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Peabody Energy Delayed Its 10K Filing: What It Means for Investors

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Peabody Energy’s announcement

On February 11, 2016, Peabody Energy (BTU) announced its 4Q15 earnings through 8K filings for the year ending on December 31, 2015. The company was supposed to file a detailed annual report for fiscal 2015 in the form of a 10K. On February 29, 2016, Peabody Energy announced in a press release that it wouldn’t be able to file the 10K on time.

In this series, we’ll focus why Peabody Energy delayed the 10-K filing. We’ll discuss the latest developments on company’s debt exchange with its lenders.

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Why did it delay the 10K?

According to the latest 10Q filings, Peabody Energy has about $6.3 billion in debt on its books. The company has been focusing on reducing the debt and improving its liquidity position through asset optimization, debt exchanges, and buybacks. As a part of this effort, Peabody Energy entered into a definitive agreement with Bowie Resource Partners to sell its New Mexico and Colorado coal assets for $358 million in cash. The agreement releases Peabody Energy from ~$105 million of liabilities.

The transaction is expected to close by the end of 1Q16—subject to governmental and regulatory approvals. However, coal (KOL) miners think that if the transaction isn’t complete before the company issues its audited financial statements, its independently registered public accounting firm will be required to issue an audit opinion with a going concern uncertainty paragraph. This would constitute a default under the credit agreement governing the 2013 Credit Facility. It could accelerate the debt owed under the agreement.

Major concern

The continued uncertainty in the recovery of coal prices was the main concern for the revival of coal companies like Peabody Energy, Arch Coal (ACIIQ), Alpha Natural Resources (ANRZQ), and Cloud Peak Energy (CLD).

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