Peabody, World's Largest Coal Producer Files Bankruptcy; 8,300 Jobs In Jeopardy

Tyler Durden's picture

One month ago we were quite amused by what at that time was one of the most ridiculous short squeezes we have ever seen when the stock of Peabody Energy, exploded higher from $2 to about $6 in days on... nothing.

Many scratched their heads at this move as nothing fundamentally had changed in the company's deteriorating operations, and its bonds are among the most distressed issues trading currently. The move was even more bizarre when just a few days later Peabody warned it may file for bankruptcy protection imminently.

And earlier today, it did just that, when in a historic event, one which is perhaps the lowlight of the sad demise of the US coal industry, U.S. coal giant Peabody Energy, the world's largest coal producer, which employs 8,300 workers, filed for bankruptcy on Wednesday, the most powerful convulsion yet in an industry that’s enduring the worst slump in decades. The stock has finally responded accordingly.

The company filed Chapter 11 petitions for most of its U.S. entities in U.S. Bankruptcy Court in St. Louis Wednesday, listing $10.1 billion in debt. All of Peabody’s mines and offices are continuing to operate and are expected to continue doing so for the duration of the process.

In the bankrutpcy statement Peabody lamented its sad fate: "The factors affecting the global coal industry in recent years have been unprecedented,” Peabody said in the statement. "Still, multiple third-party estimates project that both the U.S. and global coal demand will stabilize. Coal currently fuels approximately 40 percent of global electricity and is expected to be an essential source of global electricity generation and steel making for many decades to come."

But it is rapidly dropping, as nat gas use soars as a cleaner alternative.

The company listed debt totaling $10.1 billion and assets of $11 billion in its court filing. To help it fund operations in bankruptcy, the company has agreed to $800 million DIP loan arranged by Citigroup.  The bankruptcy leaves uncertainty around Peabody’s $1.47 billion in environmental liabilities. Under a federal law enacted in 1977, mining companies must post surety bonds or other collateral that cover future mine cleanup costs unless their balance sheets are strong enough to qualify for an exemption known as "self-bonding."

A brief timeline of the venerable company comes courtesy of Bloomberg: founded in 1883 by 24-year-old Francis S. Peabody with $100, a wagon and two mules, the miner is now the largest private-sector coal company in the world, with customers in 25 countries and about 8,000 employees, according to its website. It joins at least four other coal companies that have sought bankruptcy as the industry endures its worst downturn in decades - a result of tougher environmental policies, a flood of cheap natural gas and a global glut of metallurgical coal that’s dragged prices for steelmaking component to the lowest in more than 10 years.

BTU's default is just the beginning: "The outlook for coal players remains bleak,” said Sandra Chow, a Singapore-based credit analyst who tracks coal producers at CreditSights Inc. “Any recovery remains a long way from here."

The immediate reason for the bankruptcy is that the price of metallurgical coal has tumbled about 75% since its 2011 peak. That’s been particularly painful for Peabody, which spent $4 billion in 2011 to acquire Australia’s MacArthur Coal Ltd. in an effort to expand its sales of the steelmaking component. No Australian entities are included in the filings, and Australian operations are continuing as usual, according to the statement.

U.S. coal production peaked in 2008, at 1.17 billion metric tons. In recent years, it’s plunged and may fall to 752.5 million in 2016, the Energy Information Administration projected in its monthly Short-Term Energy Outlook released Tuesday.

In an indication of how quickly the underlying fundamentals can shift, as recently as October 2014, Peabody executives were optimistic, saying the worst might be over and investors were encouraged that coal pricing may have hit a bottom. The worst was not over, and the uptick never came.

Last year Peabody began cutting jobs and looking to sell assets. The planned sale of its New Mexico and Colorado assets was terminated after the buyer was unable to complete the transaction, according to Wednesday’s statement.

Full bankruptcy filing below

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Leveraged Algorithm's picture

Thank the Obama "folks"....

Whoa Dammit's picture

Fuck Obama and his "Clean" energy. Wind farmss that kill birds & nuclear that kills everything.

smithcreek's picture

Government induced bankruptcy, your tax dollars hard at work.

TeamDepends's picture

Change you can believe in!

jbvtme's picture

sounds like their creditors gave them the coal shoulder

Handful of Dust's picture

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

Shocker's picture

The goal is to get rid of coal... Job well done....... SAD

who is going to be next.

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

-

LowerSlowerDelaware_LSD's picture

Yet at least 50% of them will still vote for leftists (Republican, Democrat, Independent, other) to keep destroying the economy and their jobs.

Freedom, liberty, and free market capitalism work.  Crony capitalism and fascist, FREE $HIT FOR EVERYBODY, Big Government do not.

gmrpeabody's picture

Perhaps they should claim that they are disabled..., or something.

ATM's picture

They will. First the unemployment "insurance". Then EBT. Then diasability. Then SSI then we pay to bury them.

 

Save_America1st's picture

the Traitor-in-Chief's promise to bankrupt the coal industry.  Mission accomplished, apparently.

https://www.youtube.com/watch?v=DpTIhyMa-Nw

 

philipat's picture

More manufacturing and mining job losses? Never mind, manufacturing doesn't matter any more, the US is driven by services. Unquote. So my question has been for a while now WHO are all these new bartenders and waiters actually serving? An increasing share of the population can barely survive, let alone go out to eat and drink? But the Gubmin stats must be right, right?

