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Debt Exchange: Inadequate Levels of Principal <br />Reduction Leave Peabody's Financial Condition <br />Driven by Weak Coal prices Subject to Further <br />Slippage <br />Peabody currently has $6.3 billion in long term debt obligations.44 Those obligations have been <br />incurred over time and are comprised of several prior bond issuances with varying maturity <br />dates. The restructuring of this debt portfolio is an important focus of Peabody's management. <br />The company has also announced a debt exchange of its $1.5 billion Senior Note due in <br />November 2018. if the deal is approved, it would result in an agreed reduction in the principal <br />value of debt from $1.5 billion to $730 million,45 reducing the annual interest payment by an <br />estimated $47 million.16 The company is also offering the bondholders a 10% equity position in <br />the company. <br />The exchange is contingent in part on Peabody's ability to sell $500 million in other mining <br />assets by the time the deal closes.47 <br />To secure a portion of the debt reissuance Peabody will establish a separate vehicle to hold <br />four mines: Gateway in Illinois, Francisco and Wild Boar in Indiana, and Kayenta in New <br />Mexico. The new vehicle will be restricted in its ability to issue new debt.48 <br />These four mines produced an estimated $696 million in revenue in 2014, more than 10% of the <br />company's enterprise -wide revenue. The asset and revenues from these mines appear to be <br />part of the pledges related to Peabody's self -bond reclamation obligations for other mines, as <br />they are part of the "stockholder equity" used to value the company's net worth (see below). <br />There is a presumption that the new vehicle will protect the assets from Peabody's larger debt <br />problems. But it remains unclear what will happen to these mines in the event of a bankruptcy <br />proceeding: do the mortgages and guarantees ensure the protection of the newly issued <br />bonds or will they be part of the general property of the company covered under a Chapter <br />I 1 proceeding? <br />44 Form 8K-2016 Year End. <br />45 http //www.peabodyenergy,com/content/162/sec-filings. Form 8K January 22. 2016 (Form 8K-2016 Debt) The Company's <br />8K disclosure assumes the issuance of three instruments all with maturity dates of 2020 1) $250 million 6% pan parsu bonds, <br />2) $150 million 6% pari pasu bonds and 3) $330 million in Senior Secured notes, supported by the four mines The plan also <br />involves an equity position for bondholders equal to 10% of the Issuers value. <br />46 http.//seekingalpha.conVarticle/3829266-analyzing-peabody-energys-propose"ebt-exchange <br />47 Form 8K-2016 Debt, Peabody Energy Corporation (the "Issuer") Exchange Offer, 6.00% Senior Notes due November 2018, <br />Exhibit 99 1, Exchange Offer, January 8, 2016, P 2. <br />Q Form BK -2016 Debt Peabody Energy Corporation (the *Issuer) Exchange Offer, 6.00% Senior Notes due November 2018, <br />Exhibit 99. 1, Exchange Offer, January B. 2016, PA <br />Peabody's Strategies for Survival Ignore Market Realities and Risk Backfiring 11 <br />