Peabody’s bankruptcy plan will largely benefit select few

Oddly Peabody’s bankruptcy comes at a time when the Donald Trump Administration is giving the fossil fuel industry the go ahead.

The world’s largest private sector coal producer, Peabody Energy Corp, has disclosed that it expects to file bankruptcy under Chapter 11 in early April.

The move comes following a U.S. judge’s approval to slash over $5 billion of debt.

U.S. Bankruptcy Judge Barry Schermer stated he was ready to sign an order that approves Peabody’s bankruptcy once the language regarding a late settlements of Department of Justice complaints have been finalized.

Peabody’s bankruptcy comes at a time when thanks to the Trump Administration the short-term business prospects for the coal industry are looking up.

“Peabody has accomplished the goals set out nearly a year ago, against an industry backdrop that has strengthened,” said Glenn Kellow Peabody’s CEO in a statement.

The company’s reorganization plan will see the repayment to secured lenders in full. Naturally creditors have overwhelmingly supported the move.

After the re-organisation, Peabody plans on re-listing on the stock market, midst increased demand and dismantling of regulations under U.S. President Donald Trump, which has fuelled investor enthusiasm over coal disregarding its adverse effect on climate change and global warming.

Ramaco Resources Inc, a coal producer has recently concluded an IPO offering while Warrior Met Coal is set to launch its IPO.

Peabody’s reorganisation plan is being financed through a $1.5 billion sale of stock, which consists of a $750 million rights offer, available to bondholders only, while another $750 million of preferred equity will be private placed for institutional investors.

A small group of asset managers have opposed the plan saying it was in bad faith since the private placement of the funds essentially enrich only select funds which helped negotiate the company’s bankruptcy plan.

“The value of the private placement is truly extraordinary,” said Andrew Leblanc, a lawyer who represented the opponents to the plan, who plans on appealing the bankruptcy confirmation.

The opponents of the plan have argued in court stating the funds backing the re-organisation plan stands to reap hundreds of millions of dollars in profits since the plan grossly underestimates Peabody’s potential.

Elliott Management and Aurelius Capital Management have played a pivotal role in crafting the reorganization plan by pushing Peabody to use an accounting tweak which essentially weakens the positions of the company’s lenders.

This led to a dispute, which went into mediation and eventually formed the basis for the reorganization plan.

Peabody, which also owns significant assets in Australian coal mining and coal-rich Wyoming, has recently objected to an environmental liability policy as well as mine workers union retirement plan.

Bankruptcy Judge Barry Schermer has overruled these objections, including ones from shareholders whose stock will be wiped out in the reorganization.

The reorganisation plan includes a stock bonus plan for employees and executives, including a nearly $15 million bonus package for its CEO and $3 million to $5 million for its five other top executives.

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Categories: Creativity, Geopolitics, HR & Organization, Regulations & Legal, Strategy, Sustainability

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