UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 22, 2016
PEABODY ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
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| Delaware |
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1-16463 |
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13-4004153 |
| (State or Other Jurisdiction
of Incorporation) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
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| 701 Market Street, St. Louis, Missouri |
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63101-1826 |
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(ZIP Code) |
Registrant’s telephone number, including area code: (314) 342-3400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 |
Regulation FD Disclosure. |
Peabody Energy Corporation (“Peabody”) continues to
address the challenges of the current environment with a focus on the operational, organizational, portfolio and financial areas of its business. Within the financial area, Peabody has dual objectives of optimizing liquidity and deleveraging.
Peabody continues to evaluate ways to balance these objectives, including potential debt exchanges and buybacks. As disclosed on December 17, 2015, in connection with this evaluation, Peabody has entered into non-disclosure agreements with
certain holders of its outstanding indebtedness concerning potential interest in issuing new instruments (the “Transaction Discussions”).
Pursuant to the non-disclosure agreements, Peabody has agreed to publicly disclose certain confidential information relating to the
Transaction Discussions. As a result, Peabody is furnishing the information in this Item 7.01, and Exhibits 99.1 and 99.2 furnished herewith, setting forth a summary of the material terms of potential transactions discussed in December 2015 and
January 2016 (the “Proposals”). The Proposal provided by the Company, dated January 8, 2016, is furnished herewith as Exhibit 99.1, and the Proposal provided by certain holders of the Company’s debt (the “Debtholder
Proposal”), dated January 21, 2016, is furnished herewith as Exhibit 99.2.
Each of the Proposals contemplated an exchange offer
(the “Proposed Exchange”) with respect to Peabody’s 6.00% Senior Notes due 2018 (the “2018 Notes”). The Proposed Exchange contemplated the exchange of 2018 Notes for a combination of (i) secured notes issued by a
subsidiary that does not guarantee any of Peabody’s existing debt (the “Non-Guarantor Subsidiary”), (ii) two series of new secured first lien notes issued by Peabody and (iii) Peabody common stock. Peabody would contribute
certain mines and related assets to the Non-Guarantor Subsidiary in connection with the issuance of secured notes by the Non-Guarantor Subsidiary. Peabody is also furnishing the information included in Exhibit 99.3 furnished herewith, which includes
technical and operating information, historical financial information, and other information not generally disclosed by Peabody, in each case related to the mines and related assets that could be contributed to the Non-Guarantor Subsidiary under the
terms of the Proposals. To the extent that there was less than 100% participation in the Proposed Exchange, Peabody would have had the right to undertake additional exchanges of the Proposed Exchange consideration for its outstanding senior
unsecured notes held by holders of the 2018 Notes that participate in the Proposed Exchange.
Closing of the Proposed Exchange would be
subject to certain conditions, including a minimum participation requirement for the holders of 2018 Notes and the receipt by Peabody of a specified amount of net cash proceeds from the sale of assets after the commencement of the Proposed Exchange.
The Debtholder Proposal was the last proposal the Company received in connection with the Proposed Exchange, and the terms thereof may not be acceptable to the Company. No agreement has been reached with respect to the Proposals or otherwise in
connection with the Transaction Discussions. Peabody expects to continue to have discussions with certain debt holders who extend or execute new non-disclosure agreements. Peabody’s primary objectives in these discussions are to optimize
liquidity, reduce leverage, lower interest expense and extend maturities while taking into account considerations such as timing, tax impact and other factors.
The foregoing description of the Proposals does not purport to be complete and is qualified in its entirety by reference to the term sheets
for the Proposals, copies of which are furnished herewith as Exhibits 99.1 and 99.2. The information set forth in and incorporated into this Item 7.01 of this Current Report on Form 8-K is being furnished pursuant to Item 7.01 of Form 8-K
and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any of
Peabody’s filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and regardless of any general incorporation language in such filings, except to the
extent expressly set forth by specific reference in such a filing. The filing of this Item 7.01 of this Current Report on Form 8-K shall not be deemed an admission as to the materiality of any information herein that is required to be disclosed
solely by reason of Regulation FD.
| Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits. The following exhibits are being
furnished herewith:
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| Exhibit
No. |
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Description |
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| 99.1 |
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Term Sheet for Proposal dated January 8, 2016 |
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| 99.2 |
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Term Sheet for Proposal dated January 21, 2016 |
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| 99.3 |
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Financial and Other Information Relating to Certain Mines |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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PEABODY ENERGY CORPORATION |
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| January 22, 2016 |
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By: |
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/s/ A. Verona Dorch |
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Name: Title: |
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A. Verona Dorch Executive Vice President,
Chief Legal Officer, Government Affairs and Corporate
Secretary |
EXHIBIT INDEX
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| Exhibit
No. |
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Description |
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| 99.1 |
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Term Sheet for Proposal dated January 8, 2016 |
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| 99.2 |
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Term Sheet for Proposal dated January 21, 2016 |
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| 99.3 |
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Financial and Other Information Relating to Certain Mines |
Exhibit 99.1
January 8, 2016
Subject to
FRE 408 & All Other Applicable Privileges
and Confidentiality Agreements
Peabody Energy Corporation (the “Issuer”)
Exchange Offer
Any and
all of the Issuer’s
6.00% Senior Notes due November 2018 (the “Existing Notes”)
This proposal for the Issuer’s Exchange Offer is preliminary and non-binding and shall not be construed as a commitment to take any
steps to effect the Exchange, the Exchange Offer or any other transaction.
