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ST. LOUIS Peabody Energy Corp, the
world’s largest private-sector coal producer, is squaring off in
court with shareholders who claim their stock should not be
wiped out in the company’s $8 billion Chapter 11 bankruptcy,
given a rise in prices for the fuel.
Shareholders led by hedge fund Mangrove Partners hope to
prove at a hearing in St. Louis on Thursday that Peabody may be
the rare bankruptcy where a company’s assets are valuable enough
to repay creditors and have money left over for stockholders.
Many of the dozens of bankruptcies filed by energy companies
in the past year have involved similar campaigns by shareholders
who have pointed to rising commodity prices to justify the
appointment of an official equity committee.
Few, however, could convince a judge to order an official
committee for shareholders, which would receive money from the
bankrupt company for lawyers and advisers as well as play a role
in crafting a reorganization plan.
The coal industry has been recovering from weak prices that
pushed three of the four largest U.S. producers into bankruptcy
over the past two years.
Mangrove said in December that the value of Peabody would
recover if prices stabilize around $145 per ton for
metallurgical coal used in steelmaking and around $77 per ton
for the thermal type used to generate electricity.
At that time, both types of coal were trading above those
“This is more than enough to show that Peabody is not ‘hopelessly insolvent’ – all that is required to show at this
stage to obtain appointment of an equity committee,” Mangrove
said in a motion filed in December.
Peabody has objected to the request, saying current equity
holders are unlikely to receive any value, and their shares are
likely to be cancelled.
U.S. Bankruptcy Judge Barry Schermer will preside at
Peabody hopes to exit bankruptcy in April, a year after its
Chapter 11 filing. The vast majority of its creditors support
its plan to cut $5 billion of debt and raise capital from
creditors with a $750 million private placement and a $750
million rights offering.
The company’s shares, which fell to a record low of 55 cents
after its Chapter 11 filing in April, were up 11 percent at
$4.31 in over-the-counter trading on Thursday.
The U.S. Trustee, a government watchdog for bankruptcies,
objected to parts of Peabody’s reorganization plan on Wednesday.
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