Peabody Energy Corporation (BTU)

[LouisDesyjr]

Predicting the date for BK for BTU

It is language from their own 10K report that states that are in default of the bond and credit line covenants. The dates I am citing to are the periods of the ending of the 30 day grace period on the missed interest payments and the 90 day period of the 'going concern' language.

At the end of those time periods, the credit line and/or bond holders would be able to declare the company in default and the amounts owed due immediately, with some borrowing having cross defaults language that would trigger other defaults on other bonds or borrowings.

The end of the 30 day period is April 15, 2016.
The end of the 90 day period is March 31, 2016.

While it is possible that the lender on each date may hold off or waive the conditions, there have already been news reports that the first lien bond holders have been pressuring BTU to file for Chapter 11, so it can be reasonably assumed that those people will not allow any waivers for any reason.

Even if BTU somehow manages to make a sale today or tomorrow, the 90 day period is also triggered by falling below certain ratios in the fiscal year, which BTU has no way to fix in time.

The 'fantasy' that BTU is somehow going to make it, has no basis in reality or the facts. Even the sale of some mines is not enough to bring the financial ratios back into line.

BTU is losing all kinds of money every month, and will continue to lose money every month, for months into the future.

Even without the impairments and interest expense, BTU still loses money every month because coal prices are too low.

As more evidence that the prices of coal are not going to recover coal rail traffic is down.
Rail Traffic Volumes Tumble As Coal Stockpiles Soar At Record Rate:
http://www.zerohedge.com/news/2016-03-29/rail-traffic-volumes-tumble-coal-stockpiles-soar-record-rate
According to the article, coal stockpiles are up and rail traffic for coal transport is down.

BTU has clearly signaled that they are going to file by drawing down the entire credit line weeks ago, and the bond holders have been pressuring BTU to file; which means as soon as the bond holders can force bankruptcy onto BTU, they will.

So what does that mean? It means that at the end of the 30 day or 90 day period, they will have that opportunity and do it as soon as the clock strikes 12:01am for the day; and if BTU has not filed BK by then, they will force it on BTU.

While I do think that coal prices will recover someday, it will be far too late to save BTU.


If someone wants to make money buying the BTU shares, I would recommend waiting until the crash when the BK filing is announced, buy some shares, then dump all the shares when the retail market runs the stock up when the DIP financing is announced. I would not hold the shares after that since the shares will probably get cancelled in the filing.


Louis J. Desy Jr.


Disclosure: I own BTU put options and may buy more.

Weekly 4 week moving average of coal shipments by rail: