US coal miner Peabody Energy mulls filing for bankruptcy protection
17 March 2016
US-based Peabody Energy, the world's largest private-sector coal miner, yesterday said it was considering filing for bankruptcy protection.
The potential move comes barely two months after Arch Coal, the second-biggest US coal miner, filed for bankruptcy.
Peabody, which in 2011 acquired Australia's Macarthur Coal for $4.9 billion, missed a $71 million debt payment and has invoked its 30-day grace period to avoid defaulting.
The company said it had enough funds for now, but "may need to voluntarily seek protection under Chapter 11 of the US Bankruptcy Code".
Peabody, based in St Louis, which has a $6.3-billion debt, said in a filing with US Securities and Exchange Commission that it had delayed an interest-rate payment on two loans, which triggers a 30-day grace period, and in case of default of making the payments within 30 days, default would be declared.
Although the company has around $900 million in cash reserves, it said, "We may not have sufficient liquidity to sustain operations and continue as a going concern," Peabody told investors yesterday.
''As previously announced, the company continues to address the challenges of the current industry environment by focusing on its three core priorities: operational, financial and portfolio. Within the financial area, the Company has dual objectives of preserving liquidity and reducing debt. Actions related to these objectives have included extensive discussions with debt holders, and the company expects to have further discussions with lenders,'' it said in the filing.
Peabody reported a loss of $2 billion last year, up from a $787 million loss the previous year, while revenue fell by 17 per cent to $5.6 billion.
Shares of Peabody, which had already fallen by 98 per cent in the past two years, tumbled by 45 per cent to just $2.19 following its announcement yesterday.
US coal miners are currently in the doldrums battling high debts, low energy prices and new US environmental regulations from the Obama administration to cut greenhouse gas emissions from coal-fired power plants.
These problems have become bigger with the decline of steel production, and the use of natural gas due to the abundance of shale oil in the US.
Although the new greenhouse gas emissions regulations have been put on hold by the US Supreme Court, the industry faces a slowing economic growth in China, which has been a major market for US coal.