Peabody Energy is mapping out its plan to emerge from bankruptcy protection next spring.
The coal company has filed a financial reorganization proposal with the U.S. Bankruptcy Court in St. Louis that calls for shedding more than $5 billion in debt and eventually issuing new common stock. Current shareholders would not receive anything and might oppose the plan.
The filing amounts to a complicated formula involving lenders with roughly $3 billion in secured debt to be paid back in full, through a combination of cash and debt. Some others will not receive full payment for their interest in the company, but will be given a mixture of cash, debt or stock of the post-bankruptcy Peabody.
"It represents the most tangible milestone yet of our plan and our path toward emerging from Chapter 11," said Vic Svec, senior vice president of Corporate Relations.
"We are pleased to have broad consensus on this plan. Not every group, but many groups have come together to support this."
Existing stockholders are likely to raise objections because they appear to be on the verge of losing all of their investments in the St. Louis company.
"Existing shareholders would see their securities canceled," said Svec, who added they would not receive any value for those interests.
"It is unfortunately the nature of the beast, but one that again allows for the company to move forward in a sustainable fashion."
Here's the basic breakdown of the finances that could be in place to launch a new Peabody:
- $1.95 billion in new debt. (Peabody's debt load was more than $8 billion at the time of the bankruptcy filing.)
- $750 million rights offering (That gives some creditors the chance to acquire some of the company after bankruptcy.)
- $750 million private placement (These securities will be sold through a non-public offering, likely to some pre-selected investors.)
- New common stock
The bankruptcy court is expected to have a hearing on many of the details Jan. 26, 2017. A favorable decision will put the reorganization plan and a disclosure statement up for creditor approval.
The company is hoping to come out of bankruptcy at around the one-year mark of the filing, which was this past April.
Peabody could be exiting Chapter 11 protection at an opportune time. It still has operations in Australia, where coal prices for electricity generation and in the steel-making process are improving.
"In the U.S., we've seen a much improved second-half to the year, versus to the first-half of the year," Svec told St. Louis Public Radio. "Primarily related to the improvement in natural gas prices, which is a primary competitor for coal."
Lower natural gas prices were a key factor that drove Peabody into bankruptcy.
The new Peabody will have a nine-member board of directors including selections of three large creditor groups. The company's chief executive officer will also be on the panel.
Through the nearly year-long bankruptcy and complicated exit-process financing, Peabody is stressing a commitment to St. Louis. It has renewed a lease for its downtown office building. The company also says it is not planning any management or personnel changes at this point.
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