The nation’s largest coal producer, Peabody Energy (NYSE: BTU), in an effort to work out its finances, said in a Jan. 22 SEC filing that it has been trying to negotiate a deal to place a handful of its mines in a “bankruptcy remote” entity.
“Peabody Energy Corporation (“Peabody”) continues to address the challenges of the current environment with a focus on the operational, organizational, portfolio and financial areas of its business,” said the Form 8-K filing. “Within the financial area, Peabody has dual objectives of optimizing liquidity and deleveraging. Peabody continues to evaluate ways to balance these objectives, including potential debt exchanges and buybacks. As disclosed on December 17, 2015, in connection with this evaluation, Peabody has entered into non-disclosure agreements with certain holders of its outstanding indebtedness concerning potential interest in issuing new instruments (the ‘Transaction Discussions’).”
A proposal to lenders provided by the company, dated Jan. 8, 2016, is attached to the filing, and a proposal provided by certain holders of the company’s debt, dated Jan. 21, 2016, was also attached.
Each of the proposals contemplated an exchange offer with respect to Peabody’s 6.00% Senior Notes due 2018 (the “2018 Notes”). Peabody would contribute certain mines and related assets to a “Non-Guarantor Subsidiary” in connection with the issuance of secured notes by the Non-Guarantor Subsidiary.
Closing of the proposed exchange would be subject to certain conditions, including a minimum participation requirement for the holders of 2018 Notes and the receipt by Peabody of a specified amount of net cash proceeds from the sale of assets after the proposed exchange, and its terms may not be acceptable to the company. No agreement has been reached with respect to the proposals or otherwise in connection with the transaction discussions. Peabody’s primary objectives in these discussions are to optimize liquidity, reduce leverage, lower interest expense and extend maturities while taking into account considerations such as timing, tax impact and other factors.
The following mines would be contributed:
- the Kayenta surface mine in Arizona, a captive supplier to the Navajo power plant that sold 8.2 million tons of coal in 2014 (called the “Principal Property Mine”); and
- the Francisco underground mine in Indiana, the Gateway North deep mine in Illinois and the Wild Boar surface mine in Indiana (collectively called the “Non-Principal Property Mines”). Wild Boar sold 2.2 million tons in 2014, Francisco sold 3.1 million tons and Gateway North sold 2.5 million tons.