Peabody Energy Files Chapter 11 Bankruptcy for U.S. Operations
"A company like Peabody with safe, efficient operations will be well positioned to serve coal demand that will continue in the United States and around the world," said Peabody President and CEO Glenn Kellow.
St. Louis-based Peabody Energy, which describes itself as the world's largest private-sector coal company, voluntarily filed bankruptcy petitions under Chapter 11 for most of its U.S. entities in the United States Bankruptcy Court for the Eastern District of Missouri on April 13; its Australian operations are not involved. The company serves metallurgical and thermal coal customers in 25 countries and said the filings will allow it to reduce its overall debt, lower fixed charges, and improve operating cash flow.
"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 CEO 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."
Those challenges "include a dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas and ongoing regulatory challenges," according to the company.
Peabody's news release said the company has obtained $800 million in debtor-in-possession financing, including a $500 million term loan, a $200 million bonding accommodation facility, and a cash-collateralized $100 million letter of credit facility, which are subject to court approval as well as limitations as set
out in the company's filings. It also said that the planned sale of the company's New Mexico and Colorado assets was terminated after the buyer was unable to complete the transaction.
"A company like Peabody with safe, efficient operations will be well positioned to serve coal demand that will continue in the United States and around the world," said Kellow. "We are a leading producer and reserve holder in our core regions of the Powder River Basin, Illinois Basin, and Australia. Peabody has a new management team, outstanding workforce, unmatched asset base, and strong underlying operational performance that represent a key driver in the company’s future success."
The company also reported that all of its U.S. operations were cash-flow positive last year, the Australian platform earned more than the prior year despite lower prices for coal, and the company's administrative expenses and capital investments were at the lowest levels in nearly a decade. According to information on the company's website, it set a new record for safety in 2015 with a 13 percent reduction in its global incidence rate, to 1.25 per 200,000 hours worked for employees and contractors, and also delivered $5.61 billion in revenues for the year, leading to adjusted EBITDA of $434.6 million while improving Australian costs per ton by 24 percent and U.S. costs per ton by 5 percent.