Peabody reorganization at risk from Wyoming litigation: court paper

Reuters News
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Posted: Jan 23, 2017 1:33 PM

By Tracy Rucinski

CHICAGO (Reuters) - Peabody Energy Corp's plan to emerge from Chapter 11 bankruptcy faces a "material risk" that the U.S. coal producer could suffer a $1 billion revenue loss due to a disputed lease at the world's largest coal mine, according to an objection filed to its reorganization plan.

The plan by Peabody, the world's largest private-sector coal company, to cut $5 billion of debt and emerge from bankruptcy in April is supported by most of its creditors, but has faced a series of official objections from other parties.

Oil and gas driller Berenergy Corp and Peabody hold overlapping federal mineral leases in Wyoming's Powder River Basin, where Peabody operates the North Antelope Rochelle mine that provides the bulk of its coal production.

In October a Wyoming District Court ruled that Peabody was entitled to mine through Berenergy's wells as long as it made certain payments to the oil and gas company. An appeal is pending before the state's Supreme Court.

Berenergy said in a court filing that an adverse decision by Wyoming's high court would prevent Peabody from mining near its wells, potentially causing the coal producer to lose more than $1 billion in revenues it projects in the first five years of its emergence from Chapter 11.

"Thus, that litigation creates a material risk to Peabody's post-reorganization financial viability," Berenergy said in an objection to Peabody's reorganization plan filed with the U.S. Bankruptcy Court in St. Louis.

In an emailed statement, Peabody spokesman said the company was evaluating the objection and would respond in due course.

Indiana and several environmental groups also objected to Peabody's reorganization plan on concerns over how it would cover about $1 billion in future mine cleanup costs.

At issue is whether Peabody will use third-party bonds to cover future environmental liabilities in place of "self-bonding," a federal practice that exempts large coal companies from setting aside cash or collateral to ensure that mined land is returned to its natural setting, as required by law.

A hearing to approve Peabody's reorganization was scheduled in St. Louis on Thursday.

Among other objections, certain creditors and shareholders have opposed the proposed recoveries granted under the plan. And four former executives, including former chief executive officer Gregory Boyce, filed a complaint about their retirement packages.

The U.S. Trustee, a government watchdog for bankruptcies, has also objected to parts of the reorganization plan.

(Reporting by Tracy Rucinski; Editing by Lisa Von Ahn and Jonathan Oatis)