As it warms up to ask for a longer extension of its initial exclusivity period to file a Chapter 11 reorganization plan, Peabody Energy, the largest U.S. coal producer, on July 6 asked its bankruptcy court for bridge orders temporarily extending the periods where it may choose to assume or reject unexpired leases of nonresidential real property and also file a reorganization plan.
On April 13, Peabody and subsidiaries commenced their reorganization cases by filing voluntary petitions for relief under Chapter 11 at the U.S. Bankruptcy Court for the Eastern District of Missouri. Peabody is the world’s largest private-sector coal company (by volume), with 26 active coal mining operations located in the U.S. and Australia.
Peabody said in the July 6 filing: “The Debtors operate in a competitive and highly regulated industry that has experienced strong headwinds and precipitously declining demand and pricing in recent years due to the rise of low priced alternative energy sources – including an abundance of natural gas. Combined with these factors, slowing global economic growth drove a wide range of goods prices lower in 2015 and resulted in the largest broad market decline since 1991. Indeed, demand from electric utilities in the United States alone declined approximately 110 million tons in 2015. These market conditions, in connection with lower realized pricing in the United States and Australia, resulted in a 21.0 million ton decline in the Debtors’ and their non-debtor subsidiaries’ coal sales during 2015. As a result of these challenges, several large United States coal companies have filed for chapter 11 protection in recent years.”
The routine deadlines the court initially imposed for accepting or rejecting leases and for filing an exclusive reorganization plan are each after 120 days, which is Aug. 11. Peabody said it plans to file by Aug. 3 its full motions to extend both deadlines, but that it would like bridge orders that would allow short-term extensions while the main extension requests are pending. Without extension of exclusivity, other parties could file their own competing reorganization plans.
The extension motion is due for a July 20 hearing. Also due to be heard at the July 20 hearing is a July 6 request from Peabody for permission to reject three contracts. They are with:
- Rosebud Mining, 301 Market Street, Kittanning, Pa., Coal Confirmation Letter (and Amended Coal Confirmation Letter) dated June 10, 2015 (amended Dec. 30, 2015);
- Pritchard Mining, P.O. Box 3311, Charleston, WV 25333-3311, Coal Confirmation Letter (and Amended Coal Confirmation Letter) dated June 9, 2015 (amended Dec. 22, 2015); and
- Credit Suisse Securities (USA) LLC, 11 Madison Avenue, New York, NY 10010- 3643, Engagement Letter dated Jan. 5, 2016.