Peabody Energy Plummets 45% Amid Possible Bankruptcy

Shares of Peabody Energy Corporation BTU fell more than 40 percent in the pre-market hours after the coal miner said there exists substantial doubt whether it will be able to continue as a "going concern" and may need file for bankruptcy as it faces the worst industry downturn in several years.

Peabody, hit by a weak coal market, is trying to cut down debt and in talks with creditors to renegotiate payment terms. The company is trying to sell non-strategic surplus land and coal reserves, its El Segundo and Lee Ranch coal mines and related assets located in New Mexico and Twentymile Mine in Colorado. Peers Alpha Natural Resources, Inc. ANRZQ and Arch Coal Inc ACIIQ have already filed for bankruptcy. If condition worsens further, Peabody might be the next.

St. Louis, Missouri-based Peabody said incurred a substantial loss from operations and had negative cash flows from operating activities for the year ended December 31, 2015.

Shares closed down 10.6 percent at $4.01 on Tuesday. In pre-market hours, they plunged 46 percent, or $1.86, to $2.15.

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"Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities. These projections and other liquidity risks raise substantial doubt about whether we will meet our obligations as they become due within one year after the date of this report," the company said in a regulatory filing with the SEC.

Peabody has also elected to exercise the 30-day grace period with respect to a $21.1 million semi-annual interest payment due March 15, 2016 on the 6.50% Senior Notes due September 2020 and a $50.0 million semi-annual interest payment due March 15, 2016 on the 10.00% Senior Secured Second Lien Notes due March 2022.

The company said it will not comply with its financial covenants as of March 31, 2016. Absent waivers or cures, non-compliance with such covenants would constitute a default under the 2013 credit facility. As of Feb. 9, Peabody had $902.6 million in liquidity, including $778.5 million in cash.

"If we are not able to timely, successfully or efficiently implement the strategies that we are pursuing to improve our operating performance and financial position, obtain alternative sources of capital or otherwise meet our liquidity needs, we may need to voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy Code," the filing said.