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Peabody Energy Files for Chapter 11 Bankruptcy

Posted on in Corporate Bankruptcy

Peabody Energy Files for Chapter 11 Bankruptcy

The biggest coal company in the United States, Peabody Energy, filed for Chapter 11 bankruptcy in mid-April 2016. Multiple factors contributed to the company's slowed sales, such as the economic slowdown of China and increased regulations for the coal industry. The company has been in operation since 1883.

Peabody is not the only coal company suffering from high costs and low profits. Other pressures on these companies include low natural gas prices and high costs related to their healthcare and pension plans for current and retired employees. Coal production in the United States has been dramatically reduced in recent years, with a projected 752.5 million tons projected to be produced in 2016. This is approximately 25% lower than the amount of coal produced just two years ago. Peabody has suffered four consecutive years of losses. Paired with its $10.1 billion in debt, it has reached the point where it needs to restructure in order to become profitable once again. This is why it filed for Chapter 11 bankruptcy.

Goals of Chapter 11 Bankruptcy

The ultimate goal of filing for Chapter 11 bankruptcy is to become profitable again. But to get from the point of being suffocated by unmanageable debt to a successful company, there are smaller goals to meet in between.

For Peabody Energy, the goal is to lower its debt and restructure its operations. It does not plan to sell any of its assets, which are valued at $11 billion. The debt reduction is planned to be accomplished through lowering the company's fixed charges and improving its operational money flow to strengthen its liquidity. Through this, the company's owners hope to reposition it within the energy industry and enjoy profitable years in the future.

All of this will be done under supervision from the court. Reorganizing the company may require it to alter its corporate hierarchical structure, merge positions, and alter its priorities. These details are worked out between the company's owners, its lawyers, and the bankruptcy court where its case is filed. Creating a workable Chapter 11 restructuring plan can take anywhere from six months to one year, depending on its complexity. If a Chapter 11 plan is rejected, the company must create a new one and have that approved by the court before it can proceed with its bankruptcy.

Work with a Chicago Bankruptcy Attorney

No company is safe from bankruptcy, no matter how long it has been in business or how high its profits were at one point in its history. Every industry ebbs and flows and as technology marches forward, certain industries become obsolete. As we move toward renewable energy sources, the coal industry and other fossil fuels will continue to suffer. If you are considering filing Chapter 11 bankruptcy or any other type of bankruptcy, consider working with a member of our team of Chicago bankruptcy attorneys at Newland & Newland, LLP. Call us today to schedule your free legal consultation with our firm, which is located in Suite 3700 of the prestigious 180 North LaSalle Street building in Chicago.

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