Peabody files for bankruptcy

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 15 Apr 2016   Posted by admin


Peabody Energy, the world largest private sector coal company, stated that its Australian business would remain unaffected by bankruptcy proceedings.

By Reuben Adams

PEABODY Energy maintains that its Australian coal business will not be affected by a decision to file for bankruptcy in the US and all operations will continue as normal.

Peabody, in a major step to “strengthen liquidity and reduce debt,” voluntarily filed petitions under Chapter 11 for the majority of its US entities in the United States Bankruptcy Court for the Eastern District of Missouri.

The company hoped this process would help reduce its overall debt level, lower fixed charges, improve operating cash flow and “position the company for long-term success, while continuing to operate under the protection of the court process”.

Peabody’s stock market value reached $20 billion in 2011 but by April 2016 had plummeted to about $38 million, and, while many of its mines remained profitable, they were not profitable enough to service its substantial debt pile.

Peabody president and chief executive Glenn Kellow maintained that all of the company’s US operations were cashflow positive in 2015, while its Australian business earned more than the prior year despite lower coal prices.

“Through today’s action, we will seek an in-court solution to Peabody’s substantial debt burden amid a historically challenged industry backdrop,” he said.

“This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future.”

As part of the process Peabody obtained financing worth $800 million arranged by Citigroup which included participation of a number of the company’s secured lenders and unsecured noteholders.

A $500 million term loan, $200 million bonding accommodation facility and cash collateralised $100 million letter of credit facility are subject to court approval as well as limitations as set out in the company’s filings.

Peabody believed that it had sufficient liquidity to operate its business worldwide post-petition and to continue the flow of goods and services to its customers in the ordinary course.

Mr Kellow said the company would continue to take “aggressive steps to improve the business with actions consistent with its core priorities in the operational, financial and portfolio areas”.

Trading in shares of the company stock on the New York Stock Exchange was expected to be suspended immediately.