End Of An Era: Peabody Declares Bankruptcy
The St. Louis-based Peabody Energy Corp. warned a month ago that it was considering filing for Chapter 11 bankruptcy, and on Wednesday they made it official. Peabody’s mines will continue to operate uninterrupted through the bankruptcy process. According to Peabody’s court filing, it has obtained $800 million in debtor-in-possession financing facilities.
“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,” the company said in a press release.
Peabody has suffered a dramatic fall from grace, after paying $5.1 billion to acquire major coal-producing assets in Australia in 2011. Since then, coal prices have collapsed, coal demand has ground to a halt, and Peabody’s debt has piled up. In the U.S., cheap natural gas and environmental regulation has led to coal’s downfall in the electric power sector. Abroad, a slowdown in China has hurt both thermal and metallurgical coal demand. China’s demand for steel has slowed and it is undertaking a shift away from coal because of air pollution, leaving the world’s top coal producers with a vastly smaller market than they had expected just a few years ago.
U.S. coal exports have declined in recent years, leaving Peabody – who oversees large mining operations in Wyoming – with too much coal and not enough demand. U.S. coal exports fell by 23 percent in 2015 compared to a year earlier.
Peabody’s bankruptcy is the latest in a string of bankruptcies from major coal producers, including Arch Coal, Alpha Natural Resources, Patriot Coal, and Walter Energy.
