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CHICAGO The U.S. government’s bankruptcy
watchdog objected on Wednesday to certain parts of Peabody
Energy Corp’s plan to slash $5 billion of debt and
exit Chapter 11, calling a proposed $240 million in transaction
fees “exorbitant,” court papers showed.
Peabody Energy, the world’s largest private sector coal
producer, has proposed a $750 million rights offering, a $750
million private placement and the issuance of new common stock
as part of a reorganization plan unveiled last month.
In a court filing, the U.S. Trustee said the fees to be paid
in those transactions would transfer millions of dollars of
funds from the bankruptcy estate before the reorganization plan
is approved by creditors and the court.
“Plan voting is at the core of the reorganization process
and should not be eviscerated by a deal struck by powerful
well-connected parties,” the watchdog said in a filing with the
U.S. Bankruptcy Court in St. Louis.
The U.S. Trustee, which oversees the administration of
bankruptcy cases, said Peabody’s request for court approval of
those proposals would improperly lock in payment terms before
the whole reorganization plan is approved.
“We’re evaluating the statements of the trustee and intend
to respond appropriately,” Peabody spokesman Vic Svec said.
Peabody hopes to exit bankruptcy around a year after its
April, 2016 Chapter 11 filing with a plan that has the approval
of most but not all of its creditors.
Shareholders have objected to the reorganization plan and
have requested an official voice in the $8 billion bankruptcy
case, arguing that a rise in coal prices means the company is
valuable enough to repay shareholders who normally lose their
money in a bankruptcy.
A hearing on the shareholders’ request is scheduled in St.
Louis on Thursday, while the U.S. Trustee’s objections will be
heard at a hearing on Jan. 26.
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