Peabody Energy Files for Bankruptcy in Largest Coal Industry Restructuring

By Barker, Jacob | St Louis Post-Dispatch (MO), April 14, 2016 | Go to article overview

Peabody Energy Files for Bankruptcy in Largest Coal Industry Restructuring


Barker, Jacob, St Louis Post-Dispatch (MO)


ST. LOUIS * Weeks after signaling that a heavy debt load and weak coal demand could push it into bankruptcy, Peabody Energy surprised few when it filed for Chapter 11 protection here on Wednesday.

The fall of the world's largest coal company is the starkest example of the plunge in the coal industry's fortunes over the last few years. Yet with the grace period on a skipped interest payment ending this week and the failure of a big mine sale Peabody was counting on to raise cash, the news wasn't unexpected.

"All signs were pointing to it coming," said Kris Inton, an analyst at Chicago-based Morningstar.

As a hub for big coal, the St. Louis region has been at the center of several large coal bankruptcies in recent years. Peabody's rival and the nation's second-largest coal mining company, Creve Coeur-based Arch Coal, filed for bankruptcy protection in St. Louis in January. Peabody spinoff Patriot Coal's first bankruptcy was heard here in 2012, and St. Louis-based Foresight Energy also warned of a bankruptcy risk last month.

But Peabody has been one of the more prominent corporate names in the region, especially when times were good. It is one of the largest companies headquartered in the city of St. Louis, its former CEO serves on the board of Washington University and it has sponsored numerous civic organizations.

In recent years, however, it has had to pare its giving and its downtown workforce from about 600 people to the roughly 375 who now work at its Market Street headquarters.

The decline coincided with both the rise of cheap natural gas from fracked shale fields and environmental regulations that have discouraged investment in U.S. coal plants. No new coal plants are being considered domestically, with utilities instead turning to gas plants and wind and solar energy.

The U.S. Energy Information Institute predicts natural gas will overtake coal as the top source of electricity generation this year. Already, U.S. coal production is down 32 percent from last year's levels.

Abroad, a slowdown in China and other developing economies has sapped the world's hunger for steelmaking coal from mines that Peabody paid hefty prices to acquire.

"After the acquisitions of 2011 through 2012, international coal prices began a downward cycle dropping to their lowest levels in 2016," Peabody Chief Financial Officer Amy Schwetz said in a bankruptcy filing Wednesday. "This, coupled with lower volumes, resulted in the Company's debt burden becoming unsustainable."

Peabody has $10.1 billion in liabilities and $11 billion in assets, according to a court filing.

A large chunk of Peabody's debt came from its 2011 deal to buy Australian miner Macarthur Coal Ltd. for $5.2 billion, a transaction it hoped would position it as a key supplier to Asian countries undergoing rapid urbanization.

"The debt load is for sure an issue and I would imagine the bankruptcy process here will be one of cleaning up the balance sheet," said James Gellert, CEO of Rapid Ratings International, a New York firm that evaluates companies' health and default risks. "I don't by any stretch see this as the end of Peabody. I see this as a classic restructuring."

That's what Peabody has argued its problem is a debt-induced one, it has cut expenses enough to make its operations cash-flow positive and it believes coal demand should stabilize from levels depressed by incredibly cheap natural gas. Peabody has said it will remain in St. Louis, the global headquarters for a company that even last year, its worst, managed to generate $5.6 billion in revenue.

"Peabody is open for business," company spokesman Vic Svec said Wednesday. "There are no impacts and no effects from today's announcement on jobs, on offices or on operations."

The company has secured debtor-in-possession financing of $800 million and expects to continue operating normally through bankruptcy.

However, depending on what the St. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Peabody Energy Files for Bankruptcy in Largest Coal Industry Restructuring
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.