Fitch Ratings has affirmed the following ratings for Peabody Energy Corporation (NYSE: BTU):
--Issuer Default Rating (IDR) at 'BB+';
--Senior unsecured notes at 'BB+';
--Senior unsecured revolving credit and term loan at 'BB+';
--Convertible junior subordinated debentures due 2066 at 'BB-'.
The Outlook is Stable.
The ratings reflect Peabody's large, well-diversified operations, good control of low-cost production, strong liquidity and moderate leverage. In particular, Peabody ranks first in the Wyoming Powder River Basin with 2007 sales of 139.8 million tons and reserves of 3.3 billion tons and first in the Midwest with 2007 sales of 30.9 million tons and reserves of 3.7 billion tons.
Liquidity at quarter end was strong with cash on hand of $74.8 million and availability under its revolver of $1.3 billion. Total Debt with Equity Credit/EBITDA for the latest 12 months (LTM) ended June 30, 2008 was 2.8 times (x). However, Peabody has substantial legacy liabilities and adjusted leverage is estimated at 3.6x for LTM June 30, 2008. While Peabody has generally been free cash flow negative, Fitch expects lower capital spending and higher earnings to result in positive free cash flows over the next 12 to 18 months.
Peabody is the largest U.S. coal producer, fueling 10% of domestic electricity generation and the fifth largest coal producer in Australia. In 2007, Peabody sold 237.8 million tons of coal and had year-end reserves of 9.3 billion tons.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts:
Monica M. Bonar, +1-212-908-0579 (Chicago)
Sean
T. Sexton, +1-312-368-3130 (Chicago)
Media Relations:
Cindy Stoller,
+1-212-908-0526 (New York)
