A debt-fuelled $4.9 billion buyout of Australia’s Macarthur Coal at the peak of the commodities boom five years ago has stretched the world’s largest private sector coal company, Peabody Energy, to the brink of bankruptcy.
Peabody admitted last week it skipped $US71 million ($93 million) in interest payments and was on the verge of becoming the latest coal producer to file for Chapter 11 bankruptcy protection in the United States.
Coal industry experts said the top-of-the-market acquisition of Macarthur in 2011 was the key factor behind Peabody drowning in $US6.3 billion of debt that it cannot afford to repay.
Ted O’Brien, chief executive of US energy research firm Doyle Trading Consultants, said the coal price crash meant Peabody’s debt was unsustainable
“Peabody did a very highly leveraged acquisition of Macarthur assets in Australia, funded with debt at the peak of coking coal pricing,” Mr O’Brien said, as reported by the Financial Review.
“Given the market today, their capital structure is unmanageable.”
Shares of Peabody sank on the company’s announcement last Wednesday and have plummeted 97 per cent in the past year on the New York Stock Exchange.
