Peabody secures $1.5 billion in financing to exit Chapter 11

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By Tracy Rucinski | CHICAGO

CHICAGO Peabody Energy Corp said on
Thursday that a group of banks, including affiliates of Goldman
Sachs Group Inc and JPMorgan Chase Bank, has
pledged a combined $1.5 billion in loans to help the coal
producer exit bankruptcy in the coming months.

The cash will be used to cover claims by Peabody’s secured
lenders and provide “a strong foundation” for its capital
structure when it emerges from the roughly $8 billion Chapter 11
bankruptcy it filed last April, according to court documents.

Affiliates of Credit Suisse AG and Macquarie Group
Ltd are also part of the group that has signed on to
the new financing.

Peabody, with 6.3 billion tons of proven and probable coal
reserves, joined other U.S. coal producers in bankruptcy last
year when falling prices left it unable to service billions of
dollars in debt taken on to finance expansion in Australia.

The company expects to exit Chapter 11 in the second quarter
of this year with a plan, supported by most of its creditors, to
cut more than $5 billion of debt and raise new capital through a
$750 million private placement and a $750 million rights
offering.

Peabody has not yet explained how it will guarantee about $1
billion in future mine cleanup costs previously covered by “self-bonding,” a federal program that exempt large miners from
setting aside cash or collateral to ensure mined land is
returned to its natural setting, as required by law.

The practice came under scrutiny following Chapter 11
filings by U.S. coal producers that held a total of $3.6 billion
in self-bonds as of July, raising concerns that taxpayers could
some day be stuck with the cost of cleaning up mined land.



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