American mining giant Peabody Energy, the world's largest private coalmining concern, may be forced to file for Chapter 11 bankruptcy protection. Chapter 11 is a legal strategy to shield a company from its creditors while it restructures. Peabody would be able to continue operating while it attempted to restructure its $6.3bn debts.
The company has stated that there is 'substantial doubt' about whether it will survive after delaying a $71m interest payment and suffering a year in which its stock fell catastrophically from a high of $299 in Q1 of 2014. The company has been driven to the brink of collapse by fast falling energy prices around the world, the relatively low price of natural gas and widespread economic uncertainty.
Peabody, based in St Louis, Missouri, is a huge presence in American and Australian mining and in the power industry where the bulk of its output is sold. But its share price dived 43%, to $2.28, on the New York Stock Exchange on 16 March when the company revealed its difficulties to the market regulator the US Securities and Exchange Commission. The company's shares had already lost half their value in the last three months and 97% over the past year.
The company said that it failed to make the $71m interest payment due on Tuesday and had a 30 day deadline to come up with the funds or there was a "substantial doubt" that it could continue as a going concern.
Peabody's core business, selling coal to electricity companies, has suffered badly during a time when many utilities are switching their supply of raw materials to natural gas because of cheaper prices and tightening environmental regulations. At the same time economic uncertainty, especially in China, which is one of Peabody's biggest markets, is further depressing demand for coal.
Falling demand has already led to three other major US coal producers, Alpha Natural Resources, Arch Coal and Patriot Coal, filing for bankruptcy protection in the last year.
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