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Shareholders Lose as Peabody Energy Gets Chapter 11 Bankruptcy Plan Approval

Peabody Energy (OTCPK: BTUUQ) announced on January 26, 2016 that the U.S. Bankruptcy Court for the Eastern District of Missouri approved the company’s reorganization plan, disclosure statement, private placement agreement and backstop agreement.

The bankruptcy court’s approval will allow Peabody to begin soliciting votes from its creditors on the proposed plan of reorganization ahead of March deadline and hearing to confirm the plan.

The bankruptcy court’s approval is another step closer to the final blow for shareholders, who, according to some analysts, probably will end up with cancelled shares and no equity in the reorganized Peabody Energy.  Shareholders have been fighting to get a piece of the reorganized company, even attempting to create an official committee to assist in crafting the reorganization plan.  The bankruptcy court judge denied that request earlier this month.

Just in August 2016, Peabody Energy executives requested the bankruptcy judge allow the company to pay up to $12 million in bonuses to the company’s top executives.  The judge, according to the Denver Post, approved the payments, saying the bonuses are warranted because restructuring requires “extraordinary effort.”

Peabody Energy has fallen off a cliff from a stock price of around $70 per share in 2011 to trading around $1.80 today.  The drastic fall in the company’s value was overseen by the same executives seeking $12 million in bonuses.  The request, as we wrote about in August, is out of line with common notions of bonuses and performance-based compensation.  The employee who creates a fire does not then get a bonus for putting that same fire out, no matter how “extraordinary” the effort in putting it out.

As part of the court-approved plan, Peabody Energy will issue $1.5 billion in convertible debt and equity investments.  Much of the company ownership, if the plan is approved by the debtors, will remain in the hands of those debtors.

Peabody Energy is not the only North American coal producer to declare bankruptcy.   The most notable other coal producer bankruptcies are Alpha Natural Resources, Inc. and Arch Coal Inc., both of which emerged from bankruptcy in 2016.

Despite the bad news for shareholders with the bankruptcy court’s approval, not all hopes are lost for investors.  Some shareholders may be able to recover through FINRA arbitration.

Brokerage firms that provided underwriting services and analyst coverage on these companies include, but are not limited to, Avondale, Needham, Merrill Lynch, Barclays Capital, BB&T Capital Markets, Jeffries, Robert W. Baird, Oppenheimer, JP Morgan, Morgan Stanley, FBR Capital, Deutsch Bank, Credit Suisse, RBC Capital Markets, Stifel, UBS and Wells Fargo.

If your broker or brokerage firm advised you to invest in Peabody Energy, Arch Coal, Alpha Natural Resources, or any other similarly-situated company in the oil, gas, coal or energy sector and have suffered losses, you may be entitled to recover some or all of your losses through FINRA arbitration.  Our attorneys have handled hundreds of cases, recovering millions of dollars in the process.

Please contact us at www.oilgasfinraarbitration.com for a no-cost case evaluation.   Become informed about your rights, explore whether you have a claim and see if we can be of assistance in trying to recover your investment losses.   Cases are taken on a contingency fee basis, meaning no attorney’s fee is owed if there is no recovery.  You can also contact toll-free Mr. Silver at: (800) 975-4345 for a confidential, no-cost consultation on the potential for recovery of your investment losses.  Our attorneys represent clients nationwide in securities cases to recover investment losses.  No fee unless we obtain a recovery for you.

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