Peabody defends disputed reorganization plan in bankruptcy court

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By Tracy Rucinski | ST. LOUIS

ST. LOUIS 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 percent 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.



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