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According to the International Energy Agency (IEA), demand for coal is expected to drop seven percent in 2020 compared to last year. The agency believes that 2014 was likely the peak year for coal demand.
Now the world’s largest privately held coal company, Peabody Energy, is fighting to avoid bankruptcy.
Peabody, which is listed on the New York Stock Exchange, released third-quarter results on Monday, making it clear that there is a risk the company will fail for the second time in five years.
Sales are shrinking
While the world wants to use less coal, the economic downturn caused by the coronavirus has weakened demand for coal used in steel production, an important part of Peabody’s Australian operations, according to the Financial Times.
In the third quarter, the company had a loss of $ 67.2 million. Sales volumes fell 23 percent compared to the same period last year.
Distributor with lenders
It was in 2016–2017 when Peabody dumped $ 5.2 billion in bankruptcy-protected debt and landed former lender Elliot Management as the largest shareholder. Now, the coal company is again struggling to pay off the debt, according to the Financial Times.
In Australia, an insurance company has sued Peabody for security against surety bonds, a form of collateral to finance the cost of clearing closed mines.
Earlier this month, the company agreed to respond to security requests for $ 800 million.
However, this agreement only holds if the company can receive a relief on the terms of its loans from banks and extend a bond loan that matures in 2022 at the end of December.
According to Peabody, the fourth quarter results will likely mean the company falls below a minimum requirement for the debt ratio in the deal with the banks.
“The combined risks of our current financial results, market conditions, additional collateral requirements, and possible default on loan agreements create significant questions about … our ability to continue as a ‘going concern'” writes Peabody, according to the Financial Times. .(Terms)Copyright Dagens Næringsliv AS and / or our suppliers. We would like you to share our cases via a link, which leads directly to our pages. Copying or other use of all or part of the content may only be done with written permission or as permitted by law. For more terms, see here.
