Item 1.03
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Bankruptcy or Receivership
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As previously disclosed, on April 13, 2016, Peabody
Energy Corporation, a Delaware corporation (Peabody Energy or the Company), and a majority of the Companys wholly owned domestic subsidiaries, as well as one international subsidiary in Gibraltar (collectively with the
Company, the Debtors and, solely following the Effective Date (as defined below), the Reorganized Company or Reorganized Debtors, as applicable), filed voluntary petitions under Chapter 11 of Title 11 of the U.S.
Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Eastern District of Missouri (the Bankruptcy Court). The Debtors Chapter 11 cases (collectively, the Chapter 11 Cases) are being
jointly administered under the caption
In re Peabody Energy Corporation
,
et al.
, Case
No. 16-42529.
Confirmation of the Plan
On March 17,
2017, the Bankruptcy Court entered an order, Docket No. 2763 (the Confirmation Order), attached hereto as Exhibit 2.1, confirming the Debtors Second Amended Join Plan of Reorganization of Debtors and Debtors in Possession as
revised March 15, 2017 (the Plan). The Plan incorporates by reference certain documents filed with the Bankruptcy Court as part of the supplements to the Plan filed with the Bankruptcy Court on March 6, 2017 and March 15, 2017
(collectively, the Plan Supplement). A copy of the Plan is attached hereto as Exhibit 2.2 and is incorporated by reference herein.
The Plan will become effective when certain conditions are satisfied or waived, including, (a) the documents governing the Reorganized
Debtors new $950 million senior secured term loan (the Exit Facility) must have been duly executed and delivered by the Reorganized Debtors parties thereto, and all conditions precedent to the consummation of the Exit Facility
must have been waived or satisfied in accordance with the terms thereof, and the closing of the Exit Facility must have occurred; (b) the conditions precedent to the consummation of the Rights Offering and the Private Placement (each as defined
below) must have been satisfied or waived by the parties thereto, and the Reorganized Debtors must have received (or will receive simultaneously with the consummation of the Plan) the amounts required to be funded thereunder in the aggregate gross
amount of not less than $1.5 billion; (c) all documents and agreements necessary to implement the Plan must have been executed; and (d) the Debtors must have received all authorizations, consents, legal and regulatory approvals,
rulings, letters,
no-action
letters, opinions or documents that are necessary to implement the Plan and that are required by law, regulation or order. The date on which all conditions to the effectiveness of
the Plan have been satisfied or waived will be the Effective Date of the Plan. It is possible that amendments could be made to the Plan prior to the Effective Date.
The following is a summary of certain provisions of the Plan, as confirmed by the Bankruptcy Court pursuant to the Confirmation Order, and is
not intended to be a complete description of the Plan. The following summary is qualified in its entirety by reference to the full text of the Plan (including the Plan Supplement). Copies of the Plan and the Confirmation Order are available free of
charge at www.kccllc.net/Peabody. The information set forth on the foregoing website shall not be deemed to be a part of or incorporated by reference into this Current Report on Form
8-K.
Capitalized terms
used but not defined in this Current Report on Form
8-K
have the meanings set forth in the Plan.
Treatment
of Claims
The following is a high-level summary of the treatment of classified claims and interests under the Plan, which is
qualified in its entirety by the terms of the Plan:
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First Lien Lender Claims
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(1) Paid in full in cash or (2) receipt of a combination of cash and a replacement secured first lien term loan.
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Second Lien Notes Claims
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A combination of (1) $450 million of cash, first lien debt or new second lien notes and (2)(a) new common stock, par value $0.01 per share, of the Reorganized Company (Reorganized Peabody Common Stock) and
(b) subscription rights in the Rights Offering.
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Other Secured Claims
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At the election of the Debtors, (1) reinstatement, (2) payment in full in cash, (3) receipt of the applicable collateral or (4) such other treatment consistent with section 1129(b) of the Bankruptcy Code.
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Other Priority Claims
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Paid in full in cash.
