Largest U.S. Coal Producer Skips Interest Payment, Warns Of Bankruptcy; Stock Crashes

Tyler Durden's picture

One of the more impressive short squeezes in recent history took place in the first two weeks of March, when the stock of distressed Peabody Energy, the largest U.S. coal producer which employs 8,300 workers, exploded higher from just $2.50 per share at the start of the month to a whopping $6.50 just last week.

 

Many scratched their heads at this move as nothing fundamental had changed in the company's deteriorating operations, and its bonds are among the most distressed issues trading currently (with upcoming interest payments as we profiled last night).

Alas Peabody missed its narrow window to sell stock, and things were promptly normalized this morning, when the stock crashed back to earth plunging by nearly 40% back to $2.50 in the pre-market, wiping out all recent gains, after Peabody announced in its just filed 10-K, reported that it may have to join its peers Arch Coal and Alpha Natural in 11 bankruptcy protection, after it delayed $71 million in interest payment due on March 15.

As caught first by Bloomberg, Peabody’s auditor said there’s uncertainty about the company’s ability to keep running as a “going concern,” a 10-K filing with the U.S. Securities and Exchange Commission shows. More importantly, the company reported it will exercise the 30-day grace period on a $21.1 million semi-annual interest payment due March 15 for 6.5 percent senior notes maturing September 2020, and a $50 million payment for the same date on 10 percent notes due March 2022.

Here is the relevant section:

As a result of operating losses and negative cash flows from operations and our election to exercise a 30-day grace period with respect to certain interest payments, together with other factors, including the possibility that a covenant default or other event of default could cause certain of our indebtedness to become immediately due and payable (after the expiration of any applicable grace period), we may not have sufficient liquidity to sustain operations and to continue as a going concern.

 

We incurred a substantial loss from operations and had negative cash flows from operating activities for the year ended December 31, 2015. Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities. These projections and certain liquidity risks raise substantial doubt about whether we will meet our obligations as they become due within one year after the date of issuance of this report. We have also elected to exercise the 30-day grace period with respect to a $21.1 million semi-annual interest payment due March 15, 2016 on the 6.50% Senior Notes due September 2020 and a $50.0 million semi-annual interest payment due March 15, 2016 on the 10.00% Senior Secured Second Lien Notes due March 2022, as provided for in the indentures governing these notes. Failure to pay these interest amounts on March 15, 2016 is not immediately an event of default under the indentures governing these notes, but would become an event of default if the payment is not made within 30 days of such date. As a result of these factors, as well as the continued uncertainty around global coal fundamentals, the stagnated economic growth of certain major coal-importing nations, and the potential for significant additional regulatory requirements imposed on coal producers, among others, there exists substantial doubt whether we will be able to continue as a going concern.

The company also said that in February 2016 it borrowed approximately $945 million under the 2013 Revolver, the maximum amount available, for general corporate purposes. The company's lender banks will surely be excited that they are about to see another $1 billion in secured loans promptly impaired in one month when BTU has no choice but to file for bankruptcy.

Peabody, which flagged bankruptcy risk under the "risk factors" section of a regulatory filing on Wednesday, said it skipped a $71.1 million interest payment on its senior notes, kicking off a 30-day grace period. The company also raised "substantial doubt" about its ability to remain a going concern.

Peabody's lenders are pushing the company to restructure its debt through bankruptcy but the company has also been pursuing bond exchanges. As Reuters calculates, as of Dec. 31, the company had a total debt of $6.3 billion and cash and cash equivalents of $261.3 million.

As we reported last night when looking at the 100+ bonds trading at 30 cents or less with interst payments due in the next 6 months, the eye of the hurricane is about to shift away and the dire situation facing U.S. energy companies is about to be revealed when one after another after another company follows in Peabody's footsteps and elects to not make upcoming bond payments, ushering in a tidal wave of defaults which we expect will hit U.S. capital markets around late spring, early summer. The full list of soon to be insolvent issues can be found here.

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overmedicatedundersexed's picture

coal miners for obuma & Hillary, vote dem you stupid fucking jerks..

Stu Elsample's picture

Yep. The ignorant union clowns are going to pay dearly for their stupidity in the voting booth.

