Peabody defends disputed reorganization plan in bankruptcy court
Peabody Energy is facing multiple challenges to its Chapter 11 exit plan, including former employees, the State of Indiana, shareholders and activists. St. Louis Post-Dispatch photo by J.B. Forbes.
Indiana, environmental groups concerned Peabody Energy fails to address future clean-up costs
By Tracy Rucinski
ST. LOUIS, Jan 26 (Reuters) – Peabody Energy Corp , the world’s largest private-sector coal miner, defended its bankruptcy exit plan in court on Thursday against opponents including state regulators, shareholders, environmental activists and even former executives.
Peabody asked U.S. Bankruptcy Judge Barry Schermer for permission 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 emerge from its Chapter 11 bankruptcy in April.
The biggest creditors support the plan, which will bring the coal producer out of bankruptcy with about $2 billion in debt.
Testifying in a packed courtroom, Peabody Chief Financial Officer Amy Schwetz said it would be “irresponsible” to take on more debt given the cyclical nature of the coal industry.
Peabody lawyers said management had considered competing proposals by a small group of creditors but decided that they would leave the company with too much debt, putting it at risk of another Chapter 11.
“We only want to do this once,” Schwetz said.
Peabody resolved objections from certain noteholders, the United Mine Workers of America and federal bankruptcy watchdog the U.S. Trustee before Thursday’s hearing, its lawyer said.
Indiana and environmental groups oppose the plan, saying in court filings that it 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.
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 rose 8.6 per cent to $2.79 on Thursday. 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.
(Reporting by Tracy Rucinski; Editing by Lisa Von Ahn and Meredith Mazzilli)
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