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Peabody Energy one step closer to ending Chapter 11 story

Staff Writer |
Peabody Energy said it is closer to exiting bankruptcy, with a debt dispute between creditors fizzling as a recent increase in coal prices boosts their chances for recovery.

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Peabody filed for Chapter 11 protection in April, after a sharp decline in coal prices left it unable to service $10 billion of debt.

A creditor fight launched by some of Wall Street's most litigious investment funds, Aurelius Capital Management and Elliott Management, put the reorganization on hold.

Seven months later, prices for coal used to generate power and make steel have surged, particularly in Australia, where Peabody expanded with the $5.1 billion acquisition of Australia's Macarthur Coal in 2011.

The surge means that secured lenders are now likely to recoup their investment, making a legal battle over how to treat long-term debt in calculating Peabody's assets largely irrelevant. This brings Peabody one step closer to reaching a consensual bankruptcy reorganization.

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