El Dorado's picture

It's no different on the iron range in northern Minnesota. Those northern counties are blue every election season simply because of the unions.

i_call_you_my_base's picture

The Republicans will surely save them.

El Dorado's picture

I do appreciate your sarcasim and do not hold faith in either party to do anything that is right for me, my family or this country.  However maybe I should provide a little more context as to the point I was making and what I assumed stu was eluding to.  

Minnesota miners vote much like many of their fellow miners in the coal mining states that don't have right to work laws.  That is, they vote for a democrat, typically the same party that opposes further resource development and intern reduces these miner's future job prospects.

Although in the context of this article, cheap natural gas is just as responsible for the demise of the coal industry as labor unions and Obama's war on coal.  

Nutsack's picture
Nutsack (not verified) El Dorado Mar 16, 2016 8:51 AM

What HASN'T the racist homosexual muslim kneegrow lied about?

 

1) 'I will kill clean coal'

2) "I'll stand with islam"

3)

4)

5)  Anything else?

Shocker's picture

This is a big deal, its not just a small retail location. This is a major coal company

Sad times

Layoff / Closing List: http://www.dailyjobcuts.com

-

dontgoforit's picture

The George Soros/Barak Obamma slaughter is reaping its fruits.

WillyGroper's picture

yup, Gyorgy is scooping up both Arch & Peabody.

shameless thieves.

FireBrander's picture

"Sad Times"?

 

Coal is SO 1800's....geesh, your Grandpa was probably "sad" to see whale oil lamps replaced with light bulbs as it ruined the whaling industry...

Alternative, and yes, green, energy is the real deal. Iowa will hit 60% of it's electrical needs from WIND in 2017 with coal as a backup/complimnet source. Hopefully, we can replace the need for coal with a Thorium reactor once the "Coal Industry" is totally busted...as it stand now, Coal still has the money to BUY politicians and block, as much as possible, ANYTHING that reduces coal usage. Sadly, the "coal industry" has chosen to "die fighting" rather than "join the enemy" despite it's hopeless cause.

SantaClaws's picture

Anthracite coal is an excellent heating fuel.  And Blaschak, which produces clean anthracite, is an incredible anthracite brand.  See http://www.blaschakcoal.com/  When you burn coal, you are burning the natural gas contained in the coal.

 

Here in the northeast, using anthracite coal, I didn't have to use any fuel oil this winter.

 

Destroying the coal industry is one of the stupidest things the Democrats have done, which says a lot.

FireBrander's picture

"Democrats destroyed the coal Industry" ...What an absolute bunch of fucking hogshit.

 

1. Republicans run Congress!

2. Republicans can "save" the coal industry.

3. You are FULL OF SHIT if you think "Democrats destroyed the coal Industry"

4. The coal industry destroyed the coal industry...they're modern day whale oil distributors...

Wind is replacing coal in Iowa for electricity generation. Iowa will use coal as a supplement rather than a main sourse of fuel...there is NO reason to be so dependent upon coal; it has it's place, but it's no longer firt place.

BuddyEffed's picture

It's more likely that resource depletions are what's hurting the coal (and other) business models.

See this comment for detailed reasons and rationale :

http://www.zerohedge.com/news/2016-03-03/bill-gross-previews-financial-a...

Tall Tom's picture

Thorium Reactors are an unproven technology.

 

http://singularityhub.com/2012/12/11/norway-begins-four-year-test-of-tho...

 

We have no capital remaining and have run out of time,

 

Thank your President for all of that. Solyndra was a fraudulent boondoggle.

 

The entire  Narion's ability to produce fuel and ever become energy independent is now a pipe dream.

 

Nobody other than China or other SOCIALIST Nation States will even attempt it,

 

There is NO TRUST thanks to the cronyism from Obama's absolute mismanagement and corruption through his corrupted Department of Energy.

 

He served only to destroy this Nation..

 

He was successful in what he set out to do.

 

We will violently revolt before we ever accept socialism.

FireBrander's picture

You are so full of shit Tom it's astounding.

8 years of Obama....6 YEARS of that with REPUBLICANS in charge of the Congress.

CONGRESS is where the power, the money and the law writers reside! MOST of what ANY President does is just SIGN OFF on what CONGRESS puts on his desk! And ANYTHING the President does without the APPROVAL of CONGRESS, can be stopped by CONGRESS in one way or another with the nuke option being impeachment!

