Peabody Energy On Fumes, May File For Bankruptcy

(RTTNews) - Shares of coal producer Peabody Energy Corp. (BTU) are down more than 50 percent in pre-market activity on Wednesday after the coal producer said that substantial doubts existed whether it would be able to continue as a going concern.

Peabody noted that if it was unable to successfully implement the strategies it is pursuing to improve its operating performance and financial position, obtain alternative sources of capital, or otherwise meet liquidity needs, then it may need to voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy Code.

Peabody is the world's largest private sector coal company by volume. The company is struggling amid the fall in demand for coal as the U.S. shifts to alternative, cleaner sources of energy. The company's peers like Arch Coal Inc. and Alpha Natural Resources Inc. have already filed for bankruptcy.

In a regulatory filing, Peabody said that for the year ended December 31, 2015, it incurred a substantial loss from operations and had negative cash flows from operating activities.

In addition, the company's current operating plan indicates it will continue to incur losses from operations and generate negative cash flows from operating activities.

"These projections and other liquidity risks raise substantial doubt about whether we will meet our obligations as they become due within one year after the date of this report," Peabody said.

Further, the company said it has 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 percent senior notes due September 2020, and a $50 million semi-annual interest payment due March 15, 2016 on the 10 percent senior secured second lien notes due March 2022.

While the failure to pay these interest amounts on March 15, 2016 are not immediately an event of default under the indentures governing these notes, it would become an event of default if the payment is not made within 30 days of such date, Peabody noted.

Peabody is currently exploring alternatives for other sources of capital for ongoing liquidity needs and transactions to enhance its ability to comply with the financial covenants under its 2013 credit facility.

The company is also working to improve its operating performance as well as its cash, liquidity and financial position.

BTU closed Tuesday's trading at $4.01. In Wednesday's pre-market activity, the stock is down $2.04 or 50.87 percent to $1.97.