(Reuters) - Leading global coal producer Peabody Energy Corp BTU.N filed for U.S. bankruptcy protection on Wednesday after a sharp drop in coal prices left it unable to service debt of $10.1 billion, much of it incurred for an expansion into Australia.

Traders work at the post where Peabody Energy is traded on the floor of the New York Stock Exchange (NYSE) March 16, 2016. REUTERS/Brendan McDermid

The Chapter 11 bankruptcy filing ranks among the largest in the commodities sector since energy and metal prices began to fall in mid-2014 as once fast-growing markets including China and Brazil started to slow.

Peabody, the world’s biggest private-sector coal producer, said it expected its mines to continue to operate as usual and said its Australian assets were excluded from the bankruptcy.

Peabody estimated its assets at $11.0 billion and liabilities at $10.1 billion as of the end of 2015, according to court documents.

“This process enables us to strengthen liquidity and reduce debt, build upon the significant operational achievements we’ve made in recent years and lay the foundation for long-term stability and success in the future,” Peabody Chief Executive Officer Glenn Kellow said in a statement.

Peabody has agreed to $800 million in debtor-in-possession financing from both secured and unsecured creditors, subject to court approval, including a $500 million term loan, a $200 million bonding accommodation facility for cleanup costs and a letter of credit worth $100 million, it said.

Large coal companies have been allowed to leave a share of future mine cleanup without collateral through a program called “self bonding” that has come under federal scrutiny following financial distress in the coal sector. Peabody has a total of $1.1 billion in self-bonding across four states, court documents showed.

Unlike most large corporate bankruptcies, Peabody’s filing did not sketch out a plan for cutting debt.

“Essentially through the bankruptcy process the debt will be pared down to a significant degree and lenders will essentially become shareholders,” said Monica Bonar, an analyst with credit rating agency Fitch Ratings.

In that scenario, existing stock would be canceled. Shares of Peabody, which closed at $2.07 on Tuesday, were halted on Wednesday.

Court documents indicate creditors want the U.S. Bankruptcy Court in St Louis to resolve a $1 billion dispute over claims on the Peabody collateral.

The looming fight involves some of the most litigious investment funds on Wall Street, including Aurelius Capital Management and Elliott Management Corporation, according to a regulatory filing. The two funds have spent years battling Argentina in U.S. courts over the country’s 2001 default.

ILL-TIMED ACQUISITION

Debt troubles for Peabody date to its $5.1 billion leveraged buyout of Macarthur Coal in 2011, just when prices peaked for the metallurgical coal that the Australian company supplies to Asian steel mills.

As metallurgical coal demand fell, particularly in China, Peabody’s financial woes intensified. The company wrote down $700 million on its Australian metallurgical coal assets last year.

At home, the U.S. shale boom of the past few years made natural gas competitive with thermal coal, and the Obama administration’s environmental regulations raised operational costs.

“2016 will probably go down as the worst year in history for U.S. coal,” JPMorgan said in a research note on Tuesday. U.S. production declined 31 percent in the first quarter year-on-year, although stockpiles still remain high, the note said.

Producers accounting for about 45 percent of U.S. coal output have filed for bankruptcy in the industry downturn, based on the most current government figures published in 2014.

In November, Peabody agreed to provide investors with more robust disclosures about how its business could be hurt if global governments move to tackle climate change.

The case is in the U.S. Bankruptcy Court for the Eastern District of Missouri, St. Louis, case number 16-42529.