A federal appeals court has ruled in favor of Peabody Energy Corp. in a dispute with hedge funds that sought a bigger slice of the coal mining company when it emerged from chapter 11 bankruptcy in 2017, WSJ Pro Bankruptcy reported. The U.S. Court of Appeals for the Eighth Circuit on Friday rejected arguments from a creditor group that held junior debt in Peabody and claimed its bankruptcy restructuring unfairly prevented them from scooping up as much equity in a private placement agreement as other investors. The ruling marks a victory for Peabody and creditors that negotiated with the company over the terms of the chapter 11 plan, including Elliott Management Corp. and Aurelius Capital Management LP. The appeals court said that investors that negotiated with Peabody did get “favored treatment” but said that they also took on additional risk to help the company leave bankruptcy. Creditors that backed the equity offering “put themselves on the hook to buy more of the preferred stock if it did not sell, something that might easily have happened as the debtors were emerging from mediation during volatile coal-market seasons,” the appeals court said.
