Coal company Peabody Energy said it would start laying "the foundation for long-term stability and success" after filing for Chapter 11 bankruptcy protection in the USA.

Sian Crampsie

Coal company Peabody Energy said it would start laying "the foundation for long-term stability and success" after filing for Chapter 11 bankruptcy protection in the USA.

Peabody – the world’s largest private-sector coal company and a Fortune 500 firm – said that the filing covered most of its US entities but none of its Australian operations. It added that the move would enable it to strengthen liquidity and reduce debt "amid an unprecedented industry downturn".

"This was a difficult decision, but it is the right path forward for Peabody. We begin today to build a highly successful global leader for tomorrow," said Peabody President and Chief Executive Officer Glenn Kellow. "Through today’s action, we will seek an in-court solution to Peabody’s substantial debt burden amid a historically challenged industry backdrop.

"This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future."

Peabody warned investors in March 2016 of its potential inability to continue as a going concern after delaying interest payments on two bonds. It reported a net loss of $2 billion for 2015 and has net debts of around $6 billion.

The firm says that the global coal sector has suffered from a set of "unprecedented" factors that have affected coal prices, including the downturn in the Chinese economy, regulatory challenges and overproduction of shale gas in the USA.

It added in a statement that "multiple third-party estimates project that both the US and global coal demand will stabilize" and that it expects US gas prices to rebound. "A company like Peabody with safe, efficient operations will be well positioned to serve coal demand that will continue in the United States and around the world," said Kellow. "We are a leading producer and reserve holder in our core regions of the Powder River Basin, Illinois Basin and Australia.

"Peabody has a new management team, outstanding workforce, unmatched asset base and strong underlying operational performance that represent a key driver in the company’s future success."