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What: Shares of Peabody Energy Corporation (NYSE:BTU) rocketed higher in early morning trading, up more than 40% by midmorning. Fueling today's rise is a report that it's hired a bank to help restructure its debt, and a whole lot of short covering.

So what: Yesterday afternoon, Bloomberg reported that Peabody Energy had hired investment bank Lazard to advise the company on how it should restructure its $6.3 billion in debt. It's a restructuring that would be handled outside of bankruptcy, according to the report. The report also said that the company is talking with creditors on ways to cut its debt, including debt-for-equity swaps or convertible notes.

With bankruptcy seemingly off the table, at least for now, short-sellers are scurrying for the exits. With 34.5% of the company's outstanding shares sold short, this run to the exit is leading to a lot of buying, which is sending shares skyrocketing.

Now what: Peabody isn't out of the woods just yet. The company has a mountain of debt to still overcome, and any debt-for-equity swaps could lead to some serious dilution for current investors. Furthermore, the coal market isn't yet showing any signs of healing. Investors really should just watch this one from the sidelines, as Peabody's stock will likely continue to be very, very volatile and could still end up stopping at zero before all is said and done.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.