Largest US Coal Producer Considers Filing Chapter 11 Bankruptcy
The U.S.’s largest coal producer said it might file for Chapter 11 bankruptcy after missing an interest payment due Tuesday.
Peabody Energy Corp. has joined the likes of Arch Coal and Illinois-based Alliance Coal in contemplating drastic measures to pull itself up and out of the muck and mire of a stumbling coal industry. All three Goliaths are struggling in a coal market getting pummeled by low natural gas prices on one side, and overreaching regulations on the other.
Peabody, which was marked as a bankruptcy risk by regulators Wednesday, acknowledged it bounced on a $71.1 million interest payment to its lenders, putting in place a month-long grace period.
Much like Arch Coal — which filed for Chapter 11 Jan.11, citing a dwindling demand for coal — Peabody’s lenders are asking the once-massive coal producer to restructure its debt through bankruptcy. Arch filed in hopes of keeping $4.5 billion in debt off its financial accounts.
Peabody owns and operates coalmines in the once-thriving Powder River basin in Wyoming, as well as mines in Colorado and Arizona.
Peabody managed to pump out more than 117 million tons of coal in 2014, when coal was in a slightly better market, from one of its lodestar mines, North Antelope Rochelle in Wyoming.
The Missouri-based coal producer went public with its plight a day after Foresight Energy LP, one of Peabody’s competitors, said it may also file for Chapter 11 bankruptcy if it cannot come to an agreement with its lenders.
Things are rough all over for Foresight Energy, as the energy company reported a net loss of $64.3 million during the fourth quarter of trading. By comparison, Foresight managed to churn out a profit of $31.1 million a year earlier.
Alliance Coal, for its part, has managed to keep above the fray, so far, relying on a number of shrewd moves to keep its balance sheet in the black. The company announced in February it would need to lay off 275 employees from several of its coalmines around the country.
The bulk of the layoffs — 200 — would come from Hamilton County Coal, LLC, while the remaining 75 would be balanced out between Illinois subsidiaries River View Coal, LLC and White Coal, LLC.
Like its competitors, Alliance cited the same culprits for its slow and steady fall into bankruptcy: low natural gas prices, “overreaching regulations” and a glut in coal market as the reason for the layoffs.
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