Summary of Principal Terms
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| Exchange: |
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Any and all the outstanding Existing Notes for the following:
(i) $164.60 in principal amount of new 6% Pari Passu Secured First Lien Notes due 2020
(the “New Pari Passu Secured First Lien Notes”) issued by the Issuer for each $1,000 in principal amount of Existing Notes exchanged, which New Pari Passu Secured First Lien Notes shall in any event not exceed a cap equal to
$250 million;
(ii) $98.761 in principal amount of new 6%
Pari Passu NPP Secured First Lien Notes due 2020 (the “New Pari Passu NPP Secured First Lien Notes”, and together with the New Pari Passu Secured First Lien Notes, the “Pari Passu Secured First Lien
Notes”) issued by the Issuer for each $1,000 in principal amount of Existing Notes exchanged;
(iii) $217.28 in principal amount of new 6% NG Secured Notes due 2020 (the “New NG Secured
Notes”) issued by the NG Notes Issuer (as defined below) for each $1,000 in principal amount of Existing Notes exchanged, which New NG Secured Notes shall in any event (A) not exceed an original principal amount of $330 million in the
aggregate and (B) be secured by the NG Notes Assets (as defined below) that constitute Non-Principal Property Mines (as defined below); and
(iv) Assuming 100% participation in the Exchange Offer, the holders of Existing Notes who participate
in the Exchange Offer will receive 10% of the outstanding equity of the Issuer (on a pro forma basis).
If less than 100% of the Existing Notes are exchanged (such remaining amount of New Pari Passu Secured First Lien Notes, the “Residual Notes”), (i)
the above conversion percentages shall remain unchanged and (ii) those holders of Existing |
| 1 |
Equal to the maximum principal amount of obligations permitted to be secured by Section 7.01(w) of the Existing First Lien Credit Agreement); provided that in any event the aggregate principal amount of notes
issued pursuant to clauses (i) and (ii) amount shall be at least $400 million. Discuss increasing the New NG Secured Notes by the shortfall if the Issuer cannot issue at least $400 million of New Pari Passu First Lien Secured Notes.
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Notes who participate in the Exchange will also be entitled to tender other unsecured notes of the Issuer in the
Exchange for Residual
Notes at prices and priority levels to be determined by the Issuer. For the avoidance
of doubt, accrued but unpaid interest on the Existing Notes that are exchanged shall not be
payable in cash at closing. |
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| Conditions: |
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The closing of the Exchange will be conditioned on:
(i) a minimum of [ ]% of the aggregate principal amount of
the Existing Notes electing to participate in the Exchange Offer (the “Minimum Condition”);
(ii) the Issuer forming a single2 direct
or indirect wholly owned subsidiary organized as a Delaware limited liability company that is designated as an “Unrestricted Subsidiary” under the Existing First Lien Credit Agreement (the “NG Notes Issuer”) and
into which substantially all assets associated with the following mines are contributed: (i) the [Kayenta Mine] (the “Principal Property Mine”) and (ii) the [Francisco U/G Mine, the Gateway North Mine and the Wild Boar Mine]
(collectively, the “Non-Principal Property Mines” and, together, with the Principal Property Mine, the “NG Notes Assets”)34;
(iii) the NG Notes Issuer being set up
as a bankruptcy remote entity subject to the terms set forth on Annex I attached hereto;
(iv) the receipt by the Issuer of not less than $500 million in net cash proceeds from asset sales
from and after the commencement date of the Exchange Offer, including net cash proceeds from sales of mines other than the NG Notes Mines; and
(v) customary additional conditions.
For the avoidance of doubt, the Exchange Offer will not be conditioned on any new money
financing or obtaining consent from the lenders under the Existing First Lien Credit Agreement (as defined below). Notwithstanding the foregoing, the Issuer shall use commercially reasonable efforts to contribute the NG Notes Assets into the NG
Notes Issuer on or prior to the Closing Date, it being understood that the Issuer shall have [180] days after the Closing Date to complete such contribution of the NG Notes Assets, which [180]-day period shall automatically be tolled as long as any
action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator, involving the Issuer and seeking to challenge, delay or prevent the consummation of the contribution of the NG Notes Assets, is pending.
[N.B. To discuss protections for bondholders.] |
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Under review for operational workability and evaluation in light of bankruptcy remote status. |
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It is expected that the NG Notes Issuer will have a funded debt to value ratio with respect to the NG Notes Assets not to exceed 50%. Confirmation as part of due diligence. |
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Peabody’s proposal under review. |
2
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| New Pari Passu Secured First Lien Notes |
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| Issuer: |
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Peabody Energy Corporation. |
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| Maturity: |
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September 15, 2020. |
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| Interest: |
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Payable semi-annually in cash at 6.0% per annum. |
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| Ranking: |
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Pari passu with the Issuer’s existing first lien credit facilities (the “Existing First Lien Facilities”) evidenced by that certain credit agreement, dated as of June 18, 2010, as amended prior to the
date hereof, including by that certain Omnibus Amendment Agreement, dated as of February 5, 2015 (as amended, the “Existing First Lien Credit Agreement”). |
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| Guarantors: |
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Identical to the subsidiaries of the Issuer (the “Guarantors”) that guaranty the Existing First Lien Facilities after giving effect to the creation of the NG Notes Issuer. |
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| Security: |
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Identical to the collateral securing the Existing First Lien Facilities. |
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| Pari Passu Intercreditor Agreement |
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Intercreditor agreement (the “New Pari Passu Intercreditor Agreement”) among the Issuer, the administrative agent under the Existing First Lien Credit Agreement and the collateral trustee of the New Pari
Passu Secured First Lien Notes, and substantially in the form of Exhibit I-2 of the Existing First Lien Credit Agreement, subject to changes to reflect current market practice or which are not adverse to the lenders under the Existing First Lien
Credit Agreement. |
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| First Lien/Second Lien Intercreditor: |
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The New Pari Passu Secured First Lien Notes will constitute “Additional Senior Debt” under that certain intercreditor agreement, dated March 16, 2015, among Peabody Energy Corporation, the other grantor parties thereto,
U.S. Bank, National Association, as Second Priority Representative, and Citibank, N.A., as Senior Representative (the “First Lien/Second Lien Intercreditor Agreement”). |
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| Mandatory Redemption: |
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Substantially the same as the Existing First Lien Credit Agreement, subject to the pro rata application of any payments as among the loans under the Existing First Lien Credit Agreement and the New Pari Passu First Lien Secured
Notes in accordance with the Pari Passu Intercreditor Agreements (defined below). |
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| Optional Redemption: |
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The Issuer may redeem the New Pari Passu Secured First Lien Notes at par plus accrued but unpaid interest at the non-default rate to, but excluding, the date of redemption. |
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| Change of Control: |
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The Issuer will be required to make an offer to repurchase the New Pari Passu Secured First Lien Notes following the occurrence of a “change of control triggering event” (to be defined in a manner consistent with the
Existing Notes) at a price in cash equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest at the non-default rate to, but excluding, the date of repurchase. |
3
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| Covenants and Events of Default: |
