Peabody Energy Files Chapter 11 Bankruptcy
Citing the industry’s prolonged downturn, Peabody officials said the Chapter 11 fi ling will help it reduce its overall debt level, lower its fixed charges, improve the company’s operating cash flow and position it for long-term success. It intends to continue operations throughout the bankruptcy process. “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,” President and CEO Glenn Kellow said. “Through today’s action, we will seek an in-court solution to Peabody’s substantial debt burden amid a historically challenged industry backdrop.”
Peabody has obtained $800 million in debtor-in-possession (DIP) financing, an arrangement by Citigroup that includes numerous company 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. All are subject to court approval.
“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,” Kellow said.
The executive is also remaining positive on Peabody’s future, thanks to the company’s core mission. “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,” he said. “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.”
He pointed out that all of its domestic operations were cash-flow positive last year, and its Australian locations exceeded earnings year-on-year in 2015 despite lower prices for coal. Its commitment to best practices and sustainability in land restoration will also continue.
Peabody has filed first-day motions with the U.S. Bankruptcy Court to continue financial operations uninterrupted.