Peabody Energy Corp. hired Lazard Ltd. to advise the coal miner how to restructure its $6.3 billion of debt, according to two people with knowledge of the matter.
The largest U.S. coal producer, which is suffering from a collapse in demand for the commodity, is talking to creditors about ways to cut its debt load, including swapping obligations for new shares or convertible notes, said the people, who asked not to be named because the conversations are private. That kind of arrangement could allow the company to avoid filing for bankruptcy, which other miners have done in the current coal slump.
The company has engaged Jones Day as legal counsel, the people said. Debtwire previously reported that hiring.
“While Peabody has a stated goal of deleveraging over time, we won’t comment on speculation regarding specific strategies,” Vic Svec, a Peabody spokesman, said by e-mail.
Judi Mackey, a spokeswoman at Lazard, declined to comment. Dave Petrou at Jones Day didn’t return e-mails and calls seeking comment.
Peabody shares dropped 6.1 percent to $1.55 a share at 2:23 p.m. in New York.
One of Peabody’s rivals, Arch Coal Inc., is seeking to stave off a bankruptcy filing by doing a debt swap with its creditors. Shares in Arch Coal have tripled since it was reported on Aug. 19 that the company was seeking a compromise with lenders that would allow such a deal. Peabody is up almost 40 percent since then, even with the Wednesday decline.
A slew of coal miners have filed for bankruptcy this year including Alpha Natural Resources Inc., Walter Energy Inc. and Patriot Coal Corp. The price of coal used in steelmaking has dropped 72 percent since April 2011. Thermal coal, which is used in power generation, faces pressure from natural gas.
Peabody last month reported lower-than-expected earnings for the quarter ended June 30 after it began paring back operations due to weak demand. Its 6 percent notes due in November 2018 last traded at 33 cents on the dollar, according to Trace, the the bond-price reporting system of the Financial Industry Regulatory Authority. They traded above face value less than a year ago.