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To be consistent with the Existing First Lien Credit Agreement, except as follows:
(a) no maintenance
covenants shall be required; and
(b) the restricted group shall not be permitted to incur any additional first lien debt other
than Permitted Refinancing Indebtedness (as defined in the Credit Agreement). |
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| Governing Law: |
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New York. |
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| New Pari Passu NPP Secured First Lien Notes |
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| Issuer: |
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Peabody Energy Corporation. |
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| Maturity: |
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September 15, 2020. |
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| Interest: |
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Payable semi-annually in cash at 6.0% per annum. |
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| Ranking: |
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Pari passu with the Issuer’s Existing First Lien Credit Facilities. |
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| Guarantors: |
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Identical to the subsidiaries of the Issuer (the “Guarantors”) that guaranty the Existing First Lien Facilities after giving effect to the creation of the NG Notes Issuer. |
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| Security: |
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Limited to collateral securing the Existing First Lien Facilities other than any collateral consisting of Principal Property or Specified Capital Stock and Indebtedness. |
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| Pari Passu NPP Intercreditor
Agreement |
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Intercreditor agreement (the “Pari Passu NPP Intercreditor Agreement”and together with the New Pari Passu Intercreditor Agreement, the “Pari Passu Intercreditor Agreements”) among
the Issuer, the administrative agent under the Existing First Lien Credit Agreement and the collateral trustee of the New Pari Passu NPP Secured First Lien Notes, and substantially in the form of Exhibit I-2 of the Existing First Lien Credit
Agreement, subject to changes to reflect current market practice or which are not adverse to the lenders under the Existing First Lien Credit Agreement. |
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| First Lien/Second Lien Intercreditor: |
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The New Pari Passu NPP Secured First Lien Notes will constitute “Additional Senior Debt” under the First Lien/Second Lien Intercreditor Agreement. |
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| Mandatory Redemption: |
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Substantially the same as the Existing First Lien Credit Agreement, subject to the pro rata application of any payments as among the loans under the Existing First Lien Credit Agreement and the New Pari Passu First Lien Secured
Notes in accordance with the Pari Passu Intercreditor Agreements. |
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| Optional Redemption: |
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The Issuer may redeem the New Pari Passu NPP Secured First Lien Notes at par plus accrued but unpaid interest at the non-default rate to, but excluding, the date of redemption. |
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| Change of Control: |
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The Issuer will be required to make an offer to repurchase the New Pari Passu NPP Secured First Lien Notes following the occurrence of a “change of control triggering event” (to be defined in a manner consistent with
the Existing Notes) at a price in cash equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest at the non-default rate to, but excluding, the date of
repurchase. |
5
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| Covenants and Events of
Default: |
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To be consistent with the Existing First Lien Credit Agreement, except as follows: |
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(a) no maintenance covenants shall be required; and
(b) the restricted group
shall not be permitted to incur any additional first lien debt other than Permitted Refinancing Indebtedness (as defined in the Credit Agreement). |
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| Governing Law: |
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New York. |
6
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| New NG Secured Notes |
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| NG Notes Issuer: |
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NG Notes Issuer. |
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| Maturity: |
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September 15, 2020. |
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| Interest: |
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Payable semi-annually in cash at 6% per annum. |
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| Ranking: |
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Senior secured. |
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| Guarantors: |
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None. |
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| Collateral: |
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NG Notes Assets that constitute the Non-Principal Property Mines. |
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| Mandatory Redemption: |
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None. |
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| Optional Redemption: |
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The NG Notes Issuer may redeem the New NG Secured Notes at par plus accrued but unpaid interest at the non-default rate to, but excluding, the date of redemption. |
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| Change of Control: |
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The NG Notes Issuer will be required to make an offer to repurchase the New NG Secured Notes following the occurrence of a “change of control triggering event” with respect to Peabody Energy Corporation (to be defined
in a manner consistent with the Existing Notes) at a price in cash equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest at the non-default rate to, but excluding, the date of repurchase. |
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| Registration Rights: |
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None. |
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| Covenants and Events of Default: |
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Customary high-yield covenants and events of default applicable to the NG Notes Issuer, which shall in any event include financial reporting obligations with respect to the NG Notes Issuer and negative covenants with respect to
debt, liens, restricted payments (including investments), affiliate transactions, asset sales and mergers. In addition, the NG Notes Issuer shall be subject to the bankruptcy remote provisions set forth on Annex I attached hereto. In no event will
the NG Notes Issuer be permitted to have any subsidiaries or to incur any additional indebtedness for borrowed money or guaranty any of the obligations of Peabody Energy Corporation or any of its subsidiaries. [For the avoidance of doubt, the NG
Notes Issuer shall have the right to make dividends to its parent, so long as the interest coverage ratio (defined as the ratio of EBITDA of the NG Notes Issuer to cash interest expense) of the NG Notes Group is greater than [1.25x].]5 |
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| Governing Law: |
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New York. |
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| New Equity |
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| Common Stock: |
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Assuming 100% participation in the Exchange Offer, the holders of Existing Notes who participate in the Exchange Offer (the “Participants”) will receive 10% of the outstanding equity of the Issuer (on a
pro forma basis). |
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| Board Rights: |
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None. |
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| Registration Rights: |
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Customary demand and piggyback registration rights. |
8
Annex I
Bankruptcy Remote Provisions
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The NG Notes Issuer shall be a newly formed direct or indirect subsidiary of the Issuer organized as a Delaware limited liability company. |
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The NG Notes Issuer shall have a board of managers, with no more [than 3 (three)] managers serving on such board, at least one (1) of which will, at all times, be an Independent Manager (as defined below).
