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World's 2nd Largest Private Coal Mining Company Files Chapter 11

Peabody says its mines will continue operating and that its operations in Australia are not included in the Chapter 11 filing.

April 13, 2016

Peabody Energy, the world's largest private-sector coal producer, has filed for bankruptcy protection in United States Bankruptcy Court for the Eastern District of Missouri. Trading on the NYSE was suspended immediately. Peabody (BTU) shares closed Wednesday at $2.07, down from its high of $299.10 in 2014. The company listed $10.1 billion in debts and $11 billion in assets, including ownership interest in 26 active mines in the U.S. and Australia. Shareholders with at least 5 percent of the company are Blackrock, Kopernik Global Investors, Vanguard Group, and Susquehanna Securities, according to the filing.

The company's filing is one of the largest in the commodities sector since energy prices began to fall mid-2014. Specific information about Peabody's filing, including court documents, motions, notice lists and creditor search are available to the public at http://www.kccllc.net/peabody

Peabody has obtained $800 million in debtor in-possession financing facilities, which were arranged by Citigroup and include participation of a number of the company’s secured lenders and unsecured noteholders. The facilities include a $500 million term loan, a $200 million bonding accommodation facility and a cash collateralized $100 million letter of credit facility, and are subject to court approval as well as limitations as set out in the company’s filings. In addition to the company’s existing cash position, Peabody believes that it has sufficient liquidity to operate its business worldwide post-petition and to continue the flow of goods and services to its customers in the ordinary course.

Peabody has filed pleadings, referred to as “first day" motions, with the U.S. Bankruptcy Court. These motions are expected to enable the company to continue, among other things, paying employee wages and providing healthcare and other benefits without interruption.

The company said unprecedented global changes and pressures in the coal industry such as China's weak economy, domestic shale gas overproduction, falling coal prices and regulatory challenges lead to their decision.

The company had warned in March that due to "sustained depressed" coal prices had battered financial results, along with exposure to the bankruptcy of former subsidiary Patriot Coal and retiree benefit costs, bankruptcy was a possibility. Peabody had posted four consecutive yearly losses, including a $2 billion loss in 2015 as revenue fell 17 percent to $5.6 billion.

Peabody was also weighed down by debt from its poorly timed $5.2 billion acquisition of Macarthur Coal of Australia in 2011, near the peak for coal prices there as Peabody underestimated Australian supplies and overestimated the growth of Chinese coal consumption.

In a statement released Wednesday, Peabody President and CEO Glenn Kellow said, "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. 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 longterm stability and success in the future .”     

Peabody also announced that the planned sale of the company’s New Mexico and Colorado assets was terminated after the buyer was unable to complete the transaction

Source: Peabody Energy

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