Listen, we all get behind on paperwork sometimes. However, investors surely must wonder why some analysts have been slow to downgrade Peabody Energy (BTU) even though the company's stock has fallen almost 98% over the last year.
Most recently, a Sterne Agee CRT team led by Michael Dudas downgraded the company to Neutral on Wednesday, citing "severe headwinds" and the company's "significant" debt load.
Not only is Peabody's long-term debt -- which stands at $6.3 billion -- "significant," it is also rated CCC+ by Standard & Poor's Ratings Services. The ratings agency also maintains a negative outlook on the company due to capital markets remaining "unfavorable" to the coal sector.
On Tuesday, a BB&T analyst team led by Mark Levin downgraded the St. Louis-based coal producer to Underweight, and said the probability of the company filing for bankruptcy to be greater than 50% due to the company's "burdensome" debt load and accelerating cash burn.
A spokesperson for Peabody sent an email to Bloomberg in response to the BB&T downgrade which read: "in a challenging market backdrop, Peabody continues its aggressive efforts to improve the business, with a major focus on operational, portfolio and financial initiatives. Our dual financial objectives are to optimize liquidity and deleverage, and we continue to pursue multiple actions on this front"
Meanwhile, bondholders have been wise to Peabody's troubles for some time.
Peabody's 6% senior note coming due in 2018 last traded at 17.25 cents on the dollar in December and is currently quoted at 4.75 cents on the dollar, according to data compiled by Thomson Reuters. In February 2015, the issue traded at 82 cents on the dollar, which represents a 79% decline over a 10-month period.
As for future analyst downgrades, Peabody currently has one Buy rating, and three Hold ratings (including Sterne Agee's rating), according to a Bloomberg survey of 14 analysts.