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The NG Notes Indenture and the organizational documents of the NG Notes Issuer (the “Organizational Documents”) shall, among other things: |
(a) require the consent of the Independent Manager in its sole and absolute discretion to, among other things,
(1) initiate, institute, consent to, participate in or otherwise effect any Bankruptcy (to be mutually defined), liquidation or dissolution of the NG Notes Issuer or (2) amend, modify or waive any provision in the Organizational Documents
that supports the “bankruptcy remoteness” of the NG Notes Issuer, including, without limitation, the other requirements set forth on this Annex I;
(b) include a mechanism to be mutually agreed that allows the Majority Holders with the consent of the NG Notes Issuer (not to
be unreasonably withheld, conditioned or delayed) to replace the Independent Manager upon at least three months’ written notice;
(c) require the Independent Manager to consider the interests of, and have a fiduciary duty to, the NG Noteholders in
connection with any actions specified in Paragraph 3(a) above that require the vote or consent of the Independent Manager and to waive any fiduciary duties to the NG Notes Issuer or any equityholder in respect thereof;
(d) prohibit action or inaction that would breach the covenants under the NG Notes Indenture (it being understood and agreed
that all intercompany transactions between the NG Notes Issuer, on the one hand, and the Issuer, on the other hand, shall be arms’ length transactions)6;
(e) require the NG Notes Issuer observe all limited liability company formalities as a distinct entity;
(f) require the NG Notes Issuer to reimburse the reasonable and documented out-of-pocket expenses of the Independent Manager
incurred in connection with acting in his or her capacity as such;
(g) require the NG Notes Issuer to (i) permit the
Independent Manager attend any meeting of the board of managers of the NG Notes Issuer; and (ii) notify the Independent Manager of any such meetings no later than concurrently with the delivery of notice thereof to any other member of the board
of managers of the NG Notes Issuer, and provide the Independent Manager with copies of any documents or materials to be provided in connection with such meetings or otherwise provided to any other member of the board of managers of the NG Notes
Issuer; and
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Cash management to be discussed. |
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(h) prohibit the NG Notes Issuer from initiating, instituting, consenting to,
participating in or otherwise effecting any Bankruptcy (to be mutually defined), liquidation or dissolution of the NG Notes Issuer without the consent of the Independent Manager;
“Independent Manager” means an individual designated by the Majority Holders that meets the definition of “independent”
under the rules of the NYSE and approved by the NG Notes Issuer (such approval not to be unreasonably withheld, conditioned or delayed).
10
Exhibit 99.2
January 21, 2016
Subject to
FRE 408 & All Other Applicable Privileges
and Confidentiality Agreements
Peabody Energy Corporation (the “Issuer”)
Exchange Offer
Any and
all of the Issuer’s
6.00% Senior Notes due November 2018 (the “Existing Notes”)
This proposal for the Issuer’s Exchange Offer is preliminary and non-binding and shall not be construed as a commitment to take any
steps to effect the Exchange, the Exchange Offer or any other transaction.
Summary of Principal Terms
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| Exchange: |
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Any and all the outstanding Existing Notes held by qualified institutional buyers for the following:
(i) $164.60 in
principal amount of new 6% Pari Passu Secured First Lien Notes due 2020 (the “New Pari Passu Secured First Lien Notes”) issued by the Issuer for each $1,000 in principal amount of Existing Notes exchanged, which New Pari
Passu Secured First Lien Notes shall in any event not exceed a cap equal to $250 million;
(ii) A to-be-determined principal amount of new 6% Pari Passu NPP Secured First Lien Notes due
2020 (the “New Pari Passu NPP Secured First Lien Notes”, and together with the New Pari Passu Secured First Lien Notes, the “Pari Passu Secured First Lien Notes”) issued by the Issuer for each $1,000
in principal amount of Existing Notes exchanged based upon the maximum principal amount of obligations permitted to be secured by Section 7.01(w) of the Existing First Lien Credit Agreement;1
(iii) $217.28 in principal amount of
new 6% NG Secured Notes due 2020 (the “New NG Secured Notes”) issued by the NG Notes Issuer (as defined below) for each $1,000 in principal amount of Existing Notes exchanged, which New NG Secured Notes shall in any event (A)
not exceed an original principal amount of $330 million in the aggregate and (B) be secured by the NG Notes Assets (as defined below) that constitute Non-Principal Property Mines (as defined below); and
(iv) Assuming 100% participation
in the Exchange Offer, the holders of Existing Notes who participate in the Exchange Offer will receive 10% of the outstanding equity of the Issuer (on a pro forma basis). |
| 1 |
Assuming the basket in Section 7.01(w) is $150 million, $98.76 of New Pari Passu NPP Secured First Lien Notes will be issued by the Issuer for each $1,000 in principal amount of Existing Notes exchanged. In the
event that the basket under Section 7.02(w) of the Existing First Lien Credit Agreement does not permit the issuance of at least $150 million New Pari Passu NPP Secured Notes, the principal amount of the New NG Secured Notes shall be increased
dollar for dollar by such shortfall. |
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If less than 100% of the Existing Notes are exchanged (such remaining amount of New Pari Passu Secured First Lien Notes, the
“Residual Notes”), (i) the above conversion percentages shall remain unchanged and (ii) those holders of Existing Notes who participate in the Exchange will also be entitled to tender other unsecured notes of the Issuer in the Exchange for
Residual Notes at prices and priority levels to be determined by the Issuer and accepted or rejected by such holders in their sole discretion.
