A federal bankruptcy judge in St. Louis on Thursday turned down a request by shareholders of Peabody Energy Corp. to appoint an equity committee to represent them in the coal miner’s Chapter 11 bankruptcy.
The ruling by Judge Barry Schermer crushed investors’ hopes of a recovery in the bankruptcy, as Peabody’s shares will be canceled and replaced with new stock that will be owned by creditors if the company’s reorganization plan is approved.
Hedge fund Mangrove Partners, which owns about 5 percent of Peabody’s stock, led shareholders in asking for an official equity committee to help develop a reorganization plan. The shareholders had cited several ways for a possible recovery for shareholders, arguing that the company is undervaluing itself given rising coal prices.
Peabody had argued that the shareholders’ coal price forecasts weren’t based on enough data.
Unsecured creditors in Peabody’s bankruptcy have agreed to recover about 30 cents on the dollar.