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Judge denies committee to represent Peabody shareholders in bankruptcy dealings

A judge denied a motion to create an official equity committee to represent Peabody Energy Corp. shareholders during the coal miner's bankruptcy reorganization.

The U.S. Bankruptcy Court for the Eastern District of Missouri issued a bench decision Jan. 19 denying a request to create the committee, potentially leaving stockholders empty-handed if shares are canceled in the reorganization process. Peabody had previously warned that its shares were probably going to be canceled.

"It is likely that Peabody Energy equity securities will be canceled and extinguished upon confirmation of a proposed plan of reorganization by the bankruptcy court, and that the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests," an October 2016 filing stated. "In the event of cancellation of Peabody Energy equity or other securities, amounts invested by the holders of such securities would not be recoverable and such securities would have no value."

Peabody said in a Jan. 20 statement that it continues to believe its equity securities will be canceled upon confirmation of its reorganization plan.

"Yesterday's court decision to not appoint an equity committee is consistent with the plan of reorganization as filed, which the company believes maximizes the value of the enterprise," Peabody wrote in the statement.

Mangrove Partners Fund LP led an effort to appoint an equity committee based on the argument that recent coal market recoveries gave room for a Peabody reorganization that could include a recovery for shareholders. In addition to the bankruptcy judge, Peabody and the U.S. Trustee agreed that there was not a need for an equity committee.