CHICAGO, Jan 18 (Reuters) - The U.S. government’s bankruptcy watchdog objected on Wednesday to certain parts of Peabody Energy Corp’s plan to slash $5 billion of debt and exit Chapter 11, calling a proposed $240 million in transaction fees “exorbitant,” court papers showed.
Peabody Energy, the world’s largest private sector coal producer, has proposed a $750 million rights offering, a $750 million private placement and the issuance of new common stock as part of a reorganization plan unveiled last month.
In a court filing, the U.S. Trustee said the fees to be paid in those transactions would transfer millions of dollars of funds from the bankruptcy estate before the reorganization plan is approved by creditors and the court.
“Plan voting is at the core of the reorganization process and should not be eviscerated by a deal struck by powerful well-connected parties,” the watchdog said in a filing with the U.S. Bankruptcy Court in St. Louis.
The U.S. Trustee, which oversees the administration of bankruptcy cases, said Peabody’s request for court approval of those proposals would improperly lock in payment terms before the whole reorganization plan is approved.
“We’re evaluating the statements of the trustee and intend to respond appropriately,” Peabody spokesman Vic Svec said.
Peabody hopes to exit bankruptcy around a year after its April, 2016 Chapter 11 filing with a plan that has the approval of most but not all of its creditors.
Shareholders have objected to the reorganization plan and have requested an official voice in the $8 billion bankruptcy case, arguing that a rise in coal prices means the company is valuable enough to repay shareholders who normally lose their money in a bankruptcy.
A hearing on the shareholders’ request is scheduled in St. Louis on Thursday, while the U.S. Trustee’s objections will be heard at a hearing on Jan. 26. (Reporting by Tracy Rucinski; editing by Grant McCool)