TEXT-Fitch affirms Peabody Energy Corp ratings

May 10 - Fitch Ratings has affirmed Peabody Energy Corporation's
(Peabody, NYSE: BTU) Issuer Default Rating (IDR) at 'BB+'. A complete list of
ratings appears at the end of this release.

The Rating Outlook is Stable.

Peabody's credit ratings reflect large, well-diversified operations, good
control of low-cost production, strong liquidity and moderate financial
leverage.

Demand for metallurgical coal and steam coal in Asia is expected to remain
stable. In 2011, the Australia Mining Segment accounted for 46% of segment
EBITDA. Steam coal demand in the U.S. is currently weak and is expected to
remain so through 2013. Regulatory uncertainty about carbon emissions has
stalled plans for many new U.S. coal plant builds, which will cap domestic steam
coal demand in the medium term. Margin expansion in the domestic steam coal
business will be difficult given that cost inflation is not expected to be
offset by productivity gains.

Liquidity at March 31, 2012 was strong with cash on hand of $952.4 million and
availability under the company's revolver of $1.5 billion (only $21 million of
L/Cs drawn). Total debt with equity credit/operating EBITDA for the latest 12
months (LTM) ended March 31, 2012, was 3.0 times (x). Peabody has substantial
legacy liabilities and adjusted leverage is 3.8x.

Capital expenditure guidance for 2012 is $1.1 billion-$1.3 billion. Interest
expense is expected to be about $400 million for the year. Fitch expects EBITDA
of at least $2.0 billion and that negative free cash flow could be $140 million
for 2012.

Scheduled maturities of debt are $101.1 million in 2012, $121.9 million in 2013,
$107.8 million in 2014, $458.5 million in 2015, and $1.5 billion in 2016.
Peabody should remain well within its credit facility financial covenants of a
maximum consolidated leverage ratio of 4.0x and a minimum interest coverage
ratio of 2.5x. Fitch expects that total debt with equity credit/operating EBITDA
could peak at 3.5x in 2012.

The Stable Outlook reflects Fitch's expectations that Peabody will continue to
invest to the extent of its cash flow after scheduled debt repayment and that
total debt with equity credit/operating EBITDA will remain below 3x on average
over the next 18-24 months.

Fitch would consider a negative rating action if leverage remains above 3.5x and
free cash flow generation is negative for more than 12 months. Fitch would
consider a positive rating action if there were a commitment to manage the
capital structure to a lower financial leverage longer-term.

Fitch has affirmed Peabody's ratings as follows:

--IDR at 'BB+';
--Senior unsecured notes at 'BB+';
--Senior unsecured revolving credit and terms loan at 'BB+';
--Convertible junior subordinated debentures due 2066 at 'BB-'.