Peabody Energy, the biggest private coal company in the world, filed for Chapter 11 bankruptcy Wednesday morning, the company announced.
Citing “an unprecedented industry downturn,” Peabody said it decided to go through the bankruptcy process to reduce debt, improve its cash flow and reposition the company for the future.
Less than one month ago, the company informed the federal government that it could file for Chapter 11 bankruptcy.
“This was a difficult decision, but it is the right path forward for Peabody. We begin today to build a highly successful global leader for tomorrow,” said Glenn Kellow, president and CEO of Peabody.
“Through today’s action, we will seek an in-court solution to Peabody’s substantial debt burden amid a historically challenged industry backdrop. This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future.”
Peabody Energy is the world’s largest coal company in the private sector, and operates in 25 countries on six different continents.
Coal companies have been under immense stress in recent years as the growth in supply of natural gas and the cheap prices that followed has driven down demand for coal, and President Obama’s environmental regulations have hurt the industry at the same time. The company also cited the slowing of the Chinese economy as a reason for their bankruptcy.
It’s the second major bankruptcy in the coal industry this year. In January, Arch Coal, the second-biggest coal mining company in the U.S., declared Chapter 11 bankruptcy.
According to its filing with the Securities and Exchange Commission in March, Peabody Energy was $6.3 billion in debt and had $940 million worth of borrowing capacity at the end of 2015.
The company will continue to operate through the bankruptcy proceedings.
According to a company statement, Peabody received $800 million in financing through Citigroup and a number of other lenders to keep going, including a $500 million loan, a $200 million bond and $100 million line of credit backed by cash collateral.
The company planned to sell assets in New Mexico and Colorado, but those transactions have ended because the planned buyer could not complete the sale.
The Jones Day law firm will represent the company in the bankruptcy proceedings.
