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CHICAGO (Reuters) - Peabody Energy Corp BTUUQ.PK said on Thursday that a group of banks, including affiliates of Goldman Sachs Group Inc (GS.N) and JPMorgan Chase Bank (JPM.N), has pledged a combined $1.5 billion in loans to help the coal producer exit bankruptcy in the coming months.
The cash will be used to cover claims by Peabody's secured lenders and provide "a strong foundation" for its capital structure when it emerges from the roughly $8 billion Chapter 11 bankruptcy it filed last April, according to court documents.
Peabody, with 6.3 billion tons of proven and probable coal reserves, joined other U.S. coal producers in bankruptcy last year when falling prices left it unable to service billions of dollars in debt taken on to finance expansion in Australia.
The company expects to exit Chapter 11 in the second quarter of this year with a plan, supported by most of its creditors, to cut more than $5 billion of debt and raise new capital through a $750 million private placement and a $750 million rights offering.
Peabody has not yet explained how it will guarantee about $1 billion in future mine cleanup costs previously covered by "self-bonding," a federal program that exempt large miners from setting aside cash or collateral to ensure mined land is returned to its natural setting, as required by law.
The practice came under scrutiny following Chapter 11 filings by U.S. coal producers that held a total of $3.6 billion in self-bonds as of July, raising concerns that taxpayers could some day be stuck with the cost of cleaning up mined land.
Reporting by Tracy Rucinski; Editing by Alan Crosby