Peabody Energy debt dispute fizzles as coal prices rise

Peabody Energy moved closer to exiting bankruptcy as rising coal prices helped defuse a dispute between some of the company’s creditors.

The St. Louis company filed for Chapter 11 protection in April, after a sharp decline in coal prices left it unable to service $10 billion of debt. A creditor fight launched by some of Wall Street’s most litigious investment funds, Aurelius Capital Management and Elliott Management, put the reorganization on hold.

Seven months later, prices for coal used to generate power and make steel have surged, particularly in Australia, where Peabody expanded with the $5.1 billion acquisition of Australia’s Macarthur Coal in 2011.

The surge means that secured lenders such as Citibank are now likely to recoup their investment, making a legal battle over how to treat long-term debt in calculating Peabody’s assets largely irrelevant.

Read more: St. Louis Post-Dispatch

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