Inconnection with its Chapter 11 bankruptcy petition, Peabody Energy Corp.'s Executive Vice President and CFOAmy Schwetz laid out the company's recent troubles and plans for emerging fromthe bankruptcy process as a "leader in the industry well into thefuture" in a declaration to the court.

Infirst day motions, Schwetz described Peabody's path to filing, describing aseries of market and financial challenges that left the company with billions in debtobligations and depleted liquidity at the end of last year.

"In2015, the company's liquidity was impacted by providing credit support tofinancial institutions, approximately $400 million in cash interest payments,$277 million in reserve installments, lower cash from operations and a $75million payment to the Patriot Voluntary Employee Benefits Association,"Schwetz wrote.

Inresponse, Peabody set in motion a series of efforts to reduce debt andspending, including lowering production costs, , general expenses,capital spending and salaries. "Despite all of theseaccomplishments, these efforts did not fully overcome the bleak industrybackdrop," Schwetz wrote.

And the cost cutting included executive compensation. "Over the course of thepast twelve months, Peabody decreased its annual cash incentive awards paymentsfor executives and salaried employees by 50% of achievement, decreased itsannual equity awards for executives by 50% of value, and the President and CEOtook a voluntary 10% reduction in base compensation and the Board took an over18% reduction in retainers, all reflecting the company's aggressive costmanagement initiatives," she noted.

Afterexploring possible options with advisors, Peabody "determined in theirbusiness judgment that commencement of these chapter 11 cases is the bestcourse to preserve and maximize liquidity and value for their stakeholders."

"Itis the debtors' belief that the relief provided by chapter 11 will enable themto continue to restructure their debt and operations while riding out the stormthat has beset the coal industry," Schwetz wrote.

Despitethe inability to resolve its debt obligations and continued market pressure,Schwetz said the company is confident that it has the asset base, "strongunderlying operational performance, outstanding workforce, new management teamand favorable geographic diversity" to emerge from the bankruptcy processas an industry leader.

"Thecompany holds an estimated 6.3 billion tons of coal reserves and half a millionacres of surface lands," Schwetz wrote. "The company plans tocontinue to build on these unique advantages and significant strengths thatfavorably distinguish it from its competitors. Upon emergence, the debtorsbelieve these factors will provide the basis for the company to be a leader inthe industry well into the future."

In theshort term, Peabody appealed for authority to enter into debtor-in-possessioncredit facilities. The DIP facility, according to Schwetz, will allow Peabodyto continue day-to-day operations, comply with regulatory obligations, developand implement long-term business plans and properly fund the Chapter 11 cases.

Further,the facility will "send a strong and positive message to the debtors'employees, regulators and business partners that the debtors believe willbenefit their businesses," she said.

Accordingto Schwetz, the bankruptcy filing excludes Peabody's Australian assets, whichinclude active metallurgical coal mines in Queensland and New South Wales andthermal mining operations in New South Wales.

Filing finds mixed responsein coal country

In thehours after Peabody filed for bankruptcy, coal advocates from states where thecompany is active offered mixed, but mostly positive responses to the company'slegal action.

PhillipGonet, president of the Illinois Coal Association provided a positive assessmentof Peabody's filing, telling S&P Global Market Intelligence that it wouldhelp the company survive the "unprecedented industry downturn."

"Thereremains about a billion tons of recoverable coal in Illinois and Peabody ownssignificant reserves," Gonet said. "Extraction costs are relativelylow and we have a well-established transportation network to get the coal tothe end user. According to Peabody, they expect to continue to mine coal, loadtrains and reclaim lands in a business-as-usual fashion. I agree with theirassessment."

StuartSanderson, president of the Colorado Coal Association, called the filing"unfortunate, but no surprise," adding that he was not aware of anyimpact on the company's Twentymile mine — also known as Foidel Creek — located in the state.

Sandersondid take the opportunity to lay blame for the "challenging economicconditions" that forced Peabody to seek bankruptcy protection at the feetof the Obama administration.

Theoffice of Republican Gov. Matt Mead of Wyoming, where Peabody recentlyannounced layoffs atits largest mine, echoed that sentiment. "Today's filing isyet another sign of how the regulations and policies of this administration areharmful to the coal industry, Wyoming and the nation," said Mead spokesmanSeth Waggener.

However,for those working on the ground in Wyoming, the filing offered the possibilityof stability during a turbulent time for the company and industry as a whole.

"Iam not at all surprised at the bankruptcy announcement," a Peabody minerworking at a local mine said in a statement shared by Wyoming Public Media."We have all heard and read about the earlier reports of it being apossibility. I am hoping this can somehow stabilize our company and protect theremaining workforce from further layoffs. Beyond the obvious anxiety of workingfor a company that just filed bankruptcy, I feel sad that my company, once soprominent, is at this point. But we carry on, hoping for the very best."