Peabody Sends Chapter 11 Plan to Bankruptcy Judge
December 23, 2016
By Dylan Brown
The nation’s top coal producer published yesterday its plan for escaping bankruptcy.
Peabody Energy Corp. delivered its Chapter 11 reorganization plan to Judge Barry Schermer of the U.S. Bankruptcy Court for the Eastern District of Missouri. The plan needs Schermer’s approval.
St. Louis-based Peabody joined many of its competitors in bankruptcy earlier this year in the wake of an unprecedented industry slump caused by plummeting coal prices, withering foreign demand, skyrocketing domestic natural gas production and increased regulation (Greenwire, April 13).
Industry debt is also a factor. Much of Peabody’s $10 billion or so debt stems from its 2011 expansion into Australia with the $5.2 billion purchase of Macarthur Coal Ltd.
In August, Peabody requested more time to draw up a restructuring plan, but President and CEO Glenn Kellow said his company and its creditors have now reached “a proposal that has broad consensus, maximizes the value of the enterprise and paves the way for a sustainable future.”
“Eight months ago, we set out on a path to strengthen the balance sheet and position the company for long-term success amid historically challenged coal industry fundamentals,” Kellow said in a statement.
According to Peabody, the plan would reduce its debt by more than $5 billion, lower regular payments and offer up $750 million in stock “backstopped” by a third party along with the issuance of new common stock to appease certain creditors. The company is also selling the Metropolitan mine in Australia if the Australian Competition and Consumer Commission approves the deal.
Peabody expects to emerge with “substantial liquidity to satisfy near and long-term needs” as a public company. It is also preparing updated financial statements that show its recent performance
“While we still have outstanding issues to resolve prior to emergence, this plan demonstrates that Peabody retains an unmatched asset base, leading U.S. platform, substantial Australian thermal and metallurgical coal business, and a team of skilled employees,” Kellow said.
Peabody’s critics are skeptical of the plan’s handling of mine cleanups and $16.2 million in bonuses that the court approved for executives who hit performance targets.
Peabody has more than $1 billion in self-bonds, corporate promises that fulfill mine cleanup insurance requirements — more than than any other company (E&E News PM, Aug. 16).
“The company’s first proposed reorganization plan dodges the issue and unfairly risks shifting the costs for Peabody’s environmental cleanup responsibilities onto the public,” Howard Learner, an attorney for the Environmental Law & Policy Center, said in a statement. “A ‘feasible’ reorganization plan for Peabody to emerge from bankruptcy should not include continued self-bonding of mine reclamation costs.”