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General Unsecured Claims
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Against Peabody Energy: A pro rata share of $5 million in cash plus an amount of additional cash (up to $2 million) not otherwise paid
to holders of Convenience Claims in accordance with the first paragraph under Convenience Claims below.
Against the Encumbered Guarantor Debtors: (1) Reorganized Peabody Common Stock and subscription rights in the Rights Offering or (2) at the election
of the claim holder, cash from a pool of $75 million in cash to be paid by the Debtors and the Reorganized Debtors into a segregated account in accordance with the terms set forth in the Plan. Encumbered Guarantor Debtors means all
Debtors entities (other than Peabody Energy and Gib 1 and the Gold Field Debtors (each as defined below)) that serve as guarantors under the Companys first lien credit agreement, second lien notes and unsecured senior notes and are subject to
liens under the first lien credit agreement and the second lien notes.
Against the
Gold Fields Debtors: Units in the Gold Fields Liquidating Trust. Gold Fields Debtors means five legacy Debtor entities that have no current operations and that had been conducting environmental
clean-up
and performing remediation obligations related to
non-coal
mining activities.
Against Peabody Holdings (Gibraltar) Limited (Gib 1): No recoveries.
Against the Unencumbered Debtors: Cash in the amount of such holders allowed claim, less any amounts attributable to late fees, postpetition interest or
penalties. Unencumbered Debtors means the Debtor entities that do not guaranty, and are not subject to the liens arising under, the Companys first lien credit agreement or the second lien notes indenture, nor are they guarantors of
the unsecured senior notes.
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Convenience Claims
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Against Peabody Energy: Up to 72.5% of such claim in cash, provided that total payments to Convenience Claims may not exceed
$2 million.
Against the Encumbered Guarantor Debtors: Up to 72.5% of such claim
in cash, provided that total payments to Convenience Claims may not exceed $18 million.
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MEPP Claim
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$75 million in cash paid over five years as follows: (A) $5 million paid on the Effective Date; (B) $10 million paid 90 days
after the Effective Date; (C) $15 million paid one year after the previous payment; (D) $15 million paid one year after the previous payment; (E) $15 million paid one year after the previous payment; and (F) $15 million paid one
year after the previous payment.
MEPP Claim means any claim arising, or
related to the period, prior to the Effective Date in connection with the United Mine Workers of America 1974 Pension Plan.
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Unsecured Subordinated Debenture Claims
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(1) Payment of the reasonable and documented fees and expenses of the trustee under the 2066 subordinated indenture up to $350,000; and (2) solely in the event this class votes in favor of the Plan and in connection with the
settlement of certain potential intercreditor disputes as part of the global settlement embodied therein, and only if the trustee under the 2066 subordinated indenture does not object to, and affirmatively supports, the Plan, holders of allowed
Unsecured Subordinated Debenture Claims will receive from specified noteholder
co-proponents
their pro rata share of penny warrants exercisable for 1.0% of the fully diluted Reorganized Peabody Common Stock
from the pool of penny warrants issued to the noteholder
co-proponents
under the Rights Offering and/or the terms of the Backstop Commitment Agreement (as defined below).
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Intercompany Claims
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In accordance with the global settlement and compromise embodied in the Plan, all prepetition and postpetition intercompany claims will be ignored for purposes of calculating distributions to holders of claims pursuant to the Plan.
At the Debtors option, and subject to the restructuring transactions contemplated by the Plan, on the Effective Date, intercompany claims may be reinstated, settled, offset, cancelled, extinguished or eliminated, including by way of capital
contribution. Notwithstanding the foregoing, (A) the intercompany loans (1) owed by Gib 1 to Peabody IC Holdings, LLC (PIC Holdings), (2) owed by PIC Holdings to Peabody IC Funding Corp. and (3) owed by Peabody Energy
Australia Pty Ltd. to Peabody Investment Corp. (PIC) will be treated as debt for purposes of calculating distributions to holders of claims pursuant to the Plan and (B) the principal balance of the Loan Agreement, dated as of
April 11, 2012, among PIC, as lender, and Peabody Energy Australia Pty Ltd, as borrower, will be reinstated on the Effective Date.
