Ad Hoc Committee of Non-Consenting Creditors v. Peabody Energy Corp. (In re Peabody Energy Corp.)

933 F.3d 918 (2019)

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Ad Hoc Committee of Non-Consenting Creditors v. Peabody Energy Corp. (In re Peabody Energy Corp.)

United States Court of Appeals for the Eighth Circuit
933 F.3d 918 (2019)

Facts

Peabody Energy Corporation, a coal company, along with certain of its subsidiaries (collectively, Peabody) (debtors) filed for Chapter 11 bankruptcy. Peabody entered into a complex, negotiated reorganization agreement (negotiated reorganization) with a group of its second-lien and senior-unsecured lenders (creditors), pursuant to which, among other things, qualified creditors could buy discounted preferred stock in a reorganized Peabody via a private placement by buying a set amount of stock, agreeing to back-stop the placement (i.e., buy unsold stock), and supporting judicial confirmation of the negotiated reorganization. Qualifying creditors also could earn premiums for signing the relevant agreements. Peabody moved for approval of the various agreements required to implement the negotiated reorganization. The Ad Hoc Committee of Non-Consenting Creditors (Ad Hoc Committee) (creditors), which did not participate in the reorganization negotiations, opposed the negotiated reorganization, instead submitting several alternative reorganization plans to Peabody and to the Official Committee of Unsecured Creditors (Official Committee) (creditors). Peabody and the Official Committee rejected the Ad Hoc Committee’s proposals, stating that they found them to be inferior to and more costly than the negotiated plan. Over the Ad Hoc Committee’s objection, the bankruptcy court approved the agreements needed to implement the negotiated reorganization. The bankruptcy court subsequently confirmed the negotiated reorganization, in which approximately 95 percent of Peabody’s unsecured creditors agreed to participate. However, the Ad Hoc Committee did not sign the necessary agreements and thus could not participate. The Ad Hoc Committee appealed to the district court, which affirmed the bankruptcy court. The Ad Hoc Committee appealed again, arguing that the negotiated reorganization violated § 1123(a)(4) of the Bankruptcy Code because it treated the committee less favorably than other holders of the same class of claims.

Rule of Law

Issue

Holding and Reasoning (Melloy, J.)

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