Peabody Energy subsidiary sues for $20 million sale termination fee

By Caroline Salls

Pittsburgh, June 1 – Peabody Energy Corp. indirect subsidiary Four Star Holdings, LLC filed a lawsuit Wednesday in the U.S. Bankruptcy Court for the Eastern District of Missouri in an attempt to recover a $20 million sale agreement termination fee.

Four Star said it agreed to sell its New Mexico and Colorado coal assets to Western Megawatt Resources, LLC in November 2015 for $358 million in cash. Defendant Bowie Resource Holdings, LLC provided an absolute and unconditional guaranty of Megawatt’s obligations under the sale agreement.

Four Star said Megawatt needed to obtain financing to close the sale, and it agreed to pay Four Star the $20 million termination fee if it did not do so.

According to the lawsuit, Megawatt did not obtain the necessary financing within the time allowed under the sale agreement, nor in the additional time Four Star agreed to provide at Megawatt’s request.

Four Star said it asked Megawatt to pay the termination fee on April 12, and Megawatt refused three days later.

Neither Megawatt nor Bowie has paid Four Star the termination fee, according to the lawsuit.

In addition to payment of the termination fee, Four Star is asking the court to order Bowie to pay interest and costs under its guarantee.

Peabody, a St. Louis-based coal producer, filed bankruptcy on April 13. The Chapter 11 case number is 16-42529.

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