50% of accrued but unpaid interest on the Existing Notes that are exchanged shall be payable in cash at closing and 50% shall be payable in the form of
additional New NG Secured Notes issued at closing. |
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| Conditions: |
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The closing of the Exchange will be conditioned on:
(i) a minimum of [ ]% of the aggregate principal amount of
the Existing Notes electing to participate in the Exchange Offer (the “Minimum Condition”);
(ii) the Issuer forming a single direct or indirect wholly owned subsidiary organized as a
Delaware limited liability company that is designated as an “Unrestricted Subsidiary” under the Existing First Lien Credit Agreement (the “NG Notes Issuer”) and into which substantially all assets associated with
the following mines are contributed on or prior to the closing of the Exchange unless other credit support is provided that is satisfactory to the holders of the Existing Notes that are being exchanged: (i) the Kayenta Mine (the
“Principal Property Mine”) and (ii) the Francisco U/G Mine, the Gateway/Gateway North Mine and the Wild Boar Mine (collectively, the “Non-Principal Property Mines” and, together, with the Principal
Property Mine, the “NG Notes Assets”);
(iii) the NG Notes Issuer being set up as a bankruptcy remote entity subject to the terms set forth on
Annex I attached hereto;
(iv) [the receipt by the Issuer of not less than $500 million in net cash proceeds from asset
sales from and after the commencement date of the Exchange Offer, including net cash proceeds from sales of mines other than the NG Notes Mines; and]
(v) customary additional conditions.
For the avoidance of doubt, the Exchange Offer will not be conditioned on any new money
financing or obtaining consent from the lenders under the Existing First Lien Credit Agreement (as defined below). |
2
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| New Pari Passu Secured First Lien Notes |
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| Issuer: |
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Peabody Energy Corporation. |
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| Maturity: |
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September 15, 2020. |
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| Interest: |
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Payable semi-annually in cash at 6.0% per annum. |
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| Ranking: |
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Pari passu with the Issuer’s existing first lien credit facilities (the “Existing First Lien Facilities”) evidenced by that certain credit agreement, dated as of June 18, 2010, as amended prior to the
date hereof, including by that certain Omnibus Amendment Agreement, dated as of February 5, 2015 (as amended, the “Existing First Lien Credit Agreement”). |
|
|
| Guarantors: |
|
Identical to the subsidiaries of the Issuer (the “Guarantors”) that guaranty the Existing First Lien Facilities after giving effect to the creation of the NG Notes Issuer. |
|
|
| Security: |
|
Identical to the collateral securing the Existing First Lien Facilities. |
|
|
| Pari Passu Intercreditor Agreement |
|
Intercreditor agreement (the “New Pari Passu Intercreditor Agreement”) among the Issuer, the administrative agent under the Existing First Lien Credit Agreement and the collateral trustee of the New Pari
Passu Secured First Lien Notes, and substantially in the form of Exhibit I-2 of the Existing First Lien Credit Agreement, subject to changes to reflect current market practice or which are not adverse to the lenders under the Existing First Lien
Credit Agreement. |
|
|
| First Lien/Second Lien Intercreditor: |
|
The New Pari Passu Secured First Lien Notes will constitute “Additional Senior Debt” under that certain intercreditor agreement, dated March 16, 2015, among Peabody Energy Corporation, the other grantor parties thereto,
U.S. Bank, National Association, as Second Priority Representative, and Citibank, N.A., as Senior Representative (the “First Lien/Second Lien Intercreditor Agreement”). |
|
|
| Mandatory Redemption: |
|
Substantially the same as the Existing First Lien Credit Agreement, subject to the pro rata application of any payments as among the loans under the Existing First Lien Credit Agreement and the New Pari Passu First Lien Secured
Notes in accordance with the Pari Passu Intercreditor Agreements (defined below). |
|
|
| Optional Redemption: |
|
The Issuer may redeem the New Pari Passu Secured First Lien Notes at par plus accrued but unpaid interest at the non-default rate to, but excluding, the date of redemption. |
|
|
| Change of Control: |
|
The Issuer will be required to make an offer to repurchase the New Pari Passu Secured First Lien Notes following the occurrence of a “change of control triggering event” (to be defined in a manner consistent with the
Existing Notes) at a price in cash equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest at the non-default rate to, but excluding, the date of repurchase. |
3
|
|
|
|
|
| Covenants and Events of Default: |
|
To be consistent with the Existing First Lien Credit Agreement, except as follows:
(a) no maintenance
covenants shall be required;
(b) the restricted group shall not be permitted to incur any additional first lien debt other
than Permitted Refinancing Indebtedness (as defined in the Credit Agreement); provided that reductions in the revolving commitments under the Existing First Lien Credit Agreement (other than “term outs” of the revolver that constitute
Permitted Refinancing Indebtedness) shall not, for the avoidance of doubt, increase the amount of first lien debt that can be incurred under the New Pari Passu First Lien Indenture;
(c) the restricted group
shall not be permitted to make any investments (whether through the contribution of assets, the guaranty of obligations or otherwise) in an Unrestricted Subsidiary other than the NG Notes Issuer to the extent such investment would be permitted by
the Existing First Lien Credit Agreement; and
(d) a new covenant will be added restricting the ability of non-guarantor subsidiaries
(including unrestricted subsidiaries) of the Issuer from incurring indebtedness (including the the New NG Secured Notes) in excess of $500 million at any one time or guaranteeing any indebtedness in excess of $250 million at any one
time. |
|
|
| Governing Law: |
|
