Washington | A debt-fuelled $4.9 billion buyout of Australia's Macarthur Coal at the peak of the commodities boom five years ago has stretched the world's largest private sector coal company, Peabody Energy, to the brink of bankruptcy.
Peabody admitted last week that it skipped $US71 million ($93 million) in interest payments and was on the verge of becoming the latest coal producer to file for Chapter 11 bankruptcy protection in the United States. 
Coal industry experts said the top-of-the-market acquisition of Macarthur in 2011 was the key factor behind Peabody drowning in $US6.3 billion of debt that it cannot afford to repay.
Ted O'Brien, chief executive of US energy research firm Doyle Trading Consultants, said the coal price crash meant Peabody's debt was unsustainable. "Peabody did a very highly leveraged acquisition of Macarthur assets in Australia, funded with debt at the peak of coking coal pricing," Mr O'Brien said. "Given the market today, their capital structure is unmanageable."
Shares of Peabody sank on the company's announcement last Wednesday and have plummeted 97 per cent in the past year on the New York Exchange.
The Macarthur takeover in 2011, part of a frenzy of deals by foreign companies looking to gain exposure to booming demand from Asian steel mills for high-quality Australian coal supplies, inflated Peabody's debt burden by $US4.1 billion.
A regulatory filing by Peabody last week revealed that its auditor had raised substantial doubt about its ability to continue as a "going concern".
Peabody might seek protection from creditors via the US's unique Chapter 11 bankruptcy provision, which gives companies in financial difficulty a limited period to allow them to reorganise.
A host of US coal miners have gone broke in recent years, including Walter Energy, Alpha Natural Resources, Arch Coal and Patriot Coal, which Peabody spun off in 2007.
American coal producers have come under pressure from new climate-change regulations imposed by the Obama administration and the rise of cheap natural gas extracted from the shale boom. "Natural gas is really crushing coal demand," Anthony Young, senior analyst at Macquarie Group in New York, said.
In 2016 natural gas will surpass coal as the largest energy source in the US for the first time, according to the Energy Information Administration.
Revolutionary fracking and horizontal drilling technologies have unleashed a flood of natural gas on to the US market, sending the Henry hub natural gas price tumbling to $US1.70 per million British thermal units, from about $US13 in 2008.
The price of US thermal coal has plunged about 60 per cent from its peak. About five years ago, US coal miners realised that the shale gas revolution would render thermal coal, used for power generation, less competitive. Led by Peabody's leveraged takeover of Macarthur, they diversified internationally into coking - also known as metallurgical - coal, which is used in steel making.
A glut of coking coal on the world market and recent softening demand from China sent prices into freefall.
The Australian coking coal spot price slumped to less than $US80 a tonne in 2016, from a record $US330 a tonne in 2011.
Peabody controls mines in NSW and Queensland, including Millennium, Coppabella, North Goonyella, Moorvale, Burton, Middlemount, and Wilpinjong. Since the coal crash, it has sold the Wilkie Creek mine in Toowoomba and has flagged that it is willing to sell non-core assets.
A Peabody spokesman said on Friday the company would continue to "optimise" its portfolio and viewed Australia as a "core region". The company, active in Australia since 1962, has not ruled out divesting individual assets at the right price.
Peabody's chief executive is Australian Glenn Kellow, a former BHP executive who took the top job in 2015.
Despite the beleaguered coal sector experiencing its toughest period in decades, Peabody is widely expected to survive once it restructures its debt.
"When you look at Peabody, there are a lot more problems with their balance sheet than their operations," Macquarie's Mr Young said.
Peabody announced in a 10-K regulatory filing with the US Securities and Exchange Commission last week that it had exercised a 30-day grace period for its $US21.1 million interest payment on its 6.50 per cent senior notes and a $US50 million interest payment on its 10 per cent senior second lien notes. A default would occur if the payments are not made within 30 days.
Globally, the International Energy Agency in   December sharply lowered its five-year global coal demand growth forecast, reflecting China's economic rebalancing from investment in steel-intensive infrastructure to consumption and greater policy support for renewable energy in wake of the climate change deal in Paris last year.