Newspaper article St Louis Post-Dispatch (MO)

Peabody Energy Increasingly on Shaky Ground

Newspaper article St Louis Post-Dispatch (MO)

Peabody Energy Increasingly on Shaky Ground

Article excerpt

No one was expecting good financial results as Peabody Energy limped to the end of another year.

But the St. Louis-based coal company appeared to surprise even analysts and investors all too aware that the industry's struggles may yet topple the country's largest coal miner.

Peabody shares plunged 30 percent shortly after it released fourth-quarter results that capped off a year in which it lost more than $2 billion.

Its stock closed Thursday at $2.35, down $1.01, after losing almost half its value in the last five days. Its bonds are trading at pennies on the dollar. Its attempts to sell assets and negotiate debt with lenders don't appear to be persuading investors it won't join Alpha Natural Resources and Creve Coeur-based Arch Coal in bankruptcy court.

"We remain unconvinced that these efforts are sufficient and continue to feel a Chapter 11 filing for Peabody is highly likely," analysts for J.P. Morgan wrote in an investment note Jan. 21.

Perhaps surprising investors, Peabody disclosed Thursday that it had tapped what remained of a $1.65 billion revolving credit facility, borrowing the last $825 million available just this month.

With the revolver drawn down, "what other lever do they have to pull?" said Kris Inton, a Morningstar analyst.

"That was kind of a shock, too," he said. "At this point, liquidity is everything because it's really going to determine how long they can wait for coal prices to improve and (natural) gas prices to increase."

Peabody is struggling to stay afloat as its peers in the coal industry file for bankruptcy amid a years-long crash in coal prices. Domestic utilities are shifting to cheap natural gas and renewable energy amid tightening environmental regulations on dirty coal. More recently, the global slowdown in emerging markets has battered prices for most commodities, making a comeback for coal look even less imminent. …

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