24 February 2020 (closed)
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The world's number one privately-owned coal producer, US-based Peabody Energy Corp, filed for bankruptcy protection on Wednesday (13/04) after its debt burden became too high amid recent expansion efforts, a cancelled asset sale, and slumping coal prices. All of the miner's offices and mines will continue operations as usual during the bankruptcy process. The case of Peabody Energy is one of the world's largest ever bankruptcy cases in the commodities sector. Trading of Peabody Energy's shares has been suspended immediately.
Peabody Energy filed for Chapter 11 bankruptcy protection in the US. This Chapter affords the debtor a number of mechanisms to restructure its business. Corporations that need time to restructure their debts tend to file for this Chapter 11. However, it is also known as the most complex of all bankruptcy cases as well as the most expensive one. Glenn Kellow, Chief Executive Officer at Peabody Energy, stated that this process enables the company to enhance liquidity and curtail debt and lay the foundation for long-term stability and success in the future.
Peabody Energy took on a significant chunk of debt when it acquired a 100 percent stake in Australia-based Macarthur Coal Ltd, a deal worth USD $5.1 billion, in late-2011 with the aim of becoming a major supplier of metallurgical coal for Asian steel mills. However, after 2011 demand for metallurgical coal slumped hence intensifying Peabody Energy's financial woes. Moreover a planned sale of Peabody Energy's New Mexico and Colorado assets was cancelled after the buyer was unable to complete the purchase.
After 2011 global coal prices went downhill due to sluggish global economic growth, particularly due to the slowdown in China, while cheap (and cleaner) gas has become a key rival of coal. Although the global outlook for coal remains pessimistic due to sluggish growth, power plant development in Southeast Asia should give rise to higher demand for coal thus reducing some pressure on the global supply glut.