Peabody May Need Bankruptcy Protection Due to Coal Rout
- Updated: March 16, 2016
The largest coal miner in the United States, Peabody Energy Corporation announced on Wednesday that is might not be strong enough financially to stay in business in the form it current is and that it might have to file for bankruptcy protection.
The ability of Peabody to operate moving forward as a “going concern” is now in doubt, said the company in one of its regulatory filings on Wednesday with the United States Securities and Exchange Commission.
The company, based in St. Louis has been throttled by the worst downturn in the coal market in many decades. It is seeking ways it can ease it current debt burden as its rivals such as Arch Coal Inc and Alpha Natural Resources filed for bankruptcy protection.
In the past few months, Peabody has struggled with closing the sale of three of its coal mines to Bowie Resource Partners, as well as renegotiating its terms of repayment with creditors.
The coal miner elected not to pay a semi-annual coupon payment of $71 million that was due on Tuesday. The lack of making that payment entered the company into a grace period of 30 days to make the payment.
Interest is due also on a $1 billion of 10% lien notes that are maturing March of 2022 and its unsecured bonds of $650 million at 6.5% coming due September of 2020.
Peabody stock was down 49%, its biggest drop ever, in trading intraday in New York. Its shares in late morning trading were off by 43%. They have lost over 97% in value the last year.
Peabody warned it might have to include the going concern language within its filing. However, it said it might seek a waiver from its lenders in order to not default on their credit agreement.
On Wednesday, company officials said that the consolidated earnings prior to taxes, interest, amortization and depreciation would likely be too low in order to comply with the financial covenants on March 31.
Peabody has been pressured by Franklin Resources a money manager to restructure its debt of $6.3 billion in court.
The plan of Peabody to sell three of its mines ran into a snag amidst the slump in prices of coal and the souring outlook in credit markets, said people close to the sale.
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