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Peabody still taking steps to avoid bankruptcy

Peabody describes itself as the world's largest private-sector coal company
Peabody Energy

Updated 12:49 p.m., Feb. 11 with Peabody Energy's earnings report - St. Louis-based Peabody Energy is  still speaking with creditors and is open to more asset sales as it deals with huge debt and a deep industry downturn. It is reporting a full-year loss of slightly more than $2 billion, compared to a loss of less than half that for 2014.

Chief Executive Officer Glenn Kellow says Peabody has made several moves to improve its financial picture, include selling operations in New Mexico and Colorado, but more needs to be done.

"There is no question that the industry backdrop has been challenging.," Kellow told analysts Thursday during a quarterly conference call.

"Not to mention the fact that several of our peers have filed for bankruptcy in the last year. Peabody is not immune to these external pressures as evidenced by our earnings, cash flows and pricing of our public instruments."

The company is bracing for another tough year as the coal industry continues to deal with declining demand, mainly due to cheap natural gas prices.  The Wall Street Journal reports Peabody could reach the limit on a nearly $1.7 billion line of credit within days.

Such a move could be an effort to build up cash reserves ahead of a potential bankruptcy filing or a move by lenders to cut-off additional credit.

Updated 12:29 p.m., Jan. 25 with details of Peabody Energy debt negotiations - St. Louis-based Peabody Energy has, for the first time, provided details of ongoing discussions that could be essential to avoiding bankruptcy.

A key element is setting up a unit that could include mines and other operations in southwest Illinois, Arizona and Indiana.

The move could allow the company to establish new debt as it continues negotiations with creditors.

Failing to reach a deal with debt-holders has been cited as a main reason why St. Louis-based Arch Coal was forced to file for bankruptcy this year.

Peabody revealed the details in a filing with the U.S. Securities and Exchange Commission as it prepares announce year-end financial results on February 11.

Original story from Jan. 11 -

The coal industry has taken another hit. St. Louis-based Arch Coal has filed for bankruptcy. The move was expected and comes just a few weeks after the company delayed a $90 million interest payment and posted a $2 billion quarterly loss.

Arch Coal has also announced an agreement with lenders that could wipe out $4.5 million of debt.

"We are confident that this comprehensive financial restructuring will further enhance Arch's position as a large-scale, low-cost operator," said Chief Executive Officer John Eaves in a company statement released early Monday.

"Since the market downturn, we have taken many steps to enhance the efficiency of our operations and to strengthen our asset base."

Arch Coal says it has enough money on hand to continue mining operations and shipments as it goes through the bankruptcy process.

Analyst's Take

At least one analyst expects the company to emerge from bankruptcy leaner, but production levels could remain around current levels. Doyle Trading Consultants Chief Executive Officer Ted O'Brien says this is a balance sheet-focused bankruptcy, as opposed to a Chapter 11 filing that is designed to rein in operations.

"At this point it doesn't look like there will be any significant change to Arch's operating footprint," O'Brien told St. Louis Public Radio. His company closely monitors the coal industry.

"Things chance, but at this point it doesn't look like that will be the case."

Arch Coal Logo
Credit Arch Coal Inc.

Arch Coal has mining operations Wyoming, Colorado, Illinois, West Virginia, Kentucky, Virginia and Maryland. It employs roughly 5,000. At this point, it's not known how many people might be losing their jobs as part of the bankruptcy restructuring.

Peabody Impact

Arch Coal's decision places more focus on another major coal industry player based in St. Louis.

Peabody Energy is the world's largest private coal company and has also been dealing with a massive debt load due a drop in demand, pending federal emissions regulations and cheap natural gas.  The company has been maneuvering to avoid a bankruptcy filing.

"Peabody is doing all the pro-active steps they need to in order to shore-up their own balance sheet," said O'Brien.

"They've recently divested assets in Colorado and they are in discussions right now with creditors."

Even if it avoids bankruptcy, the coal industry's fortunes over the next couple of years do not appear to be bright. Along with pressures from a drop in demand and natural gas, utilities are not buying as much coal. O'Brien says many of them already have huge stockpiles, so further purchases at this point are not necessary.

"The U.S. industry will be much leaner at the end of this downturn than it has ever been," said O'Brien.

He does see some light after this major adjustment period.

"Once you get to a long-term stable U.S. utility demand around 600-million tons, I think there will be a sustainable U.S. industry for many, many years to come."

Follow Wayne Pratt on Twitter: @WayneRadio

Wayne Pratt is the Broadcast Operations Manager and former morning newscaster at St. Louis Public Radio.