Ghost of Porky's picture

8,300 more barristas making $15/hr.

 

Progress!

Son of Loki's picture

Well, they also get 1 Free Cup of Coffee per 8 hr shift.

Those benfits add up.

 

"Yes we can!"

boattrash's picture

Obama's "Mission Accomplished" press conference in 3...2...1...

MalteseFalcon's picture

Just another sad victim of the energy crisis.

Well I guess we'll never be energy independent now.

<sniff>

Canadian Renegade's picture

Alberta under this commie NDP government we have now is also planning to have us completely off of coal by 2030.

Slomotrainwreck's picture

The economy is too fuk'dup. One president can't handle it all. We need moar Presidents.

johnnymustardseed's picture

This didn't have anything to do with it

Peabody's debt troubles date back to its $5.1 billion 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 $700 million writedown on its Australian metallurgical coal assets last year.

Flakmeister's picture

Yeah, but it plays much better to blame Obama here...

MFL8240's picture

Why do we need jobs when we have a man who can wipe away 400,000 student loans?  He has no authority to dismiss any loans yet the Republican clown act in DC will do nothing. 

Max Cynical's picture

Another day of euphoric celebrations in the White House...

wisefool's picture

Coal, Nat Gas, Methane, Wood, Peet, Oil, Tar has been burning on Earth continously since its formation. Even before life. Life adapts.

It will take several generations for birds to adapt to windmills. For goodness sakes birds have still not entirely adapted to windows glass.

Nothing will ever successfully adapt to all the thousands of manmade radioactive isotopes.

Thanks G.E., Al Gore and Bill Gates!

MalteseFalcon's picture

"Nothing will ever successfully adapt to all the thousands of man-made radioactive isotopes."

The Hulk did.

And if comic books inform your world, then you probably believe in nukuloor power.

Hey down arrow guy, I hear north Pacific cod is on sale.  Go get yourself some.  You and your family.

ebworthen's picture

Soon as Tesla sells 500K+ Peabody will be back to burn coal to produce the electricity needed to save the environment.

Because everybody knows that burning fossil fuels, fracking, and nuclear to power "green" cars are the way to prevent pollution and save the "climate" from "change".

Nevermind that big burning orb called the Sun, has no effect on the Earth; it's just all us primates that control everything!

JRobby's picture

Get rid of the fucking stack scrubbers too!

If you want your particulate, you can keep your particulate.

ghengis86's picture

Wasn't it Obie who said he was going to bankrupt coal? Or Hildebeast? It is their plan.

NoDebt's picture

Yes, he said directly that he was going to put them down.  The coal miners, being unionized Democrats, still voted for him.  Twice.

 

Bangin7PoundCocks's picture

You didn't black that lung.

Never One Roach's picture

I calcuated if they fire 9,000 here, and another 6,000 there, the BLS can drop the "official" unemployment number down to 2.8%.

 

It's paradoxical Dem arithmetic!

Restorative_Ally's picture

Could you imagine how much we could all gain if only ONE of those 8300 had nothing to lose?

venturen's picture

you make it up in programmers and bartenders....didn't you know?

JRobby's picture

 "The coal miners, being unionized SHEEP, still voted for him.  Twice."

corporatewhore's picture

It was her ladyship.  But it doesn't matter because a baby has no rights until breathing and abortion "rights" are so much more important .  In fact she has a position paper on womyn's rights.

MasterControl's picture

Oh good this means unemployment should go down.

firstdivision's picture

Good.  This country will not move off of shitty outdated methods unless pushed while kicking and screaming.  Now we can get investments going for thorium reactors. 

More Ammo's picture

Bombs are the reason it will never happen here. 

 

 

The vid says Thorium is hard to get and that is because it is highly regulated 1) to stop raw earth mining in the US  2)to keep it out expermental hands evn though it is not dangerously radioactive.

 

China has tons of the stuff and are going all hog to develop viable reactor solutions.

Rusty Shorts's picture

Nuclear power would have never been developed for civilian use because it is cost prohibitive, it is totally about military use..as per video. Secondly, the biggest problem facing nuclear power today is the severe shortage of Uranium...which is required for Thorium reactors...again cost prohibitive.

 

How severe is the Uranium shortage??? Finnish Nuclear engineer Arto Lauri explains..

https://www.youtube.com/watch?v=sSQdB3myW9M

onewayticket2's picture

"prices will necesarily skyrocket."  - obama 2009

 

he's had it out for coal since day 1.

 

http://money.cnn.com/2015/08/03/investing/coal-obama-climate-change/

XAU XAG's picture
8,300 Jobs In Jeopardy

 

What state does this town Jeopardy reside?

 

They sure are creating alot of jobs!

 

/S

Handful of Dust's picture

Those coal states will have alot of barristas!

Charles Nelson Reilly's picture

West Virginia may have a total of 2 Starbucks. They have been utterly decimated by the progressive liberal elites.

HectorCamachoTrump's picture

"
West Virginia may have a total of 2 Starbucks. They have been utterly decimated by the progressive liberal elites."

A quick google check pretty much destroys your first sentence.
Your second sentence proves you are functionally retarded.

Please don't let your children breed, if you had any.