Cloud Peak Energy Inc.

A dark and dirty descent into bankruptcy was the story of Cloud Peak Energy Inc., as America's coal industry continues to hover in a volatile space.

Based in Wyoming's Powder River Basin, Cloud Peak made news in March by skipping a $1.8 million interest payment, triggering talks of the need for Chapter 11 protection. As of Dec. 31, the company's Cloud Peak Energy Resources LLC subsidiary owed $56.4 on 2024 bonds and $290.4 million on second-lien debt maturing in 2021, according to a fling with the U.S. Securities and Exchange Commission.

Our proprietary FRISK® score was able to capture Cloud Peak's drop into the "red zone" of risk starting in the summer of 2018, giving creditors a competitive advantage to pivot away from this counterparty months before scary headlines arrived:

Cloud peak FRISK image

In this High Risk Report, we take a look at additional factors which caused Cloud Peak to crumble, including their intense decrease in working capital and unfavorable rates of return in late 2018 and 2019.

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Our FRISK® score model incorporates four powerful risk inputs:

  • “Merton”-type model of stock market capitalization and volatility
  • Financial ratios, including those used in the Altman Z”-Score Model
  • Bond agency ratings from Fitch, Moody's, and DBRS Morningstar
  • Website click pattern data from CreditRiskMonitor® subscribers, representing key credit decision-makers at more than 35% of current Fortune 1000 companies plus thousands of other large companies worldwide

Since the start of 2017, the FRISK® score’s rate of success in capturing public company bankruptcy is 96%: 235 identified out of 243 bankruptcies. In any given year, you can count on one hand the times we miss – and in those outlier cases, the circumstances deal with unusual, unforeseen events such as natural disasters and CEO fraud.

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About Bankruptcy Case Studies

CreditRiskMonitor® Bankruptcy Case Studies provide post-filing analyses of public company bankruptcies. Our case studies educate subscribers about methods they can apply to assess bankruptcy risk using our proprietary FRISK® score, robust financial database, and timely news alerts.

In nearly every case, a low FRISK® score gave our subscribers early warning of financial distress within a one-year time horizon. Our proprietary FRISK® score predicts bankruptcy risk at public companies with 96% accuracy. The score is formulated by a number of indicators including stock market capitalization and volatility, financial ratios, bond agency ratings from Moody’s, Fitch and DBRS, and crowdsourced behavioral data from a subscriber group that includes 35% of the Fortune 1000 and thousands more worldwide.

Whether you are new to credit analysis or have decades of experience under your belt, CreditRiskMonitor® Bankruptcy Case Studies offer unique insights into the business and financial decline that precedes bankruptcy.