Peabody Energy, a leading coal company in the US, is seeking bankruptcy protection after its $4.9 billion takeover of Australia’s Macarthur Coal escalated its debt burden. The US coal company took over the Australian mine in 2011 at the height of commodities boom.

The company is in the process of filing Chapter 11 bankruptcy protection at the United States.  The financially stretched Peabody in mid-March missed $93 million in interest payments. The shares of Peabody tanked at the New York Stock Exchange after the news broke about its bankruptcy filing plan.

According to coal industry experts, the acquisition of Macarthur had burdened Peabody with $8.3 billion of debt, which, it is finding it difficult to repay, reports The Australian Financial Review.

Ted O’Brien, CEO of Doyle Trading Consultants noted the fall in coal prices has made Peabody’s debt unsustainable. In early March, a regulatory filing by Peabody had revealed that its auditor having raised doubts about its ability to sustain as a “going concern.”

The US’s unique Chapter 11 bankruptcy provision offers protection to distressed companies from creditors with a cooling period to reorganise themselves.

Among the US coal companies, who have sought bankruptcy cushion in the past include, Walter Energy, Alpha Natural Resources, Arch Coal and Patriot Coal. The American coal industry has been under pressure after the Obama administration introduced many climate-change laws and cheap natural gas emerged as an alternative.

“Natural gas is really crushing coal demand,” noted Anthony Young, senior analyst at Macquarie Group.

Meanwhile, Peabody Energy announced a definitive agreement to sell 5.06 percent of its shares in the Prairie State Energy Campus to Wabash Valley Power Association, for $75 million.

This is part of the company’s focus on portfolio optimization and sale of non-core assets, according to a press release. Prairie State is a 1,600-megawatt coal-fueled electricity generation plant in Illinois and was commissioned in 2012.