remain debt-free forever, though he sees competitive advantages to having a more conservative balance sheet.
"We don't want to be highly leveraged. Most coal companies are junk bond kind of issuers, like Massey Energy (MEE.N: Quote, Profile, Research) and the others," Ross said.
"We'd like to have a fairly conservative balance sheet. We just feel it puts us in a good position, both in terms of our internal expansion and in terms of being able to make acquisitions," he said.
Ross, 68, is a billionaire "vulture" investor with a long track record of buying assets from distressed companies, consolidating them and then selling them at a huge gain when market conditions have changed.
Most recently, Ross rolled up bankrupt and underperforming steel makers to create International Steel Group. Ross in April sold ISG to Mittal Steel Co. (MT.N: Quote, Profile, Research) for $4.5 billion.
Ross formed International Coal in April to do the same thing for the coal industry, which has enjoyed a revival as sky-high natural gas and oil prices fuel demand for coal. Stockpiles long held by utilities have been whittled down, forcing power producers to buy new supplies.
Ross noted that most of ICG's coal is sold under long-term contracts, which typically re-price only once a year. As a result, there is a lag period when ICG realizes the benefit of higher spot prices.
"Our realizations have been going up," he said, though he declined to comment on his outlook for coal prices, citing regulatory rules surrounding public offerings.
"People just bought $250 million worth of our stock, so you can come to your own conclusions on why they would do that," Ross said.
For now, Ross appears to have struck paydirt with his investments in coal. About two years ago, he said he paid the equivalent of $1.50 to $2.00 a share for what became ICG.
International Coal shares currently fetch about five times that amount. "It's been a pretty good investment so far," said Ross.
In Wednesday trading, ICG fell 32 cents, or 2.8 percent, to $11.01 a share. The stock is down 11 percent since it joined the NYSE.
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