New York. |
4
|
|
|
| New Pari Passu NPP Secured First Lien Notes |
|
|
| Issuer: |
|
Peabody Energy Corporation. |
|
|
| Maturity: |
|
September 15, 2020. |
|
|
| Interest: |
|
Payable semi-annually in cash at 6.0% per annum. |
|
|
| Ranking: |
|
Pari passu with the Issuer’s Existing First Lien Credit Facilities. |
|
|
| Guarantors: |
|
Identical to the subsidiaries of the Issuer (the “Guarantors”) that guaranty the Existing First Lien Facilities after giving effect to the creation of the NG Notes Issuer. |
|
|
| Security: |
|
Limited to collateral securing the Existing First Lien Facilities other than any collateral consisting of Principal Property or Specified Capital Stock and Indebtedness. |
|
|
| Pari Passu NPP Intercreditor Agreement |
|
Intercreditor agreement (the “Pari Passu NPP Intercreditor Agreement”and together with the New Pari Passu Intercreditor Agreement, the “Pari Passu Intercreditor Agreements”) among the
Issuer, the administrative agent under the Existing First Lien Credit Agreement and the collateral trustee of the New Pari Passu NPP Secured First Lien Notes, and substantially in the form of Exhibit I-2 of the Existing First Lien Credit Agreement,
subject to changes to reflect current market practice or which are not adverse to the lenders under the Existing First Lien Credit Agreement. |
|
|
| First Lien/Second Lien
Intercreditor: |
|
The New Pari Passu NPP Secured First Lien Notes will constitute “Additional Senior Debt” under the First Lien/Second Lien Intercreditor Agreement. |
|
|
| Mandatory Redemption: |
|
Substantially the same as the Existing First Lien Credit Agreement, subject to the pro rata application of any payments as among the loans under the Existing First Lien Credit Agreement and the New Pari Passu First Lien Secured
Notes in accordance with the Pari Passu Intercreditor Agreements. |
|
|
| Optional Redemption: |
|
The Issuer may redeem the New Pari Passu NPP Secured First Lien Notes at par plus accrued but unpaid interest at the non-default rate to, but excluding, the date of redemption. |
|
|
| Change of Control: |
|
The Issuer will be required to make an offer to repurchase the New Pari Passu NPP Secured First Lien Notes following the occurrence of a “change of control triggering event” (to be defined in a manner consistent with the
Existing Notes) at a price in cash equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest at the non-default rate to, but excluding, the date of repurchase. |
|
|
| Covenants and Events of
Default: |
|
To be substantially identical to the covenants applicable to the New Pari Passu Secured First Lien Notes. |
|
|
| Governing Law: |
|
New York. |
5
|
|
|
| New NG Secured Notes |
|
|
| NG Notes Issuer: |
|
NG Notes Issuer. |
|
|
| Maturity: |
|
September 15, 2020. |
|
|
| Interest: |
|
Payable semi-annually in cash at 6% per annum. |
|
|
| Ranking: |
|
Senior secured. |
|
|
| Guarantors: |
|
None. |
|
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| Collateral: |
|
NG Notes Assets that constitute the Non-Principal Property Mines. |
|
|
| Mandatory Redemption: |
|
None. |
|
|
| Optional Redemption: |
|
The NG Notes Issuer may redeem the New NG Secured Notes at par plus accrued but unpaid interest at the non-default rate to, but excluding, the date of redemption. |
|
|
| Change of Control: |
|
The NG Notes Issuer will be required to make an offer to repurchase the New NG Secured Notes following the occurrence of a “change of control triggering event” with respect to Peabody Energy Corporation (to be defined
in a manner consistent with the Existing Notes) at a price in cash equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest at the non-default rate to, but excluding, the date of repurchase. |
|
|
| Registration Rights: |
|
None. |
|
|
| Free Cash Flow Sweep |
|
The NG Notes Issuer shall redeem the New NG Secured Notes without premium or penalty in an amount equal to 10% of Free Cash Flow. “Free Cash Flow” is to be defined with respect to the NG Notes Issuer as (i) EBITDA less
(ii) SG&A Overhead Payments less (ii) unfinanced capital expenditures and certain investments less (iii) cash interest expense less (iv) cash taxes (or any other cash payments made pursuant to a tax sharing agreement) less (v) all other cash
items added back to net income in the calculation of EBITDA less (vi) other items to be mutually agreed. “SG&A Overhead” is to be defined as SG&A allocated to the NG Notes Issuer pursuant to a cost sharing agreement acceptable to
the NG Noteholders (the “Cost Sharing Agreement”), which SG&A Overhead for any fiscal year shall not exceed the lesser of (x) 20% of the SG&A of the Issuer and its subsidiaries on a consolidated basis for such fiscal
year and (y) $30 million (which amount in this clause (y) shall grow at the CPI pursuant to an annual adjustment). |
|
|
| Covenants and Events of Default: |
|
Customary high-yield covenants and events of default applicable to the NG Notes Issuer, which shall in any event include financial reporting obligations with respect to the NG Notes Issuer and negative covenants with respect to
debt, liens, restricted payments (including investments), affiliate transactions, asset sales and mergers. In addition, the NG Notes Issuer shall be subject to the bankruptcy remote provisions set forth on Annex I attached hereto. In no event will
the NG Notes Issuer be |
6
|
|
|
|
|
permitted [to have any subsidiaries, ]to sell assets outside the ordinary course of business (other than the sale of assets not constituting NG Notes Assets or assets contributed to incur Additional NG Secured Notes that are
contributed to the NG Notes Issuer by its parent companies substantially concurrently with such sale), to guaranty any of the obligations of Peabody Energy Corporation or any of its subsidiaries or to incur any additional indebtedness for borrowed
money (other than the incurrence of additional notes that are issued under the indenture pursuant to which the New NG Secured Notes are issued (“Additional NG Secured Notes”) subject to (i) such Additional NG Secured Notes
being pari passu in right of payment and lien priority to the New NG Secured Notes, (ii) such Additional NG Secured Notes having substantially the same other terms (including effective yield and weighted average life to maturity) as the New NG
Secured Notes, (iii) the aggregate principal amount of Additional NG Secured Notes shall not to exceed, when taken together with any other debt for borrowed money incurred by non-guarantor subsidiaries of the Issuer, $500 million at any time, and
