Peabody Energy voluntarily filed petitions under Chapter 11 for the majority of its U.S. entities in the United States Bankruptcy Court for the Eastern District of Missouri. According to the petition, the company intends to 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 has obtained $800 million in debtor-in-possession financing facilities, which were arranged by Citigroup and include a number of the company’s secured lenders and unsecured noteholders. The facilities include a $500 million term loan, a $200 million bonding accommodation facility and a cash collateralized $100 million letter of credit facility. These are subject to court approval and limitations set out in the company’s filings. In addition to the company’s existing cash position, Peabody believes that it has 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.
All of the company’s mines and offices are continuing to operate and are expected to continue doing so for the duration of the process. No Australian entities are included in the filings, and Australian operations are continuing as usual.
“This was a difficult decision, but it is the right path forward for Peabody. We begin today to build a highly successful global leader for tomorrow,” said Peabody president and chief executive officer Glenn Kellow. “Through today’s action, we will seek an in-court solution to Peabody’s substantial debt burden amid a historically challenged industry backdrop. 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.”
Peabody’s planned sale of the company’s New Mexico and Colorado assets was terminated after the buyer was unable to complete the transaction.
The factors affecting the global coal industry in recent years have been unprecedented. Industry pressures in recent years include a dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas and ongoing regulatory challenges.
Still, multiple third-party estimates project that both the U.S. and global coal demand will stabilize. Coal currently fuels approximately 40% of global electricity.