Peabody gets permission from bankruptcy court to draw funds

PEABODY Energy has received authorization from the US Bankruptcy court to pay employees in the usual manner and to continue their healthcare and other benefits programs without disruption; pay certain prepetition wages and reimbursable US employee expenses; and continue to use existing cash management systems and maintain existing bank accounts.

Lou Caruana

The company announced this week it that it will be operating under Chapter 11 protection after financing and sale deals fell through for the coal giant.

The court’s approvals also affirmed on an interim basis the $US800 million in Debtor-in-Possession (DIP) financing facilities by a lender group led by Citigroup that includes participation of a number of the company’s secured lenders and unsecured noteholders.

Those facilities include a $500 million term loan, of which $200 million is now available to the company, a $200 million bonding accommodation facility and a cash-collateralized $100 million letter of credit facility.

The court will hold hearings in May to issue the final orders regarding Peabody’s first-day motions including the final approval of the DIP financing.

All of the company’s mines and offices are continuing to operate in the ordinary course of business. No Australian entities are included in the filings, and Australian operations are also continuing as usual, according to Peabody Energy CEO Glenn Kellow.

“We are pleased with this first positive step forward in our Chapter 11 process, and the support we have received since our filing from our employees, customers, suppliers and many other stakeholders has been highly encouraging,” he said.

In its remarks to the court the company noted that the DIP financing, involving both secured and unsecured lenders, provides sufficient liquidity to enable Peabody to operate in the normal course of business, and the opportunity for the company to maximize value to the estate through this process.

The company also welcomed the comments to the court from certain unsecured lenders that they believe in the company, in its assets and its people.

Peabody voluntarily filed petitions under Chapter 11 for the majority of its US entities in the US Bankruptcy Court for the Eastern District of Missouri, taking a major step to strengthen its liquidity and reduce debt amid an unprecedented industry downturn.