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Peabody Energy Files For Bankruptcy With $800M DIP Loan In Hand

Peabody Energy today filed for Chapter 11 in bankruptcy court in St. Louis, Mo., the company announced, citing an “unprecedented industry downturn.”

The company said that NYSE trading in its shares is expected to be suspended immediately, pursuant to exchange regulations.

In connection with the filing, the company said it obtained an $800 million DIP facility comprised of a $500 million term loan, a $200 million bonding accommodation facility, and a cash collateralized $100 million letter of credit facility. DIP lenders include “a number of the company's secured lenders and unsecured noteholders,” the company said, adding that Citigroup arranged the loan.

Peabody also announced that the planned sale of the company's New Mexico and Colorado assets was terminated after the buyer was unable to complete the transaction.

The company said its mines and offices are expected to continue operations in the ordinary course of business during the Chapter 11 process. The company’s Australian units are not included in the filing. With respect to the factors affecting the global coal industry in recent years, the company cited a dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas, and ongoing regulatory challenges.

That said, the company also looked forward to a post-reorganization environment, noting that “multiple third-party estimates project that both the U.S. and global coal demand will stabilize,” and adding, “Globally, thermal coal is expected to continue to fuel hundreds of existing coal generating plants as well as scores more that are under construction. Coal currently fuels approximately 40% of global electricity and is expected to be an essential source of global electricity generation and steel making for many decades to come."

Further, the company said, U.S. gas prices are projected to rebound from recent lows. "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," said Glenn Kellow, the company’s president and CEO, in a statement. "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." Last, but not least, the company noted that its U.S. operations were cash-flow positive in 2015, and that the Australian platform earned more than the prior year despite lower prices for coal and the company's administrative expenses and capital investments were at the lowest levels in nearly a decade.

The company said Jones Day is its legal advisor, Lazard Fréres & Co. is its investment banker and financial advisor, and FTI Consulting is its restructuring advisor. Peabody Energy is the world's largest private-sector coal company. — Alan Zimmerman

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