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Section 510(b) Claims
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No recovery.
Section 510(b) Claim means any claim against a Debtor arising from rescission of a purchase or sale of a security of any debtor or an affiliate of
any Debtor, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 of the Bankruptcy Code on account of such a
claim.
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Peabody Energy Equity Interests
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No recovery. The Companys current equity securities will be cancelled and extinguished upon the Effective Date, and holders thereof will not be entitled to receive and will not receive or retain, any property or interest in
property on account of those equity interests.
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Subsidiary Debtor Equity Interests
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Reinstated, subject to the restructuring transactions contemplated by the Plan.
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The Exit Facility
Pursuant to the Plan and as a condition to its effectiveness, the Company expects to enter into the Exit Facility as contemplated by the exit
facility commitment letter, dated as of January 11, 2017, from Goldman Sachs Bank USA, JPMorgan Chase Bank, N.A., Credit Suisse AG, Credit Suisse Securities (USA) LLC, Macquarie Capital Funding LLC and Macquarie Capital (USA) Inc. (the
Exit Facility Commitment Letter). The Exit Facility Commitment Letter was filed with the Bankruptcy Court on January 11, 2017 and previously disclosed on the Companys Current Report on Form
8-K
filed with the Securities and Exchange Commission (SEC) on January 12, 2017. The Exit Facility would be entered into on the Effective Date. The Exit Facility provides for a
$950 million senior secured term loan, matures in 2022 and bears interest at a fluctuating rate of LIBOR plus 4.50% per annum with a 1.00% LIBOR floor.
Securitization Facility
On the
Effective Date, the Company expects to extend and amend the Fifth Amended and Restated Receivables Purchase Agreement, dated as of March 25, 2016 (as amended prior to the date hereof), among P&L Receivables Company, LLC, as the seller, the
Company, as the servicer, the
sub-servicers
party thereto, the various purchasers and purchaser agents party thereto and PNC Bank, National Association, as administrator, in order to, among other things,
(i) increase the purchase limit to an amount not to exceed $250.0 million, (ii) extend the facility termination date, and (iii) add certain Australian subsidiaries of the Company as originators.
The Rights Offering, the Backstop Commitment Agreement and the Private Placement
The Plan contemplates two separate capital raises through the sale of equity interests in the Reorganized Company. First, the Plan provides for
a $750 million rights offering (the Rights Offering) pursuant to which all holders of allowed Second Lien Notes Claims and specified allowed General Unsecured Claims (including unsecured notes claims) as of January 27, 2017
received subscription rights to purchase units consisting of (a) shares of Reorganized Peabody Common Stock and (b) penny warrants exercisable for 2.5% of the fully diluted Reorganized Peabody Common Stock on the Effective Date (after
giving effect to the reservation and deemed issuance of shares of common stock for issuance upon the conversion of the Series A Convertible Preferred Stock (as defined below), but subject to dilution by the shares of common stock to be issued
pursuant to the LTIP (as defined below) and any post-Effective Date issuance of capital stock). The purchase price for the units in the Rights Offering will be 55% of the Plan Equity Value (as defined in the Plan) of the shares of Reorganized
Peabody Common Stock that are to be issued in connection with the exercise of the subscription rights in the Rights Offering. Pursuant to the backstop commitment agreement, dated as of December 22, 2016 (as amended, the Backstop
Commitment Agreement), among the Company and the other parties thereto (collectively, the Backstop Parties) previously disclosed on the Companys Current Report on Form
8-K
filed with
the SEC on December 23, 2016, the Backstop Parties have agreed to backstop 100% of the Rights Offering on the terms set forth in the Backstop Commitment Agreement.
