• 3 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 7 minutes Saudi and UAE pressure to get US support for Oil quotas is reportedly on..
  • 11 minutes China devalues currency to lower prices to address new tariffs. But doesn't help. Here is why. . . .
  • 15 minutes What is your current outlook as a day trader for WTI
  • 3 hours Will Uncle Sam Step Up and Cut Production
  • 54 mins In The Bright Of New Administration Rules: Immigrants as Economic Contributors
  • 9 hours Domino Effect: Rashida Tlaib Rejects Israel's Offer For 'Humanitarian' Visit To West Bank
  • 29 mins Long Range Attack On Saudi Oil Field Ends War On Yemen
  • 8 hours Gretta Thunbergs zero carbon voyage carbon foot print of carbon fibre manufacture
  • 14 mins * 8 to 10 "good" years left in oil industry * UAE model for Economic Deversification * Others spent oil billions on terrorism, wars, lopping off heads * Too late now
  • 9 hours Continental Resource's Hamm wants shale to cut production. . . He can't compete with peers.
  • 3 hours CLIMATE PANIC! ELEVENTY!!! "250,000 people die a year due to the climate crisis"
  • 14 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 22 hours Significant: Boeing Delays Delivery Of Ultra-Long-Range Version Of 777X
  • 1 day Strait Of Hormuz As a Breakpoint: Germany Not Taking Part In U.S. Naval Mission
  • 22 hours Why Oil is Falling (including conspiracy theories and other fun stuff)
  • 12 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 4 hours US Petroleum Demand Strongest Since 2007
The Revival Of A $53 Billion Megaproject

The Revival Of A $53 Billion Megaproject

The Iraqi government is still…

Gas Flaring “Running Rampant” In The Permian

Gas Flaring “Running Rampant” In The Permian

Gas flaring in the Permian…

Largest U.S. Coal Producer On The Edge Of Bankruptcy

One of the more impressive short squeezes in recent history took place in the first two weeks of March, when the stock of distressed Peabody Energy, the largest U.S. coal producer which employs 8,300 workers, exploded higher from just $2.50 per share at the start of the month to a whopping $6.50 just last week.

Many scratched their heads at this move as nothing fundamental had changed in the company's deteriorating operations, and its bonds are among the most distressed issues trading currently (with upcoming interest payments as we profiled last night).

Related: IEA Sees “Light At The End Of The Tunnel” For Oil Markets

Alas Peabody missed its narrow window to sell stock, and things were promptly normalized this morning, when the stock crashed back to earth plunging by nearly 40 percent back to $2.50 in the pre-market, wiping out all recent gains, after Peabody announced in its just filed 10-K, reported that it may have to join its peers Arch Coal and Alpha Natural in 11 bankruptcy protection, after it delayed $71 million in interest payment due on March 15.

As caught first by Bloomberg, Peabody’s auditor said there’s uncertainty about the company’s ability to keep running as a “going concern,” a 10-K filing with the U.S. Securities and Exchange Commission shows. More importantly, the company reported it will exercise the 30-day grace period on a $21.1 million semi-annual interest payment due March 15 for 6.5 percent senior notes maturing September 2020, and a $50 million payment for the same date on 10 percent notes due March 2022.

Related: Solar Power Is About To Get MUCH Cheaper

Here is the relevant section:

As a result of operating losses and negative cash flows from operations and our election to exercise a 30-day grace period with respect to certain interest payments, together with other factors, including the possibility that a covenant default or other event of default could cause certain of our indebtedness to become immediately due and payable (after the expiration of any applicable grace period), we may not have sufficient liquidity to sustain operations and to continue as a going concern.

We incurred a substantial loss from operations and had negative cash flows from operating activities for the year ended December 31, 2015. Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities. These projections and certain liquidity risks raise substantial doubt about whether we will meet our obligations as they become due within one year after the date of issuance of this report. We have also elected to exercise the 30-day grace period with respect to a $21.1 million semi-annual interest payment due March 15, 2016 on the 6.50% Senior Notes due September 2020 and a $50.0 million semi-annual interest payment due March 15, 2016 on the 10.00% Senior Secured Second Lien Notes due March 2022, as provided for in the indentures governing these notes. Failure to pay these interest amounts on March 15, 2016 is not immediately an event of default under the indentures governing these notes, but would become an event of defau
lt if the payment is not made within 30 days of such date. As a result of these factors, as well as the continued uncertainty around global coal fundamentals, the stagnated economic growth of certain major coal-importing nations, and the potential for significant additional regulatory requirements imposed on coal producers, among others, there exists substantial doubt whether we will be able to continue as a going concern.

The company also said that in February 2016 it borrowed approximately $945 million under the 2013 Revolver, the maximum amount available, for general corporate purposes. The company's lender banks will surely be excited that they are about to see another $1 billion in secured loans promptly impaired in one month when BTU has no choice but to file for bankruptcy.

Related: Why Oil Prices May Not Move Higher

Peabody, which flagged bankruptcy risk under the "risk factors" section of a regulatory filing on Wednesday, said it skipped a $71.1 million interest payment on its senior notes, kicking off a 30-day grace period. The company also raised "substantial doubt" about its ability to remain a going concern.

Peabody's lenders are pushing the company to restructure its debt through bankruptcy but the company has also been pursuing bond exchanges. As Reuters calculates, as of Dec. 31, the company had a total debt of $6.3 billion and cash and cash equivalents of $261.3 million.

As we reported last night when looking at the 100+ bonds trading at 30 cents or less with interest payments due in the next 6 months, the eye of the hurricane is about to shift away and the dire situation facing U.S. energy companies is about to be revealed when one after another after another company follows in Peabody's footsteps and elects to not make upcoming bond payments, ushering in a tidal wave of defaults which we expect will hit U.S. capital markets around late spring, early summer. The full list of soon to be insolvent issues can be found here.

By Zerohedge

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment
  • Terry on March 16 2016 said:
    Why is this not a bigger headline? Seems like a significant domino. I dont believe or current administration either understands or cares about the unintended consequences of its policies. This will hurt the lower and middle classes harder and faster than anyone.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play