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ST. LOUIS Peabody Energy Corp, the
world’s largest private-sector coal miner, can begin seeking
creditor votes for a plan to cut $5 billion of debt and exit its
Chapter 11 bankruptcy, a U.S. bankruptcy judge said on Thursday.
U.S. Bankruptcy Judge Barry Schermer overruled objections
from opponents including state regulators, shareholders,
environmental activists and even former executives. Their
complaints can still be debated at a later confirmation hearing.
Peabody has said it hopes to emerge from its $8 billion
bankruptcy in April with a plan that will raise $1.5 billion in
private capital and leave it with under $2 billion of debt.
The biggest creditors support the plan, which Peabody
defended in court over competing proposals by a small group of
creditors that would see Peabody exit bankruptcy with about $2.4
billion of 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 and put
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.
Indiana and environmental groups opposed the plan, saying
that it fails to address whether Peabody 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
Shareholders have said the company is worth more than it
acknowledges and that their stock should not be cancelled.
Peabody’s volatile pink sheet ended up 0.9 percent at $2.85
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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