Peabody Energy files Chapter 11 plan, eyes second-quarter emergence

By Caroline Salls

Pittsburgh, Dec. 22 – Peabody Energy Corp. filed its plan of reorganization and related disclosure statement Thursday with the U.S. Bankruptcy Court for the Eastern District of Missouri.

According to a company news release, the plan filing represents a key milestone in the company’s Chapter 11 process.

“Today’s proposed plan is an important achievement in our path toward emergence,” president and chief executive officer Glenn Kellow said in the release.

“The plan charts Peabody’s course forward and reflects an enormous amount of work by the company and multiple creditor groups to advance a proposal that has broad consensus, maximizes the value of the enterprise and paves the way for a sustainable future.”

The proposed plan provides for a new, sustainable capital structure that significantly reduces the pre-filing debt levels by more than $5 billion, lowers fixed charges and recapitalizes the company through a backstopped rights offering of $750 million, a private placement of mandatorily convertible preferred stock of $750 million and the issuance of new common stock to satisfy other creditor claims.

The plan also anticipates that Peabody will emerge with substantial liquidity to satisfy near-term and long-term needs, according to the release.

Creditor treatment

Under the plan, current Peabody Energy equity securities will be cancelled, and holders will receive no distribution.

Contingent debtor-in-possession facility surviving claims will be preserved and, if allowed, paid in full in cash.

Securitization facility claims will be satisfied in the ordinary course of business or paid in full in cash.

Holders of first-lien lender claims will be paid in full in cash, including interest at the default rate, or, to the extent the company does not receive a commitment for at least $1.5 billion in exit financing, a replacement secured first-lien term loan and cash.

Holders of second-lien notes claims will receive, at the option of the Peabody debtors, a share of $450 million in any combination of cash, additional first-lien debtor or new second-lien notes, a share of a common stock split and a share of a rights offering equity rights split.

Holders of general unsecured claims against encumbered debtors will receive a share of the common stock split and the rights offering equity rights split.

Holders of unsecured debenture claims will receive no distribution until holders of general unsecured claims are paid in full.

The company said three key stakeholder groups, including its first-lien creditors, a second-lien group and an unsecured noteholder group, reached agreement with the company on a framework that culminated in the plan.

Peabody said it expects the disclosure statement approval hearing to be held on Jan. 26, and the company is targeting emergence in the beginning of the second quarter.

Projections updated

Given recent changes in the industry and the company, Peabody said it also elected to provide updated projections for 2016 through 2021 and will make these projections public.

Revisions to the company’s August business plan mostly impact early years based on changes in near-term pricing and currency, along with the planned sale of the Metropolitan Mine targeted for the first quarter of 2017, subject to clearance by the Australian Competition and Consumer Commission.

In addition, Peabody said it is preparing updated financial statements to reflect the impact of actual performance, and these will be filed as a supplement ahead of the disclosure statement hearing.

New board

The company said the plan provides for a nine-member board of directors, which will be comprised of the CEO, a director chosen by Peabody, appointments from three large creditor groups and four directors chosen by a search process. Directors from the existing Peabody board will be considered as part of the search process.

Peabody, a St. Louis-based coal producer, filed bankruptcy on April 13, 2016. The Chapter 11 case number is 16-42529.

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