(iv) on a pro forma basis after giving effect to the incurrence of such Additional NG Secured Notes and any assets contributed to the NG Notes Issuer in connection therewith the NG Note Issuer’s ratio of funded debt to EBITDA does not (i)
increase or (ii) exceed 3.00x). The NG Notes Issuer shall have the right to make (a) SG&A Overhead Payments pursuant to the Cost Sharing Agreement so long as no Default or Event of Default has occurred and is continuing and (b) dividends to its
parent with Free Cash Flow that is not swept pursuant to the Free Cash Flow Sweep so long as: (i) no Default or Event of Default has occurred and is continuing or would result therefrom, (ii) the Total Leverage Ratio of the NG Notes Issuer is less
than 3.75x and (iii) the NG Notes Issuer has Liquidity (defined as unrestricted cash and cash equivalents of the NG Notes Issuer) of at least $10 million on a pro forma basis after giving effect to such dividend (each a “Permitted NG
Notes Issuer Distribution”). |
|
|
| Governing Law: |
|
New York. |
7
|
|
|
| New Equity |
|
|
|
|
| Common Stock: |
|
Assuming 100% participation in the Exchange Offer, the holders of Existing Notes who participate in the Exchange Offer (the “Participants”) will receive 10% of the outstanding equity of the Issuer (on a
pro forma basis). |
|
|
| Board Rights: |
|
None. |
|
|
| Registration Rights: |
|
Customary demand and piggyback registration rights. |
8
Annex I
Bankruptcy Remote Provisions
| 1. |
The NG Notes Issuer shall be a newly formed direct or indirect subsidiary of the Issuer organized as a Delaware limited liability company. |
| 2. |
The NG Notes Issuer shall have a board of managers, with no more than 3 (three) managers serving on such board, at least one (1) of which will, at all times, be an Independent Manager (as defined below).
|
| 3. |
The NG Notes Indenture and the organizational documents of the NG Notes Issuer (the “Organizational Documents”) shall, among other things: |
(a) require the consent of the Independent Manager in its sole and absolute discretion to, among other things,
(1) initiate, institute, consent to, participate in or otherwise effect any Bankruptcy (to be mutually defined), liquidation or dissolution of the NG Notes Issuer or (2) amend, modify or waive any provision in the Organizational Documents
that supports the “bankruptcy remoteness” of the NG Notes Issuer, including, without limitation, the other requirements set forth on this Annex I;
(b) require a certificate from the chief financial officer of the NG Notes Issuer to the Independent Manager at least
5 business days prior to making any dividend or other distribution on account of its equity interests which certifies that such dividend or other distribution constitutes a Permitted NG Notes Distribution and includes financial calculations
reasonably acceptable to the Independent Manager demonstrating the same (it being understood and agreed that no dividend or other distribution shall be permitted to be made unless and until such calculations are reasonably acceptable to the
Independent Manager);
(c) include a mechanism to be mutually agreed that allows the Majority Holders with the consent of
the NG Notes Issuer (not to be unreasonably withheld, conditioned or delayed) to replace the Independent Manager;
(d) to
the fullest extent permitted by law, require the Independent Manager to consider the interests of, and have a fiduciary duty to, the NG Noteholders in connection with any actions specified in Paragraph 3(a) above that require the vote or consent of
the Independent Manager and to waive any fiduciary duties to the NG Notes Issuer or any equityholder in respect thereof;
(e) include covenants consistent with those in the NG Notes Indenture and other customary separateness covenants, in each case,
that cannot be amended or waived without the consent of the Independent Manager;
(f) require the NG Notes Issuer to
reimburse the reasonable and documented out-of-pocket expenses of the Independent Manager incurred in connection with acting in his or her capacity as such;
(g) require the NG Notes Issuer to (i) permit the Independent Manager attend any meeting of the board of managers of the
NG Notes Issuer; and (ii) notify the Independent Manager of any such meetings no later than concurrently with the delivery of notice thereof to any other member of the board of managers of the NG Notes Issuer, and provide the Independent
Manager with copies of any documents or materials to be
9
provided in connection with such meetings or otherwise provided to any other member of the board of managers of the NG Notes Issuer; providing that the Independent Manager shall not have any
voting rights with respect to any actions by the NG Notes Issuer other than as set forth in Paragraphs 3(a), 3(b) and 3(e) above; and
(h) require all managers to, to the fullest extent permitted by law, to consider the interests of the creditor before
initiating, instituting, consenting to, participating in or otherwise effect any Bankruptcy (to be mutually defined), liquidation or dissolution of the NG Notes Issuer.
“Independent Manager” means an individual designated by the Majority Holders and approved by the NG Notes Issuer (such approval not to
be unreasonably withheld, conditioned or delayed).
10
Overview of Select Assets Exhibit
99.3
Disclaimer Peabody or its affiliates
and representatives make no representation or warranty, express or implied, as to any matter reflected in or relating to this presentation. Certain statements and information in this presentation are forward looking in nature and based on
numerous assumptions that Peabody believes are reasonable, but they are open to a wide range of uncertainties and business risks that may cause actual results or outcomes to differ materially from expectations. These factors are difficult
to accurately predict and may be beyond the control of relevant parties. Actual future results may vary significantly from the projections, estimates, forecasts and other forward-looking information in this presentation. The recipient
must make its own inquiries regarding the assumptions, uncertainties and contingencies that may affect future value, operations and results, and the impact that a variation in future outcomes may have. Nothing in this presentation is intended to
constitute a contract or an offer to enter into a contract, or to be binding or to create legal obligations or rights.