If "Obama has destroyed this nation", he did it with the FULL SUPPORT of the REPUBLICAN PARTY.

Pull your head out.

Countrybunkererd's picture

I can't argue that the Repub's have done anything right but YOU need to pull your head out of your ass.  From a current and a retired engineer in the NE i know that a majority of the windmills in PA just spin and aren't producing power.  They broke within the first year of operations and are spinning to create the illusion they are still fine.  How is your utility bill?  Mine went up 18% last year and will go up 10% as of the notice i received this month sometime this summer.  How do you suppose that a company can pay 30-50 percent MORE in electricity when, for example, China builds a coal plant a month WITHOUT CLEAN SCRUBBERS mind you, and still pay a decent wage to their employees?  Those same employees also pay the increase in electricity as well...working longer hours with no raises if they keep their job going forward.

The pipe dream of America becoming some green energy economic powerhouse will never happen.  Even Europe is going back to coal use.  And we want electric cars charged from the mains to stop CO2?  Why is it Ford sells a diesel hatchback with incredible fuel economy in E-Rope but not in N.A.?  Idiots passing laws.

As far as coal goes there is a direct and steady push by EPA and MSHA that i also know directly from some who own coal companies.  Since Odumb@$$ started their visits/audits/ or just say taxes and penalties have gone up a staggering amount.

I am all for increased efficiency in all things but it must be driven by the dollar not from poorly written, and even more poorly understood laws from idiots who were raised to think they know best for all.  American exceptionalism, yep, we are racing toward an exceptional crash in our standard of living.  As the bearded man selling clothes once said...i guarantee it.

WillyGroper's picture

Lockheed...that's a shocker.  What no drug $$ ?

Dow's seed production made me happy.  Hope they die.

Mr. BaGoggles's picture

Wow, you're a racist, misogynist, what else? Homophobe?

You've pretty well got all the hatred bases covered, don't you?

bamawatson's picture

banal sophmoric superficial pointless insipid drivel

MalteseFalcon's picture

We reached diminishing returns on identity politics about 25 years ago.

Time to focus on the ills of globalization: endless war and the gutting of America's economy and infrastructure.

After that we can return to constructing you a safe space.

Countrybunkererd's picture

They can build their own damn safe spaces and learn that others don't have to pay for their dreams, however misguided those dreams are.

AlaricBalth's picture
Because sometimes the truth oozes out of these vipers... "Clinton Says She'll "Put a Lot of Coal Companies and Coal Miners Out of Business"

http://www.motherjones.com/blue-marble/2016/03/hillary-clinton-will-prob...

Oldwood's picture

And does anyone think they are not also trying to kill oil? Look at the state of American....(as well as the rest of the world oil) companies.

Nothing is an accident.

A systematic destruction of our economy, especially with green issues as it is one area they can make their destruction appear as a meaningful sacrifice. Look at how this works....all of it about sacrifice of our individual liberties and financial security for the collective, leaving everyone to wonder what or who IS the collective that actually benefits.

Never One Roach's picture

What Clinton meant to say [and Obama has already done to a large extent]:

 

"Clinton Says She'll "Put a Lot of Energy Companies and Engineers and STEM Graduates Out of Business"

FireBrander's picture

By the day, it is becoming easier and cheaper, to generate "oil" from algea...

 

Initially, it was $100 a gallon, then $50, then $25, then $15 and now it's $7.50 and the next drop, once known obstacles are overcome, is $3, possibly $2...

http://www.biofuelsdigest.com/bdigest/2014/10/13/where-are-we-with-algae...

http://www.news.iastate.edu/news/2013/06/28/algaeproduction

Stares straight ahead's picture

I agree!
If our economy keeps tanking, these alternative energy sources should more than be enough for our diminishing needs.
Add the declining manufacturing jobs to our proposal to take out 50% of the population, and we might even be able to generate 80% of our energy needs from manure tea houses.

skeelos's picture

What they don't tell you is that the price assumes the same taxpayer subsidy as ethanol but the algoil price is for crude not refined which makes the quoted price seem even more attractive than it really is.  Lies, and more lies from people who have a vested interest in lying their way into your wallet.

headhunt's picture

the primary coal killer are the new EPA regulations on coal.

