Peabody Energy Corp. is planning to draw down the remaining available balance of its $1.65 billion revolving credit facility, a move that would give the company much-needed cash to weather the coal industry's deep downturn.

The St. Louis company, which has been in talks with bondholders to reduce its $6.3 billion debt load, may max out the loan as soon as this week, according to people familiar with the matter.

As of Nov. 5, Peabody had $1.2 billion available under its revolving loan, which was provided by lenders led by Citigroup Inc., according to a regulatory filing.

Companies typically use revolving loans to fund small or infrequent expenses they expect to repay with cash or long-term debt like bonds. Fully drawing down on a revolving loan can signal a company is building up its cash reserves ahead of a bankruptcy filing or that it is worried lenders may at some point cut off access to credit.

Last summer, Peabody rival Alpha Natural Resources Inc. drew the balance of its revolver a little more than a month before filing for chapter 11 bankruptcy protection. A handful of heavily indebted oil-and-gas producers also have tapped their credit lines in recent weeks.

Peabody hasn't abandoned efforts to avoid bankruptcy and is still trying to reach a deal with creditors out of court, according to people familiar with the matter. The company has been working with restructuring advisers from Lazard Ltd. and Jones Day since last year, some of the people said.

Peabody and other coal companies are struggling as power plants opt for less expensive natural gas and demand falls for the type of coal used in steelmaking. The industry slide has driven several coal companies, including Alpha, Arch Coal Inc. and Patriot Coal Corp., into bankruptcy over the past year.

Peabody's shares have fallen 97% over the past year, closing Wednesday at $3.36. The company's market value currently stands at around $63 million, according to FactSet, and much of its debt trades at distressed levels. Some $1 billion of bonds Peabody sold in March 2015 recently traded at less than 10 cents on the dollar, according to MarketAxess.

The company, which is scheduled to release fourth-quarter financial results Thursday, had $334.3 million in cash as of Sept. 30.

Write to Matt Jarzemsky at matthew.jarzemsky@wsj.com

 

(END) Dow Jones Newswires

February 10, 2016 20:25 ET (01:25 GMT)

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