IPO VIEW-Oxford could fall short of dividend promise

* Oxford could struggle to pay hefty 9 pct dividend

* Most IPO proceeds going to pay debt, partners, fees

* Steam coal prices expected to remain low -analyst

By Clare Baldwin

NEW YORK, July 9 (BestGrowthStock) – Oxford Resource Partners LP’s
(OXF.N: ) strongest selling point is the coal miner’s generous
dividend, but the payout may not be as rich as promised and
little of the money raised in its initial public offering will
go to grow its operations.

Oxford, which excavates coal used in electricity generation
from surface mines in Northern Appalachia and the Illinois
Basin, hopes to raise about $166.25 million in its IPO next

The Columbus, Ohio-based company has locked up sales
contracts for the next two and a half years and is hoping to
pay a nine percent dividend amid flat coal prices. That is high
for any company but especially for a coal miner.

“Certainly the dividend payment is going to be a draw but
at this point I don’t believe the deal has the right footprint
to make it attractive for investors,” said IPOfinancial.com
President David Menlow.

Oxford’s net income plummeted in the three months ended
March 31 compared with a year earlier, and the company is
spending more cash than it is making from its operations.

Oxford warned in a regulatory filing earlier this month
that it may not be able to pay its planned quarterly dividend.
It said it would need to generate about $36.7 million in
surplus cash a year to make the payments, a far cry from the
$16.1 million generated in the year ended Dec. 31.

“The risk with this kind of company is pricing and volume
uncertainty which makes it hard to support a consistent, high
yield,” said Nick Einhorn, an analyst with Connecticut-based
Renaissance Capital.

Coal generates about fifty percent of U.S. electricity.
While it is expected to remain the nation’s top power fuel for
decades, the industry faces curbs on sulphur dioxide and
nitrogen oxide emissions and at least a chance of more sweeping
restrictions from Congress.

Meanwhile, sales of steam coal, used in electricity
production, are struggling on a cost basis, said Jeff Wilson, a
mining expert at Richmond, VA-based Wilson Energy Advisors.
Steam coal is selling for around $64 per ton, according to the
industry newsletter Coal & Energy Price Report.

“The prices have drifted down and squeezed margins pretty
hard,” he said. “There is probably going to be more
consolidation rather than the advent of a bunch of new
companies getting into the business.”

Oxford cut the expected price range for its IPO by $1 in an
amended filing on July 2, in what could be a sign of investor

Another potential worry for investors is that of the $154.6
million in expected net proceeds from the IPO, only $22.1
million is going to grow the business.

The rest is being used to repay debt and expenses, pay
partners, pay out an advisory agreement, and for working
capital. Oxford is also planning to borrow an additional $86
million for the same purposes.

“I don’t think it’s a dealbreaker but it’s enough to give
an investor pause,” Einhorn said about the additional

Oxford and lawyers for the company did not immediately
return calls for comment.

Underwriters on the offering are being led by Barclays
Capital and Citigroup. The shares are expected to trade on the
New York Stock Exchange under the symbol “OXF.”

Also on deck for next week are digital whiteboard maker
SMART Technologies Inc (SMT.O: ) (SMT.TO: ), which hopes to raise
about $600.1 million; business software maker Qlik Technologies
Inc (QLIK.O: ), which hopes to raise about $100.8 million; and 3D
movie technology maker RealD Inc (RLD.N: ), whose technology was
used in the hit movie Avatar. It hopes to raise about $150.5
(Reporting by Clare Baldwin, additional reporting by Steve
James and Matt Daily; Editing by Bernard Orr)

IPO VIEW-Oxford could fall short of dividend promise