It is actually far more efficient and better for the environment to burn a combination of natural gas and coal to generate electricity.

To use one over the other only because coal has be demonized by the retarded left is stupid - but that is what retards and commies do.

HardlyZero's picture

In order to reduce our "footprint" they either request we abort or self-abort our existence.  Since war isn't coming to reduce the populations...  sad and taxing days.

The Coal and Oil will stay there and can be tapped later when the population rises again in the future and natural demand occurs.

MFL8240's picture

You will never make sense with a fool!

cheech_wizard's picture

No, but the bankers will surely pick up their remaining assets for pennies on the dollar.

Standard Disclaimer: I woke up this morning to find not a single banker hanging from a lamppost. Thinking I'll go back to bed.

Kirk2NCC1701's picture

No, China's Oligarchs will save them, when they buy them for 10 cents on the dollar.

Their global and US buying of key Real Assets and companies continues.

Gold Tyler, now tell us about that Gold Surge again. All I see, is the Blue Light Special.

VinceFostersGhost's picture

 

 

coal miners for obuma & Hillary

 

Hey, they said "Yes We Can".......that was good enough for us.

 

In retrospect....we probably should have asked what that actually meant.

NoPension's picture

Democrats are the worker's party.

Son of Loki's picture

But Pelosi and Obama promised to "retrain" these coal miners to be Barristas at Starbucks, right?  That's part of Barry's Transpacific Trade Pact..."retraining." 

 

I'm sure they'll enjoy getting out of those deep mines under the earth and take pleasure in making a Double Mocha Frappachino with Whipped Cream and Sprinkles for the bankers and progressive yuppie protesters in their town, the same yuppies who freed them from the mines by shutting them down.

 

"And pleeze don't forget to make that milk no-fat."

 

"I'm on a diet."

Anti-kleptocrat's picture

They can always commute to a nice auto job in Mexico ... 

DeathMerchant's picture

Those jobs were placed on the do not recommend list as the premium cost for kidnap insurance was more than the wages.

847328_3527's picture

Bill Clinton promised "retraining" as part of his destructive NAFTA. The Dem/Rep Congress allotted zero money for the retraining budget so do you know how may jobless Americans were "retrained?"

 

Zero.

Mr. Bones's picture

Democrats [said they were] the workers party.  What have they actually done lately?

Falconsixone's picture

They only work at skating the system.

Never One Roach's picture

Hopefully the coal miners were savers.

 

..oh, wait a sec...

 

Fed policy has cost savers nearly $8 billion, study finds

 

 

http://www.msn.com/en-us/money/markets/fed-policy-has-cost-savers-nearly...

 

"We ZIRP'ed some folks."

DeathMerchant's picture

Allowed thousands more illegal and H1-B visa workers to enter the country, hence the workers party thing.

Never One Roach's picture

It's the most painful party I've ever seen.

HardlyZero's picture

Roman Empire did the same as their aristocrats required labor and they minimized the middle class away.  The demographics require imported cheap labor when the middle class is hollowed out.

Countrybunkererd's picture

And serious social unrest follows every nation that can't pay decent wages.

Oldwood's picture

Democrats are the party of the mentally weak. This is why they resent the church, as THEY want to be God. People of religion often believe that their actions on this earth matter little as long as they profess their love and commitment to God. This is also the American worker who believes that they can buy foreign made goods, hire illegal workers and depend on unions to protect their jobs and wages because they pray to the gods of the democratic party.

There is nothing wrong with the principles of religion or democratic platforms as long as they are allowed to reconcile with reality. To ignore your true circumstance and responsibilities in the faith that that simply BELIEVING will provide is simple madness or stupidity.

Politics IS our national religion

skeelos's picture

The top ten coal producing states in the US in descending order:  WY, WV, KY, PA, TX, MT, IL, VA.  Of those ten states, the electoral college results were the same in both 2008 and 2012.  Obama carried PA, IL, and VA.  The Republican carried the other seven.

thecondor's picture

Exactly what Obama wanted. To cquote our dear leader "we bankruptcy'd some folks"

CheapBastard's picture

"If you want to keep your coal mining jobs, you can keep your coal mining jobs. I promise!"

 

~ Soweto Hussein Obama

Budnacho's picture

"Gee Mr Peabody, you're increbible!"