Fording Explores Its Options

Article Excerpt

FORDING CANADIAN COAL TRUST $37.82 (Toronto symbol FDG.UN; SI Rating: Average) has announced that it is reviewing various strategic alternatives to increase unitholder value. These include the sale of some of its assets, including its 60% interest in the Elk Valley Coal Partnership, or a sale of the company. Teck Cominco owns 19.95% of Fording as well as 40% of the Elk Valley Coal Partnership (which gives Teck a 52% economic interest in Elk Valley). It has a right of first refusal if Fording wants to sell its Elk Valley interest. However, a deal to sell Fording itself would not trigger this right. Teck could launch its own bid for Fording, or sell its stake to another bidder. Meanwhile, Fording has cut its quarterly distribution by 11.7%, from $0.60 a unit to $0.53. The new implied annual rate of $2.12 yields 5.6%. However, growing demand for steel in China should lead to higher coal prices in 2008. Fording sells its coal in U.S….

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