Peabody Energy Corp. is suing Bowie Resource Holdings LLC over the collapse of its $358 million offer to acquire Peabody's Colorado and New Mexico mines, which preceded Peabody's bankruptcy filing.

The lawsuit, filed Wednesday in the U.S. Bankruptcy Court in St. Louis, seeks to collect a $20 million termination fee from Bowie, plus interest, costs and expenses, court papers show.

According to Peabody, the deal fell apart when Bowie failed to line up financing for the cash purchase price. It says Bowie—a unit of Louisville, Ky.-based coal mining company Bowie Resource Partners LLC—has so far refused to pay the termination fee that was negotiated in connection with the sale.

A Bowie representative couldn't be reached for comment on Thursday.

The proposed sale, announced in November, of Peabody's Twentymile mine in Colorado and its El Segundo and Lee Ranch mines in New Mexico came in connection with other cost-cutting efforts as Peabody last year sought to restructure its debt without a bankruptcy filing.

In its announcement of the deal, Bowie touted the acquisition as doubling the size of its coal output to 25 million tons a year. The company already operates mines in Utah and Colorado.

The sale was to have closed in the first quarter of this year. Peabody said that Bowie had agreed to "use its reasonable best efforts" to arrange the financing needed to close the sale—no easy task in light of widespread distress in the coal markets—but made it clear nothing was guaranteed.

The sale was a condition of a bond exchange Peabody was hoping to use to restructure its debt outside of bankruptcy court. In court papers, the company cited the failed sale, along with other pressing challenges, as being among the reasons it sought chapter 11 protection in April.

Since the bankruptcy filing, Peabody has secured court approval for an $800 million financing package to see it through its restructuring. It hasn't yet proposed restructuring terms, as it must first contend with a looming battle between its senior and junior creditors.

Peabody is hoping to resolve the dispute by early fall, so it can be on a path to emerge from bankruptcy in April 2017.

Peg Brickley contributed to this article.

Write to Jacqueline Palank at jacqueline.palank@wsj.com

 

(END) Dow Jones Newswires

June 02, 2016 11:55 ET (15:55 GMT)

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