A group of Peabody Energy Corp.’s senior lenders hired law firm Davis Polk & Wardwell LLP to help protect the value of their assets as they anticipate the company will begin talks to restructure its $6.3 billion of debt, Bloomberg News reported yesterday. The creditors, who hold the troubled miner’s $1.17 billion first-lien term loan, are concerned that any proposal from the company would potentially dilute the value of the assets securing the debt. The lenders hired the firm after Peabody rival Arch Coal Inc. attempted a debt-exchange deal that would have helped cut its $5.1 billion of obligations while also diluting the assets of its backers. Arch Coal’s lenders objected to the plan because they would have had to share their assets with a new group of creditors. Peabody’s management told investors in a Sept. 10 presentation that the company is focusing on deleveraging “through potential avenues including debt exchanges.”
