NEW YORK/CHICAGO, March 1 (Reuters) - Peabody Energy Corp’s lenders are pushing the largest U.S. coal producer to restructure its $6 billion in debt through bankruptcy, the company said in a filing on Monday night.
Peabody is pursuing bond exchanges to deal with its debt as coal prices decline. Its lenders are concerned that Peabody is not pursuing an in-court restructuring, according to the filing.
“Peabody continues to take a number of steps to improve the business amid the prolonged industry downturn, including pursuing the best alternatives to achieve our financial objectives,” the company said in an emailed statement in response to a request for comment on the filings.
Peabody has been trying to sell coal mines in New Mexico and Colorado to privately owned Bowie Resource Partners LLC to raise $358 million cash and relieve it of certain liabilities tied to the mines, according to a statement on Nov. 20, 2015.
Calls on Tuesday to Bowie for comment were not immediately returned.
A person close to the deal for the coal mines, which has a March 31 deadline to be finalised, said on Monday that Bowie’s financing had been temporarily shelved.
Private equity firm Blackstone Group LP also committed to an equity investment for Bowie’s acquisition if enough debt could be raised at previously agreed terms, a separate source familiar with the matter said.
Paula Chirhart, a spokesperson for Blackstone, declined to comment on Tuesday.
Peabody said in a separate filing late on Monday that if the sale was not completed by the time it issued audited financial statements for 2015, its accounting firm would be required to issue a “going concern” opinion, which is a statement on the operational resources of a company. The audited financial statements are due by the end of March, but Peabody said in the same filing that it would be delayed releasing them.
According to Peabody’s filing, the “going concern” opinion would cause a default under Peabody’s credit agreements after a grace period.
“If they don’t get this $350 million of proceeds from the Bowie sale, that could certainly accelerate the required restructuring,” said Matthew Vittorioso, a high yield research group managing director at Barclays. “We believe this company needs to restructure either way. It has an unsustainable debt load and is likely to use more than $500 million of cash in 2016.”
Decreasing demand for coal, stricter environmental controls and increasing competition from natural gas have pushed four big coal miners, including second largest U.S. miner Arch Coal , into bankruptcy protection over the past year.
Peabody’s 2018 bonds are trading at less than 4 cents on the dollar and its stock is down 98 percent in the past year. Peabody shares were trading at $2.44 on Tuesday afternoon. (Additional reporting by Lynn Adler in New York)