Newspaper article St Louis Post-Dispatch (MO)

Zero or Billions? Peabody Shares' Value Is at Issue in Bankruptcy

Newspaper article St Louis Post-Dispatch (MO)

Zero or Billions? Peabody Shares' Value Is at Issue in Bankruptcy

Article excerpt

Bob Sullivan thinks Peabody Energy's executives are poor- mouthing their own company.

Sullivan, a longtime energy investor based in Massachusetts, owns 358,100 shares and worries that Peabody's management is in a hurry to declare those shares worthless.

In an attempt to keep that from happening, Sullivan and Kopernik Global Advisors, a Tampa, Fla., hedge fund, asked a U.S. bankruptcy trustee to appoint a committee to represent shareholders. Their request was turned down this week, as was a separate request on behalf of Mangrove Partners, a New York hedge fund.

Sullivan called the trustee's ruling "disappointing" but added, "It doesn't change anything in terms of the value that's there. We're going to have to look at how we react to it."

He and other shareholders could still file a motion asking Judge Barry Schermer, who's overseeing Peabody's Chapter 11 bankruptcy, to appoint a committee to represent them. Nathaniel August, Mangrove's president, said he had no comment on the trustee's ruling.

Peabody has been in bankruptcy since April and is due to file a reorganization plan next week. It has said it expects existing shares to be canceled.

Equity committee appointments are rare because when a company goes broke there's usually no value for shareholders. In a few recent cases, however, judges recognized that rising energy prices have changed things in shareholders' favor.

Martin Bienenstock, the New York lawyer representing Sullivan and Kopernik, was successful in getting an equity committee appointed two months ago at Breitburn Energy Partners, a bankrupt oil and gas producer.

Sullivan argues that rising coal prices have created substantial value at Peabody.

His analysis, contained in Bienenstock's letter to the trustee's office, starts with a business plan that Peabody filed this summer. That plan, he says, dramatically understates the company's worth.

Metallurgical coal prices in Asia, a key market for Peabody's Australian mines, have tripled since April. …

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