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Related Issuers
Rating Action:

Moody's downgrades Peabody's ratings (CFR to Caa3), outlook negative

22 Dec 2015

New York, December 22, 2015 -- Moody's Investors Service downgraded the ratings of Peabody Energy Corporation (Peabody), including the corporate family rating (CFR) to Caa3 from Caa1, probability of default rating (PDR) to Caa3-PD from Caa1-PD, the ratings on the senior secured credit facility to B3 from B2, the ratings on second lien debt to Caa3 from Caa1, the ratings on senior unsecured notes to Ca from Caa2, and the junior subordinated debenture ratings to C from Caa3. The speculative grade liquidity rating of SGL-3 remains unchanged. The outlook is negative. This concludes the review for possible downgrade initiated on August 27th, 2015.

Downgrades:

..Issuer: Peabody Energy Corporation

.... Corporate Family Rating, Downgraded to Caa3 from Caa1

.... Probability of Default Rating, Downgraded to Caa3-PD from Caa1-PD

....Junior Subordinated Conv./Exch. Bond/Debenture, Downgraded to C (LGD6) from Caa3 (LGD6)

....Senior Secured Bank Credit Facilities, Downgraded to B3 (LGD2) from B2 (LGD2)

....Senior Secured Regular Bond/Debenture, Downgraded to Caa3 (LGD3) from Caa1 (LGD3)

....Senior Unsecured Regular Bond/Debenture, Downgraded to Ca (LGD5) from Caa2 (LGD5)

Outlook Actions:

....Outlook, Changed To Negative From Rating Under Review

RATINGS RATIONALE

The downgrade reflects our expectation of continued deterioration in the company's credit metrics due to the ongoing decline in the seaborne metallurgical coal markets and weakness in the US and seaborne thermal coal markets, as well as our expectation that market recovery will be slower and more protracted than previously anticipated. As of September 30, 2015, the company's Debt/ EBITDA, as adjusted stood at 8.7x, and over the preceding twelve months the company burned over $500 million in cash. We expect the leverage to continue increasing and liquidity to continue deteriorating, absent market improvements or deleveraging actions.

On December 17, 2015 the company filed Form 8-K with the US Securities and Exchange Commission, stating that it continues to evaluate its options to reduce leverage and preserve liquidity, including potential debt exchanges and buybacks. The ratings reflect our expectation that if the company undertakes debt exchanges and/or other restructuring options, the debt holders will not recover the full amounts due as outlined in the original debt agreements, which would meet Moody's definition of default.

The B3 rating on the secured facility, three notches above the Caa3 CFR, reflects the security provided by the collateral package, which includes a claim on certain US properties and various stock pledges. The Caa3 rating on the second lien notes, in line with the CFR, reflects their relative position in the capital structure with respect to claims on collateral, behind the senior secured credit facility but ahead of the Ca rated unsecured notes and C rated subordinated debentures.

The speculative grade liquidity rating of SGL-3 reflects adequate liquidity, including cash and cash equivalents of $334 million, $1.4 billion available under $1.65 billion revolver and $48 million of available capacity under the accounts receivable securitization program as of September 30, 2015. We expect that absent a market recovery, the company may have limited headroom under covenants in 2016. Peabody has several alternatives for arranging back-door liquidity if necessary. Peabody's large number of mines and its operational diversity across the PRB and Illinois Basin give it the flexibility to sell non-core assets if necessary.

A further downgrade will be considered if liquidity and/or leverage continue to deteriorate. While an upgrade is unlikely in the near term, it would be considered if we expected Debt/ EBITDA, as adjusted, to be sustained below 6.5x while maintaining adequate liquidity.

The principal methodology used in these ratings was Global Mining Industry published in August 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Peabody Energy Corporation is the world's largest private sector coal company with coal mining operations in the US and Australia and close to 8 billion tons of proven and probable reserves. For the twelve months ended December 31, 2014, the company sold 249.8 million tons of coal and generated $6.8 billion in revenues, including 25 million tons of thermal coal sold from the Midwestern division, 166.4 million tons of thermal coal sold from the Powder River Basin and Colorado, 38.2 million of tons of thermal and metallurgical coal from Australia, and 20.2 million tons from trading and brokerage. For the twelve months ended September 30, 2015, the company generated $6 billion in revenues.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Anna Zubets-Anderson
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Brian Oak
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
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JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades Peabody's ratings (CFR to Caa3), outlook negative
No Related Data.
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