By Tracy Rucinski, Bernard Orr, Tom Hals and Richard Pullin
March 17, 2017 - Peabody Energy Corp, the world's largest private sector coal producer, said on Thursday it expects to exit its Chapter 11 bankruptcy in early April after a U.S. judge said he would approve its plan to slash over $5 billion of debt.
U.S. Bankruptcy Judge Barry Schermer said he was ready to sign an order to approve Peabody's bankruptcy emergence once language regarding a late settlement of certain U.S. Department of Justice complaints had been finalized.
St. Louis-based Peabody will leave bankruptcy amid dramatically improved short-term prospects for its business compared to a year ago, when it sought Chapter 11 protection.
"Peabody has accomplished the goals set out nearly a year ago, against an industry backdrop that has strengthened," Chief Executive Officer Glenn Kellow said in a statement.
The reorganization plan, which will repay secured lenders in full, received overwhelming support from its creditors.
Peabody plans to re-list on the stock market, coinciding with increased demand from Asia and anticipation of eased regulation under U.S. President Donald Trump that has fueled investor enthusiasm for coal.
Coal producer Ramaco Resources Inc recently completed an initial public offering and Warrior Met Coal has filed to sell shares in an IPO.
Peabody's plan is being financed through a $1.5 billion sale of stock, consisting of a $750 million rights offering available to bondholders and a $750 million private placement of preferred equity for institutional investors.
A small group of asset managers opposed the plan because they said it was proposed in bad faith and attacked the private placement for enriching the select funds that 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. He said they would appeal the bankruptcy confirmation.
The opponents argued in court papers that the main funds backing the plan stood to reap hundreds of millions of dollars in profits because the plan underestimated Peabody's potential.
Hedge funds Elliott Management and Aurelius Capital Management played a key role in crafting the reorganization plan by urging Peabody to use an accounting change to weaken the position of the company's lenders.
The dispute went into mediation and eventually formed the basis for the reorganization plan.
Peabody reached last-minute settlements on a number of objections to the plan, including one from individual investors who said they were wrongly blocked from the private stock sale.
Peabody, which owns prime assets in Australia and coal-rich Wyoming in the United States, also recently settled objections over its environmental liability policy and a mine workers union retirement plan.
Schermer overruled other objections, including from shareholders whose stock will be wiped out in the reorganization.
The plan also includes a stock bonus plan for employees and executives, including about $15 million for CEO Kellow and $3 million to $5 million for five other top executives.