Peabody Energy, the world’s largest coal company, warned on Wednesday that it may have to file for Chapter 11 bankruptcy if it can’t keep up with its debt payments. Peabody issued the warning in a securities filing.
The private coal company explained that demand for coal around the world and stiffer regulations raised “substantial doubt” about whether it can continue to operate outside bankruptcy. Arch Coal, Alpha Natural Resource, and the Patriot Coal Corporation have already filed bankruptcy, according to The New York Times.
Peabody Energy posted a loss of $2 billion last year. The previous year the coal company lost $787 million. The average price and amount of coal that it sold fell last year, causing revenue to fall by 17 percent to $5.6 billion. Further declines are expected this year because U.S. utilities are using less coal. There is also a lower demand for the fossil fuel from overseas markets.
While disappointing, Peabody’s warning isn’t surprising. CNN Money notes that the coal industry has faced problems in recent years, including proposed regulation from the Obama administration to cut greenhouse gas emissions from the United States’ coal-burning power plants.
Peabody Energy has been trying to negotiate a deal with its creditors for weeks to ease some of its debt payments. However, those talks have failed, forcing the coal company to consider filing for bankruptcy. Peabody reached the limit on its revolving credit line last month when it borrowed the maximum of $945 million.
Peabody reached the limit on its revolving credit line last month when it borrowed the maximum of $945 million. The company said Wednesday that it can’t make the $71 million in interest payments due that day. It has up to 30 days to make the payment or be found in default.
Peabody’s stock was trending up in recent weeks after plunging 98 percent in the past two years. The upward movement came amid hopes that Peabody Energy could sell some assets and reach a deal with creditors. The stock tumbled more than 50 percent in premarket trading following the securities filing.