Kayenta Location Map Navajo Generating
Station Kayenta Mine RR from Mine to Plant, ~100 miles
Kayenta Overview Product 10,600 Btu,
10.1% Ash, 13.3% Moisture, 1.2 #SO2 Ownership Operates through a lease agreement with the Navajo Nation & Hopi Tribe Location Near Kayenta, AZ on reservation lands on the Black Mesa highland plateau Overview Kayenta is a mine-mouth operation
providing 100% of its sold production to the Navajo Generation Station (NGS) power plant Kayenta produces thermal coal for the NGS near Page, AZ through a cost-plus sales contract More than 90% of the workforce is Native American Minable Reserves
215.0Mt Major Equipment Operates three draglines (1 - 2570 and 2 – 8750) with supporting truck fleets 24 Dozers, 18 haul trucks, 3 Excavators, 17 Loaders, 2 Backhoe Loaders Transportation Dedicated closed loop electric train; ~100 mile rail
line Geology Multi-seam, ranging from 3 to 15 feet (1) Proven & Probable Reserves as of December 31, 2014; sourced from 10-K Tons Sold (Mt)
Kayenta Summary Financial Statistics
Margin Per Ton (1) (1) Expected tons sold in Q4’15 of ~1.4Mt.
Midwest Selected Operations Locations
Wild Boar Overview Product 11,000 Btu,
9.3% Ash, 14.0% Moisture, 5.9 lbs. SO2 Ownership 100% owner operator Location Lynnville, IN Overview Began production in 2010 Surface mines operating a combination of truck and shovel and tractor push Average projected strip ratio (total yards /
tons produced) over the next 3 years: ~19.65 Operates 24 hours per day, 7 days per week, year-round Prep plant has capacity of 650tph and is located near Wild Boar and Somerville UMI servicing both operations Minable Reserves 15Mt Major Equipment 21
Dozers, 8 Excavators, 7 Haul Trucks, 11 Dump Trucks, 2 Loaders Transportation Rail (NS, ISRR and CSX), Rail to Barge (via Ohio River MP 772.5) Geology Seams mined: Indiana 5 and 5A (1) Proven & Probable Reserves as of December 31, 2014; sourced
from 10-K Tons Sold (Mt)
Wild Boar Summary Financial Statistics
Margin Per Ton
Francisco UG Overview Product Thermal:
11,500 Btu, 8.6% Ash, 12.1% Moisture, 6.1 lbs. SO2 Ownership 100% owner operator Location Near Francisco in Gibson County, IN Overview Began production in 2003 Underground mine operating 3 split-air CM supersections utilizing battery coal haulers
Operates two 8-hour shifts, 5.5 days a week, year-round Prep Plant has capacity of 650tph Minable Reserves 31.0Mt Major Equipment 36 Coal Haulers, 29 Continuous Miners, 19 Roof Bolters, 13 Scoops Transportation Rail (NS), Truck Geology Seams mined:
Indiana 5 (1) Proven & Probable Reserves as of December 31, 2014; sourced from 10-K Tons Sold (Mt)
Francisco UG Summary Financial
Statistics Margin Per Ton
Gateway / Gateway North Overview
Product Thermal / Stoker: 11,000 – 11,200 Btu, 8.8% - 9.2% Ash, 11.8% - 13.8% Moisture, 5.5 lbs. SO2 Ownership 100% owner operator Location Near Coulterville in Randolph County, IL Overview Began production in 2005 and has the production
capacity of up to 4.5Mtpa Underground mine utilizing continuous miner to extract thermal coal Product Yield: ~65% Operates 3 shifts per day, 7 days a week, year-round Peabody invested $73M of capital for Gateway North Prep plant has a capacity of
1,000tph Minable Reserves 75.0Mt Major Equipment 13 Coal Haulers, 6 Continuous Miners, 6 Roof Bolters, 5 Scoops Transportation Truck, Rail (UP), Barge (Cora Terminal via rail) Coal can also be trucked to KRPD #2 Dock Geology Seams mined: Herrin No.
6 (1) Proven & Probable Reserves as of December 31, 2014; sourced from 10-K Tons Sold (Mt)
Gateway / Gateway North Summary
Financial Statistics Margin Per Ton (1) (1) Cash cost per ton expected to decrease going forward.
Other Information(1) 13 Bonding
Requirements as of 9/30/15 (dollars in thousands) Consolidating Balance Sheet – September 30, 2015 Unaudited (dollars in thousands) (1) Peabody also inadvertently included in a spreadsheet provided to certain holders of Peabody's debt in
columns entitled "2016 Prior Plan" the following information (in thousands, except per ton amounts): Tons Sold – Francisco Underground, 2,913; Gateway – –; Gateway North – 2,658; Wild Boar – 2,011; Kayenta –
7,800; Tons Produced – Francisco Underground, 2,913; Gateway – –; Gateway North – 2,658; Wild Boar – 2,011; Kayenta – 7,800; Sales Price per Ton – Francisco Underground, $42.00; Gateway – –;
Gateway North – $39.46; Wild Boar – $43.24; Kayenta – $41.97; Cash Cost per Ton – Francisco Underground, $36.67; Gateway – –; Gateway North – $25.95; Wild Boar – $32.45; Kayenta – $32.24; Margin
per Ton – Francisco Underground, $5.33; Gateway – –; Gateway North – $13.51; Wild Boar – $10.79; Kayenta – $9.73; EBITDA – Francisco Underground, $15,535; Gateway – –; Gateway North –
$35,915; Wild Boar – $21,687; Kayenta – $75,901; Capital Expenditures – Francisco Underground, $15,535; Gateway – –; Gateway North – $35,915; Wild Boar – $21,687; Kayenta – $75,901; Bonding
Requirements – Francisco Underground, $15,535; Gateway – –; Gateway North – $35,915; Wild Boar – $21,687; Kayenta – $75,901. This information is outdated and has not been utilized by Peabody for any purpose.
Peabody therefore does not view this information as either relevant or material; accordingly, this information should not be relied upon for any purpose.
