Peabody Wins Access to $800 Million Bankruptcy Loan

Peabody Energy Corp. on Thursday won bankruptcy-court approval to start drawing on an $800 million financing package designed to fund its newly launched chapter 11 reorganization.

Judge Barry S. Schermer of the U.S. Bankruptcy Court in St. Louis said he would grant preliminary approval to the financing package, arranged by Citigroup Inc., according to an audio recording of Thursday’s hearing.

The judge’s approval allows Peabody to begin drawing $200 million of a $500 million term loan and to access a $100 million letter-of-credit facility as well as a $200 million facility that is available to satisfy the company’s environmental obligations.

Besides Peabody’s existing secured lenders, the holders of Peabody’s unsecured bond debt—distressed investors Centerbridge Partners LP, Aurelius Capital Management LP, Elliott Management Corp., and Capital Research and Management- –are also contributing to the financing.

“We take this as a show of support for the process,” said Peabody bankruptcy lawyer Heather Lennox.

The loan’s terms require Peabody to meet certain deadlines in its restructuring, including coming up with business plans for its U.S. and Australian operations within four months, filing a restructuring plan in the next seven months and emerging from chapter 11 protection within a year.

“It’s a fairly short timetable, isn’t it?” Judge Schermer asked.

“It’s somewhat aggressive, but we think at this point that we’re in a position to meet those milestones,” Peabody bankruptcy lawyer Mark Cody replied.

Judge Schermer will consider granting final approval to the full amount of the bankruptcy loan at a May 5 hearing.

Thursday’s hearing revealed a brewing fight among Peabody’s lenders. At issue is the question of whether the top- ranking lenders can lay claim to enough of Peabody’s major mines to establish their claims as fully secured.

The issue “is going to be a hotly contested item,” Ms. Lennox said.

Mangrove Partners, a New York investment fund that holds more than $100 million of unsecured debt, believes Peabody’s senior lenders’ claims are undersecured and thus not entitled to the cash interest payments they are getting as part of the bankruptcy loan arrangement, according to a Mangrove lawyer.

However, the issue of whether the lenders are entitled to the cash interest payments wasn’t decided Thursday and can be revisited later.

Peabody’s court appearance came the day after the largest U.S. coal miner sought chapter 11 protection, the latest miner to turn to bankruptcy in the face of declining demand and increased regulation.

The company reported more than $10 billion in debts as of the end of last year.


Powered by Facebook Comments