The company sought bankruptcy after the sale of three of its south-western US coal mines to Bowie Resource Partners in a $650 million deal fell through because of Bowie’s inability to raise finance -- leaving Peabody unable to make an interest payment that fell due this week.

Peabody CEO Glenn Kellow said: “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.

“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 voluntarily filed petitions under Chapter 11 for the majority of its US entities in the United States Bankruptcy Court for the Eastern District of Missouri.

Through this process, the company intends to reduce its overall debt level, lower fixed charges, improve operating cash flow and position the company for long-term success, while continuing to operate under the protection of the court process.

All of the company’s mines and offices are continuing to operate in the ordinary course of business and are expected to continue doing so for the duration of the process. No Australian entities are included in the filings, and Australian operations are continuing as usual, Peabody said.

In connection with the process, Peabody has obtained $US800 million in debtor-in-possession financing facilities, which were arranged by Citigroup and include participation of a number of the company’s secured lenders and unsecured noteholders.

The facilities include a $500 million term loan, a $200 million bonding accommodation facility and a cash collateralized $100 million letter of credit facility, and are subject to court approval as well as limitations as set out in the company’s filings.

In addition to the company’s existing cash position, Peabody believes that it has sufficient liquidity to operate its business worldwide post-petition and to continue the flow of goods and services to its customers in the ordinary course.

“The factors affecting the global coal industry in recent years have been unprecedented. Industry pressures in recent years include a dramatic drop in the price of metallurgical coal, weakness in the Chinese economy, overproduction of domestic shale gas and ongoing regulatory challenges,” the company said.

Still, multiple third-party estimates project that both the US and global coal demand will stabilize. US gas prices are projected to rebound from recent lows.

Globally, thermal coal is expected to continue to fuel hundreds of existing coal generating plants as well as scores more that are under construction.

Coal currently fuels approximately 40% of global electricity and is expected to be an essential source of global electricity generation and steel making for many decades to come.

“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.”

In 2015, all of Peabody’s US operations were cash-flow positive, the Australian platform earned more than the prior year despite lower prices for coal and the company's administrative expenses and capital investments were at the lowest levels in nearly a decade.

Peabody intends to continue to work with the applicable state governments and federal agencies to meet its reclamation obligations, it said.

Peabody has filed pleadings, referred to as “first day” motions, with the US Bankruptcy Court. These motions are expected to enable the company to continue, among other things, paying employee wages and providing healthcare and other benefits without interruption.

Also, as required under New York Stock Exchange regulations, trading in shares of the company stock on the NYSE is expected to be suspended immediately.