Peabody granted approval of incentive plans, self-bonding agreements

By Caroline Salls

Pittsburgh, Aug. 18 – Peabody Energy Corp. received court approval of incentive plans for its executive leadership team (ELT) and of a modification to the compensation program for its independent directors, according to an 8-K filed Thursday with the Securities and Exchange Commission.

The ELT is comprised of Peabody president and chief executive officer Glenn L. Kellow, president- Australia Charles F. Meintjes, president - Americas Kemal Williamson, executive vice president and chief financial officer Amy B. Schwetz, executive vice president and chief legal officer, government affairs and corporate secretary A. Verona Dorch and group executive marketing and trading Bryan A. Galli.

The company said it established the ELT incentive plans to motivate the ELT to meet and exceed operational goals that will be critical for the debtors’ restructuring and will enhance the value of its estates. The company said it is possible that ELT members may receive no payment at all under these incentive plans.

Each ELT member’s target direct compensation is expected to decrease compared to his or her pre-bankruptcy target compensation level, even if the incentive plans are approved and target performance is achieved. The decrease for the team as a whole would be 26%.

Each member of the ELT would still be eligible to earn a target award equal to 80% of annual base salary, or 110% of annual base salary in the case of the president and CEO, under the incentive plan.

Earned awards would be determined based on the company’s performance, first for calendar year 2016, and then for calendar year 2017.

Each member of the ELT would have a target award opportunity under a key employee incentive plan equal to a percentage of annual base salary, including 175% for the president and CEO, 125% for the Australia and Americas presidents, executive vice president and chief legal officer, 150% for the executive vice president and CFO and 100% for the group executive marketing and trading.

Previously, Peabody’s directors were slated to receive $240,000 in compensation for 2016 plus applicable retainers, consisting of a $110,000 annual cash retainer, $65,000 in deferred cash and $65,000 in deferred stock units that vest monthly.

Under the approved modification, that total compensation will be reduced to a single $175,000 annual cash retainer, plus applicable chairman or committee chairperson retainers, during the pendency of the Chapter 11 cases and discontinue the deferred cash and deferred stock units.

Self-bonding agreements OK’d

According to the 8-K, Peabody also received court approval of agreements with three state regulatory agencies regarding financial assurances in support of coal mine restoration. Specifically, superpriority settlement agreements were reached with Wyoming, New Mexico and Indiana, states in which the company has self-bonding obligations.

These agreements give the relevant state authorities the ability to receive cash first in priority as additional assurance for Peabody’s performance before distribution to any lender or other pre-bankruptcy creditor, up to the full amount of the company’s $200 million bonding accommodation facility.

Each state is entitled to a percentage of the $200 million bonding accommodation facility based on a proportion of self-bonding relative to Peabody’s total obligation as of April 12.

In addition to providing supplemental financial assurances to these states, the company said it agreed to quarterly reclamation activity status meetings, as well as targeting reductions in the amount of bonds outstanding with the states.

As of June 30, Peabody had $1.14 billion of self-bonding and $320 million of surety bonds supporting reclamation activities outstanding, according to the release.

Peabody, a St. Louis-based coal producer, filed for bankruptcy on April 13 in the U.S. Bankruptcy Court for the Eastern District of Missouri. The Chapter 11 case number is 16-42529.

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