Christopher Coats for SNL:
Outlining a dismal year ahead for coal producer Peabody Energy Corp., BB&T Capital Markets predicted that the company has far greater than a 50/50 chance of following Arch Coal Inc., Alpha Natural Resources Inc. and Walter Energy Inc. into bankruptcy. The prediction accompanied the bank’s downgrade of Peabody from “hold” to “underweight.”
“With BTU’s cash burn likely to accelerate in the coming year, its debt-load too burdensome relative to what likely will be at least another year or two of weak coal markets, the asset sale market unappealing for non-tier one/non cash generative assets, and no access to the capital markets, we raise the probability of a bankruptcy filing to far greater than 50/50,” BB&T analyst Mark Levin wrote in a Feb. 16 note.
According to the note, Peabody fell far short of expectations for the final quarter of 2015. On Feb. 11, the company announced a $2.04 billion loss in 2015 and a loss per share even worse than analysts had expected. The company also revealed it accessed the remaining capacity under its $1.65 billion revolving credit facility, a possible indication the company could be worried about the cash it has immediately available.