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Peabody revises reorganization plan, expresses concern with alternative

Peabody Energy Corp. disclosed an amendment to its plan of reorganization settling claims related to worker pensions and a letter expressing its concerns with an alternate bankruptcy reorganization plan presented by a committee of creditors.

Peabody said in a new filing with the U.S. Bankruptcy Court for the Eastern District of Missouri it will pay claims related to the United Mine Workers of America 1974 Pension Plan over four years. The holder will receive $5 million upon the effective date of Peabody's reorganization, $10 million 90 days later and $15 million paid each year after for four years.

Peabody also disclosed a Jan. 25 letter written to a committee of non-consenting creditors in the bankruptcy case. The letter indicates Peabody is still reviewing an alternative plan submitted by the committee, but wrote a preliminary response to address inaccuracies and "fundamental concerns" with the proposal.

One concern, Peabody wrote, is that Peabody feels that in the "highly cyclical" coal market, Peabody cannot responsibly support a funded debt level over $2 billion, a figure exceeded by "several hundred million" in the alternative plan.

"Actual creditor recoveries are dependent upon the reorganized debtors' businesses succeeding so that they do not face Chapter 11 [bankruptcy reorganization] again, as has happened to many other coal companies that exited their first Chapter 11 cases overlevered," Peabody wrote.

The company also noted that while the volatile and cyclical nature of the coal market has suggested implied enterprise values as low as just over $1 billion and as high as $5.1 billion, that range is well below the alternative plan's assumption of a $6.75 billion valuation. Instead of using volatile figures associated with market-implied values, Peabody wrote, Peabody and its investment banker have valued the company based upon the coal company's business plan, asset mix and production schedule.

Peabody's amended plan lists a plan equity value of $3.105 billion.