CHICAGO Feb 6 Opponents of Peabody Energy
Corp's reorganization plan have filed an emergency
appeal against a key piece of the coal producer's proposal they
say violates U.S. bankruptcy law by prematurely requiring
creditors to promise support it.
At the heart of creditors' complaints are the terms of a
$1.5 billion private recapitalization that Peabody has proposed
as part of a plan to slash $5 billion of debt and exit Chapter
The plan by the world's largest private-sector coal company
could provide lucrative returns for early subscribers. In order
to sign up for the private offering, creditors had to support
Peabody's broader reorganization plan, a complex and lengthy
document, within days of its publication on Dec. 22 and almost a
month before it went to bankruptcy court for approval.
U.S. Bankruptcy Judge Barry Schermer blessed the plan on
Jan. 26, overruling objections from a range of parties and
opening the door for Peabody to officially begin seeking
In a filing with the U.S. Court of Appeals for the 8th
Circuit on Friday, an ad hoc committee of dissenting creditors
said Peabody "improperly" forced the majority of creditors to
commit their votes in favor of the plan well before it received
"The choice was to support the plan or suffer severe
economic loss," they said in a motion to expedite the appeal,
adding that the move undermined "the creditor democracy at the
core of Chapter 11."
In an emailed statement, Peabody spokesman Vic Svec said the
company continued to support its plan as submitted.
While it is normal for a company in Chapter 11 to try to
build creditor support for its plan early on, Peabody's opposing
creditors say the company negotiated for months with "a favored
few" to develop a complex plan and then forced others to quickly
accept, according to court papers.
The select group included Aurelius Capital Management and
Elliott Management Corp, some of Wall Street's most litigious
investment funds. When Peabody filed for Chapter 11 the two
funds disputed the value of its assets, but the disagreement
with other lenders later dissipated when coal prices rose,
increasing many creditors' chances for recovery.
Peabody, with attractive coal mines in Australia and the
United States, hopes to emerge from bankruptcy in April, a year
after its Chapter 11 filing during a commodities crash, with
over $8 billion of debt.
Its bankruptcy confirmation trial is scheduled for March 16.
(Editing by Jeffrey Benkoe)