Peabody Energy emerges from bankruptcy protection

VANCOUVER (miningweekly.com) – The world’s largest private sector coal producer Peabody Energy has emerged from US Chapter 11 bankruptcy protection, the company said on Monday.

The merging entity has a new capital structure, including new equity that will start trading on the NYSE on Tuesday morning under the ticker ‘BTU’.

“We believe that 'the new BTU’ is well positioned to create substantial value for shareholders and other stakeholders over time,” said Peabody president and CEO Glenn Kellow in a press release.

In the past year, Peabody said it had shaved more than $5-billion in debt from its pre-filing levels at March 2016.

Over the past year, three of the largest US coal mine operators – Peabody Energy, Arch Coal and Alpha Natural Resources – have filed for Chapter 11 protection under the US Bankruptcy Code, as domestic and international demand for coal has slackened and US export markets have deteriorated badly from major strength levels just four years ago. To compound matters, companies were struggling with debt from acquisitions and expansions undertaken before the market sank.

Despite coal prices having seen somewhat of a rebound over the last six months, several analysts argue that natural gas remains a strong, low-cost fossil energy competitor, adding to Peabody's risk profile despite the pro-coal policies under US President Donald Trump’s administration.

Kellow advised that the company has taken “significant steps” to create a capital structure to succeed through all cycles. “Our financial focus will now be on reducing debt, targeting high-return investments and returning cash to shareholders over time,” he said.

“We look forward to this next phase in our company’s history. Coal remains an essential part of the energy mix, and Peabody is the largest US coal producer while our Australian platform has access to the higher-growth Asia-Pacific region,” Kellow stated.

Peabody predicts it will be worth $310-million based on a low-ball $3.1-billion market capitalisation, which critics argue could be worth up to three times that amount. Kellow and other top executives stand to reap tens of millions of dollars in stock bonuses under Peabody's bankruptcy exit plan, which sets aside 10% of newly issued shares for employees.

The executives will collect a big portion of that stock upon exiting bankruptcy, worth about $15-million for Kellow and between $3-million and $5-million for each of five other executives, according to a company estimate.

AUSTRALIA UPDATE
Meanwhile, Peabody provided an update on the effects of Cyclone Debbie in Australia on the logistics chain related to the company's metallurgical coal mines in Queensland, reporting that outages on the rail system are preventing coal shipments from mine to port.

Third-party rail services provider Aurizon announced initial assessments indicate recovery of the Goonyella system is expected to take about five weeks.

Peabody said it was still too early to assess impacts on volume and results, as well as any effects on the second-quarter price negotiations with metallurgical coal customers.

Queensland accounts for more than half of the world's seaborne metallurgical coal supplies.