Largest coal company in the US, Peabody Energy Corporation (BTU), files for bankruptcy . The largest coal company in the United States, Peabody Energy, filed for bankruptcyon Wednesday. The company posted losses for every year since 2011, as Peabody struggled to deal with low natural gas prices and increased government regulations on coal production. Now it will likely be up to the creditors to fight over the remains of the former coal giant. As JPMorgan notes: Peabody has filed for Chapter 11 protection for the majority of its US assets while excluding all of its Australian mining operations, probably to simplify the process. The company’s mines and offices are expected to continue operating during the Chapter 11 restructuring process. The sale of its New Mexico and Colorado assets to Bowie Resources is terminated, and Bowie is expected to pay $20mn in termination fees. The lender group will provide $800mn in Debtor-In-Possession financing. The DIP facility includes a $500 million term loan, a $200 million bonding accommodation and cash collateralized $100 million letter of credit, and are subject to court approval. We feel this announcement shouldn’t surprise the market. We will be reviewing the detailed 8k filing for additional color.
Peabody Energy Corporation
CRT Research opines:
This morning, Peabody announced that its U.S. operations would be filing for Chapter 11 protection in the eastern district of Missouri. BTU’s Australian entities have been left out of the bankruptcy filings and are expected to continue to operate as going concerns. In the release, the Company disclosed that a group of secured and unsecured lenders would be providing an $800 million DIP facility comprised of a $500 million term loan, $200 million bonding facility, and $100 million letter of credit facility. With the recent drawdown of all remaining availability on the revolver (the Company had roughly $900 million in liquidity as of 3/11/16), we estimate that Peabody should have sufficient liquidity for the duration of the bankruptcy. Management also disclosed that the sale of the Colorado and New Mexico assets has officially been terminated. We expect that the Company should receive a $20 million breakup fee. The Company hired Jones Day as legal advisors, Lazard as its investment banker, and FTI Consulting as its restructuring advisor.
We are discontinuing coverage of Peabody Energy Corp. because of the company’s Chapter 11 filing and the shares’ trading suspension on the NYSE. Our final rating for BTU shares was Underweight and our final price target was $1.
See the following visualizations which highlight relevant financial figures regarding Peabody Energy, as well as the decline of oil and natural gas rigs in the United States.
Peabody Energy Corporation (BTU) Historical Stock Price
Peabody Energy Corporation (BTU) Stock Price – 2 Years
Peabody Energy Corporation (BTU) Quarterly Net Income & Profit Margin
Oil vs Natural Gas Rigs in the United States