Second, the Plan contemplates raising an additional $750 million through the sale of shares of a series of new mandatory convertible
preferred stock of the Reorganized Company (the Series A Convertible Preferred Stock) in a private offering (the Private Placement). Pursuant to the private placement agreement, dated as of December 22, 2016 (as amended,
the Private Placement Agreement), among the Company and the other parties thereto (collectively, the Private Placement Parties) previously disclosed on the Companys Current Report on Form
8-K
filed with the SEC on December 23, 2016, the Private Placement Parties have agreed to purchase the
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Series A Convertible Preferred Stock at a purchase price equal to the Plan Equity Value per share of Reorganized Peabody Common Stock. Each share of Series A Convertible Preferred Stock will be
convertible into shares of Reorganized Peabody Common Stock at a conversion ratio reflecting a 35% discount to the Plan Equity Value per share of Reorganized Peabody Common Stock, which ratio will be subject to adjustment as set forth in the
certificate of designation for the Series A Convertible Preferred Stock included as part of Exhibit IV.H.1.a to the Plan. The aggregate purchase price for the shares of Series A Convertible Preferred Stock to be issued and sold in the Private
Placement is $750 million. The Series A Convertible Preferred Stock will have a dividend rate of 8.5% per annum, payable semi-annually in kind as a dividend of additional shares of Series A Convertible Preferred Stock and will have a
liquidation preference, optional and mandatory conversion provisions, anti-dilution protection, voting rights and certain other terms and conditions as set forth in the certificate of designation for the Series A Convertible Preferred Stock.
Long Term Incentive Plan
Pursuant
to the Plan, the Reorganized Company will adopt a long-term incentive plan (LTIP). The LTIP will provide for a pool of 10% of the fully diluted equity of the Reorganized Company (after giving effect to the exercise of the penny warrants
and the conversion of the Series A Convertible Preferred Stock). Of this amount, 25.8% will be granted to employees and executives in connection with the Effective Date in the form of restricted stock or units. The material terms of the LTIP are set
forth in Exhibit I.A.146 to the Plan.
Equity Securities to be Authorized, Issued and Reserved for Issuance After Emergence
As of March 1, 2017, the Company had 18,491,188 shares of common stock, par value $0.01 per share, issued and outstanding. On the
Effective Date, all outstanding shares of the Companys common stock will be cancelled and extinguished, and any rights of any holder in respect thereof will be deemed cancelled, discharged and of no force or effect. The New Certificate of
Incorporation will authorize the issuance of 450,000,000 shares of Reorganized Peabody Common Stock and 100,000,000 shares of preferred stock, par value $0.01 per share, of the Reorganized Company, of which 50,000,000 shares will be designated as
Series A Convertible Preferred Stock.
On the Effective Date, the Reorganized Company will issue or reserve for issuance shares of
Reorganized Peabody Common Stock for distribution in accordance with the Plan. Pursuant to the Plan, on the Effective Date 71,836,154 shares of Reorganized Peabody Common Stock and 30,000,000 shares of Series A Convertible Preferred Stock will be
issued. The Reorganized Company will also reserve for issuance a sufficient number of shares to be issued pursuant to the exercise of the penny warrants, the payment of dividends on the Series A Convertible Preferred Stock, the conversion of the
Series A Convertible Preferred Stock and awards granted under the LTIP.
Treatment of Executory Contracts or Unexpired Leases
On the Effective Date, pursuant to sections 365 and 1123 of the Bankruptcy Code, each executory contract and unexpired lease to which any
Debtor is a party shall be deemed automatically rejected by the Debtors, except for any executory contract or unexpired lease that (i) has been assumed or rejected pursuant to an order of the Bankruptcy Court entered before the Effective Date,
(ii) is the subject of a motion to assume or reject pending on the Effective Date, (iii) is assumed, rejected or otherwise treated pursuant to Article III of the Plan, or (iv) is listed on Exhibit III.A.1 of the Plan.
Assets and Liabilities
As of
January 31, 2017, the total assets and liabilities of Peabody Energy were approximately
$11,763,200,000 and $11,360,200,000, respectively. This
financial information has not been audited or reviewed by Peabody Energys independent registered public accounting firm and may be subject to future reconciliation or adjustments. This information should not be viewed as indicative of future
results.
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