Firm cannot service debt built up to expand into Australia as coal prices fall
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| Trains filled with coal leave Peabody’s North Antelope Rochelle Mine in Wyoming. Photograph: Mae Ryan for the Guardian |
Peabody Energy, the world’s largest privately owned coal producer, has filed for US bankruptcy protection in the wake of a sharp fall in coal prices that left it unable to service a recent debt-fuelled expansion into Australia.
The company listed both assets and liabilities in the range of $10bn (£7bn) to $50bn, according to a court filing on Wednesday.
Peabody’s chapter 11 bankruptcy filing ranks among the largest in the commodities sector since energy and metals prices began to fall in the middle of 2014 as once fast-growing markets such as China and Brazil began to slow.
Peabody’s debt troubles date back to its $5.1bn leveraged buyout of Australia’s Macarthur in 2011, a coveted asset at the time meant to position it as a supplier of metallurgical coal for Asian steel mills.
But as demand for metallurgical coal fell, particularly in China, Peabody’s financial woes intensified. It made a $700m writedown on its Australian metallurgical coal assets last year.
Producers accounting for about 45% of US coal output have filed for bankruptcy in the current industry downturn, based on 2014 government figures.
“This was a difficult decision, but it is the right path forward for Peabody,” the chief executive, Glenn Kellow, said in a statement. “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 has secured $800m in debtor-in-possession financing from both secured and unsecured creditors, including a $500m term loan, $200m bonding accommodation facility and a letter of credit worth $100m, the company said in its release.
The case has been filed in the US bankruptcy court for the eastern district of Missouri, St Louis.
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