Peabody Energy Corp, the world's largest private-sector coal miner, squares off in court on Thursday against opponents of its reorganization plan, including state regulators, shareholders, environmental activists and even former executives.
Peabody will ask U.S. Bankruptcy Judge Barry Schermer for approval to begin seeking creditor votes on its plan to slash $5 billion of debt, mostly by raising $1.5 billion in private capital, and to exit Chapter 11 bankruptcy in April.
The biggest creditors support the plan, which will bring the company, which produces both metallurgical coal used in steelmaking and the thermal type used to generate electricity, out of bankruptcy with about $2 billion in debt.
Peabody has said a competing proposal developed by a small group of creditors would leave it with $2.4 billion in debt after bankruptcy and put it at risk of a return to Chapter 11, given the volatility of the coal industry.
Indiana and environmental groups have said in court filings that Peabody's plan fails to address whether the company can cover $1 billion in future mine cleanup costs with third-party bonds.
Until now, Peabody has covered cleanup liabilities under "self-bonding." This federal program is under scrutiny for exempting presumably healthy coal companies from providing financial guarantees to cover their legal obligation to return mined land to its natural setting.
Other objectors are generally upset about the way Peabody is allocating its value, which has fluctuated with swings in coal prices.
Shareholders have said the company is worth more than it acknowledges and that their stock should not be canceled, while four former executives, including ex-chief executive officer Gregory Boyce, have sued to protect their retirement benefits.
The U.S. government's bankruptcy watchdog, the U.S. Trustee, has objected to the "exorbitant" $240 million in fees Peabody plans to pay as part of its capital-raising.
Oil and gas producer Berenergy Corp said it could prevail in litigation with Peabody in a dispute over leases at the world's largest coal mine, North Antelope Rochelle in Wyoming. That would cost Peabody $1 billion in revenue and could unravel its reorganization plan.
Peabody's volatile pink sheet shares ended up about 17% at $2.57 on Wednesday. The stock rocketed briefly above $18 in October in response to steps by China to limit its domestic coal production but has since drifted lower.