Coal giant Peabody files for bankruptcy

Apr 13, 2016, 4:37 PM EDT
Coal mining.
(Source: Jeffery Scism/flickr)

Coal giant Peabody filed for bankruptcy as pressures from around the world grew too much to bear.

Reuters reports:

Leading global coal producer Peabody Energy Corp (BTU.N) filed for U.S. bankruptcy protection on Wednesday after a sharp drop in coal prices left it unable to service debt of $10.1 billion, much of it incurred for an expansion into Australia. The Chapter 11 bankruptcy filing ranks among the largest in the commodities sector since energy and metal prices began to fall in mid-2014 as once fast-growing markets including China and Brazil started to slow. Peabody, the world's biggest private-sector coal producer, said it expected its mines to continue to operate as usual and said its Australian assets were excluded from the bankruptcy. Peabody estimated its assets at $11.0 billion and liabilities at $10.1 billion as of the end of 2015, according to court documents. "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," Peabody Chief Executive Officer Glenn Kellow said in a statement.

USA Today writes:

Low natural gas prices, the sluggish Chinese economy and U.S. environmental regulatory pressure have compounded the financial pressures facing coal companies, which include costs such as pensions and retiree health care obligations, analysts say. Peabody's market capitalization peaked at about $20 billion in 2011, illustrating the swift contraction in the coal market over the last half decade. The company has about 7,100 employees globally, including 5,400 hourly workers. On Wednesday, it was $34 million. "The announcement shouldn’t come as a surprise to anyone," Rapid Ratings International CEO James Gellert, whose firm has been tracking Peabody, says. "Peabody has been on a downward trajectory for the last few years and between low commodity prices, increased regulation and a crippling debt weight, it was only a matter of time before the filed for bankruptcy." The U.S. Energy Information Administration projected that 2016 U.S. coal production will equal about 752.5 million tons, representing a 25% decline from 2014.

The Washington Post notes:

Peabody is the latest in a string of coal-company bankruptcies that have also engulfed other industry leaders, including Alpha Natural Resources and Arch Coal. The upheaval has raised concerns that the industry will not be able to afford to pay for cleanup costs related to its many mines across the country. “Bankruptcy restructuring could provide coal companies with a way of escaping obligations to restore land,” reported The Washington Post’s Steven Mufson and Joby Warrick earlier this month. However, the company said Wednesday that the bankruptcy filing “does not change Peabody’s approach toward best practices in mining and its focus on sustainability to create high-quality land restoration for generations that follow.”