The beleaguered coal markets are taking their toll on North America’s largest producer, Peabody Energy (NYSE:BTU), which announced that was electing to take a “grace period” on certain interest payments.
Peabody said March 16 that its latest financial filing with the Securities and Exchange Commission (SEC) includes a statement from its auditors “concluding that our current financial path – absent significant improvements, asset sales and/or other favorable changes – may not be sustainable over the course of the year.”
“One practical effect is that this opinion impacts our credit agreement and may result in an acceleration of our debt obligations,” Peabody said of the 10-K report filed with SEC.
“We also disclosed that the company has elected to exercise a 30-day grace period related to interest payments due on March 15. This grace period is allowed, and companies using their grace periods may do so for a number of reasons. In our case, we plan to continue to use this time to have conversations with our lenders about our alternatives, while maintaining options around our interest payments.”
Another coal producer, Foresight Energy, also recently said that it was taking a grace period and negotiating with its creditors.
As for Peabody, the company said that it is working through its challenges. Peabody said:
“With regards to our liquidity, we had approximately $900 million of available liquidity as of March 11, 2016, consisting primarily of cash and cash equivalents,” Peabody said.
“As previously announced, the company continues to address the challenges of the current industry environment by focusing on its three core priorities: operational, financial and portfolio. Within the financial area, the Company has dual objectives of preserving liquidity and reducing debt. Actions related to these objectives have included extensive discussions with debt holders, and the company expects to have further discussions with lenders,” the company concluded.
Fitch Ratings downgraded Peabody’s long-term Issuer Default Rating in February, saying some kind of default appears more likely given demands on its liquidity.