Cloud Peak Signals Possible Bankruptcy Filing

Mar 15, 2019

Cover page of Cloud Peak's annual report
Credit U.S. Securities And Exchange Commission

One of the largest coal companies in the country headquartered in Gillette signaled it may soon be filing for Chapter 11 bankruptcy. Cloud Peak Energy released its annual financial statement today saying it did not pay a nearly $2 million interest payment in debt, which now gives them 30 days before defaulting.

 

The payment’s become a final litmus test on whether the company can afford to keep running. In its SEC filing, the company reported, “if we determine not to make this interest payment by April 14, 2019, we may seek protection under Chapter 11.”

 

“They've made a very clear decision here say they're not going to pay this upcoming interest payment that's due at least for 30 days while they have this kind of waiting period that allows them more time to think about what they want to do going forward,” Taylor Kuykendall said, coal reporter with S & P Global.

 

Cloud Peak’s financial struggles aren’t new. It ended a credit agreement last November and announced a review of strategic alternatives. That signaled a potential sale of the company. Just last month, the company laid off 15 people.

 

It’s now forecasting that cash from its operations won’t be enough to continue paying for its interest or other expenses. It’s seeing over $300 million in debt. Some of its challenges include declines in the exports market, depressed thermal coal conditions, and generally reduced cash flow this year.

 

While the company was likely shopping its assets in the recent fourth quarter, Kuykendall said no one took the bait.

 

If we determine not to make this interest payment by April 14, 2019, we may seek protection under Chapter 11.

“I think if you were looking at buying this company, and you were to flip through this 10K filing that we saw today, I mean it's just loaded with risks,” Kuykendall said. "They might be able to put together something that looks interesting to a buyer. But it does kind of look like that we might have to hit the bankruptcy court first."

 

Kuykendall said if Cloud Peak doesn't file for Chapter 11 bankruptcy it could look at extending the deadline for its debt payment by restructuring with lenders. For now, the timeline is 30 days to find out Cloud Peak’s next steps.