Peabody takes disputed reorganization plan to bankruptcy court

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By Tracy Rucinski | ST. LOUIS

ST. LOUIS Peabody Energy Corp, the
world’s largest private-sector coal miner, squares off in court
on Thursday against opponents of its reorganization plan,
including state regulators, shareholders, environmental
activists and even former executives.

Peabody will ask U.S. Bankruptcy Judge Barry Schermer for
approval to begin seeking creditor votes on its plan to slash $5
billion of debt, mostly by raising $1.5 billion in private
capital, and to exit Chapter 11 bankruptcy in April.

The biggest creditors support the plan, which will bring the
company, which produces both metallurgical coal used in
steelmaking and the thermal type used to generate electricity,
out of bankruptcy with about $2 billion in debt.

Peabody has said a competing proposal developed by a small
group of creditors would leave it with $2.4 billion in debt
after bankruptcy and put it at risk of a return to Chapter 11,
given the volatility of the coal industry.

Indiana and environmental groups have said in court filings
that Peabody’s plan fails to address whether the company can
cover $1 billion in future mine cleanup costs with third-party
bonds.

Until now, Peabody has covered cleanup liabilities under “self-bonding.” This federal program is under scrutiny for
exempting presumably healthy coal companies from providing
financial guarantees to cover their legal obligation to return
mined land to its natural setting.

Other objectors are generally upset about the way Peabody is
allocating its value, which has fluctuated with swings in coal
prices.

Shareholders have said the company is worth more than it
acknowledges and that their stock should not be cancelled, while
four former executives, including ex-chief executive officer
Gregory Boyce, have sued to protect their retirement benefits.

The U.S. government’s bankruptcy watchdog, the U.S. Trustee,
has objected to the “exorbitant” $240 million in fees Peabody
plans to pay as part of its capital-raising.

Oil and gas producer Berenergy Corp said it could prevail in
litigation with Peabody in a dispute over leases at the world’s
largest coal mine, North Antelope Rochelle in Wyoming. That
would cost Peabody $1 billion in revenue and could unravel its
reorganization plan.

Peabody’s volatile pink sheet shares ended up about 17
percent at $2.57 on Wednesday. The stock rocketed briefly above
$18 in October in response to steps by China to limit its
domestic coal production but has since drifted lower.



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