Peabody skips coupon on 6½% notes, 10% notes; going concerns issued

By Susanna Moon

Chicago, March 16 – Peabody Energy Corp. has exercised the 30-day grace period for interest due Tuesday on its 6½% senior notes due September 2020 and its 10% senior secured second-lien notes due March 2022, according to a 10-K filing with the Securities and Exchange Commission.

The company decided to skip making the $21.1 million interest due on its 6½% notes and the $50 million interest due on its 10% notes and has 30 days to cure the default.

As a result of the possible default, along with 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 other matters, there exists substantial doubt whether we will be able to continue as a going concern,” the filing noted.

The company said it suffered substantial losses from operations and recorded negative cash flows from operating activities for the year ended Dec. 31.

The company said its operating plan points to continued losses from operations as well as negative cash flows from operating activities.

The forecasts and liquidity risks “raise substantial doubt” about the company’s ability to meet its obligations as they become due within a year of the filing, the company said.

Recent drawdown, other news

As previously announced, Peabody drew the $120 million of remaining funds under its $1.65 billion revolving credit facility on Feb. 12.

The revolver expires on Sept. 24, 2018, or on Aug. 15, 2018 if Peabody’s 6% senior notes due 2018 are still outstanding.

As previously reported, in a Feb. 11 conference call Peabody chief financial officer Amy Schwetz said the drawdown was intended “to provide Peabody with the maximum amount of control and flexibility with respect to its liquidity position, in light of continued challenging marketing positions” after “unprecedented commodity and coal market issues heavily weighed on” the company’s performance in 2015.

Peabody said on Jan. 22 that it was discussing a possible exchange offer with holders of its 6% senior notes due 2018.

The term sheet for the proposal was dated Jan. 8 and the noteholders responded on Jan. 21 with their own proposal that tweaks the terms of the company’s proposal.

No agreement had been reached.

Peabody previously said that the talks were intended to optimize liquidity, to reduce leverage, to lower interest expense and to extend maturities while also considering timing, tax impact and other factors.

Peabody said at the time that it “continues to address the challenges of the current environment with a continued focus on the operational, organizational, portfolio and financial areas of the business” and to evaluate ways to balance its objectives of optimizing liquidity and deleveraging, including potential debt exchanges and buybacks, and is also interested in issuing new debt.

Peabody is a St. Louis-based coal producer.

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