The number of shares of Peabody Energy Corp. (NYSE: BTU) sold short is more than double what it was a year ago. The number of shares short hit a 12-month peak of 101.6 million in the settlement period ended July 31, and that number declined to 95.5 million by the August 14 settlement date. That is still more than a third of Peabody’s float, however.

Since the equities meltdown of last Friday and Monday, energy stocks have recovered strongly, either because the share prices had fallen so far that the stock is now an irresistible buy or because short sellers who believe in their position want to hold on until the euphoria evaporates.

In Peabody’s case, there is a combination of short covering and a report from Bloomberg on Wednesday that the coal miner has hired Lazard to help it figure out how to restructure $6.3 billion in debt. That generally means that bankruptcy is not an immediate option, a boost for shareholders, who get essentially nothing when a company files for bankruptcy.

Bloomberg cited unnamed sources who said that Peabody is looking to cut its debt load perhaps by swapping debt for new shares or convertible notes. Bloomberg also noted that Peabody debt traded at $0.33 on the dollar recently, where they traded at face value less than a year ago.

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Another troubled coal miner, Arch Coal Inc. (NYSE: ACI) is also working to get its creditors to approve a debt swap that would allow the company to avoid bankruptcy. Lenders are pushing back, saying that issuing new shares or convertible notes dilutes their stake. Arch’s proposed debt swap was originally set to end on August 14, but was extended to August 28.

Peabody likely faces the same issues as Arch and is equally likely to get some pushback from current creditors. And if Arch cancels its debt swap offer tomorrow, Peabody could really be in a fix and all that short covering we suspect is happening will have been a good bet.

Peabody’s stock traded about 46% higher in the noon hour Thursday, at $2.23 in a 52-week range of $0.99 to $15.94.

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