The world’s largest coal mining company has announced it has filed for Chapter 11 protection in U.S. Bankruptcy Court for the majority of its U.S. operations. “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 President and CEO Glenn Kellow said as quoted in the company’s press release.
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The Chapter 11 filing was made in the United States Bankruptcy Court for the Eastern District of Missouri.
Peabody said it expected its mines and offices will continue to operate during its debt restructuring process and said it had secured $800 million in debtor-in-possession financing to fund its operations.
They include Arch Coal (ACIIQ), which filed for protection on January 11, Alpha Natural Resources (ANRZQ), which filed on August 3, Walter Energy (WLTGQ) on July 15, and JW Resources on June 30.
It delayed interest-rate payments on a pair of loans and said it might not be able to continue operations without some intervention. Through this process, 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.
The industry is also caught in the crosshairs of a larger political debate over the future of coal that has flared up in the presidential contest.
The price of metallurgical coal has fallen 75 per cent since the deal and Peabody was forced to take a $700m writedown on its Australian metallurgical coal assets past year. “Coal now fuels approximately 40 percent of global electricity and is expected to be an essential source of global electricity generation and steel making for many decades to come”.
“The factors affecting the global coal industry in recent years have been unprecedented”.
New drilling techniques allowed USA energy companies to free enormous amounts of natural gas, driving prices lower.
Peabody has posted four consecutive yearly losses, including a $2 billion loss in 2015 as revenue fell 17% to $5.6 billion.
Peabody expects its fortunes to turn around as US gas prices rebound and use of thermal coal in power plants continues.
The filing leaves uncertainty around Peabody’s $1.47 billion in environmental liabilities.
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Before the bankruptcy filing, WildEarth Guardians and the Environmental Law & Policy Center sought to get Peabody’s self-bonding revoked in states including Wyoming, New Mexico and IL, saying that its finances were too poor to justify the privilege.
