2016-02-29_ENFORCEMENT - C1982056

• Permit No: C1982056
• IBM Index Class Name: Enforcement
• Doc Date: 2/29/2016
• Doc Name: Sightline Citizens Complaint to OSM Regarding Peabody Self Bond
• From: Sightline Institute
• To: OSM
• Violation No.: TDNX16140182002
• Email Name: DIH
• Email Name: JRS
• Email Name: MPB
• Email Name: JLE
• Media Type: D
• Archive: No

valuation the full enterprise value of Peabody's mines, domestic and foreign. In short the PIC
corporate balance sheet takes full advantage of Peabody Energy's assets but is, through an
accounting treatment allowed to allocate only a small portion of the total liabilities of
Peabody Energy.
Program rules appear to allow for a definition of the parent and subsidiary relationship for the
purposes of the self -bonding applications that is materially different from that used in federal
SEC filings or under GAAP relating to group consolidation. Under those filings Peabody Energy
Corporation is the parent company and PIC and NMCR are both considered subsidiaries.
In 2010, under either the PIC or PEC accounting, the parent would have complied with self -
bonding rules. As noted in Table 9: Peabody Energy Total Liabilities to Net Worth65 at End of
2015, however,
The NMCR application would not meet eligibility requirements under current financial
conditions using Peabody Energy Corporation as the true parent.
It is also important to note that whatever net worth Peabody Energy Corporation may have in
2016 it has been pledged that value to its bondholders. A review of Peabody Energy's
financial filings indicates that generally and specifically the company has pledged its mining
assets to its creditors.
Much of Peabody's debt is governed by a multi-party agreement (Credit Facility) established
in 2013 and amended in February 2015. As described in the company's filing under the Credit
Facility "The Company and substantially all of its domestic subsidiaries"66 secure the
indebtedness. In the section of the filing that describes the Senior Secured Notes the company
discloses that the notes are "Jointly and severally guaranteed by nearly all of the Company's
domestic subsidiaries."67
In addition to this
general assignment of
the value of the assets
of Peabody Energy
Corporation and its
subsidiaries to its
bondholders, in 2015, as
part of the amendment
to the Credit Facility,
the company issued
mortgages to its
creditors for the
following mines in order
to specifically secure
more liberalized credit
terms for Peabody
Energy going forward.
Table 11: Mines Mortgaged by Peabody to its Creditors in 2015
Credit Facility Amendment
Mine
North Antelope Rochelle
State
Wyoming
2014 ..
Production
tons)
118.0
Caballo
Wyoming
8.0
1 Rawhide
WyominR
15.0
Lee Ranch
New Mexico
0.3
El Segundo
New Mexico
8.2
K_yenta
Arizona
8.2
Bear Run
Indiana
8.6
Total Coal Production
166.3
Total Peabody Domestic
185.0
f Percent Mortgaged
90%
65 Form 8K-2016 Year End.
66 http://www.peabodyenergy.comicontent/l62fsec-filings, Form 10K, February 25, 2015, Long Term Debt, p. F-38
87 http://www.peabodyenergy.com/content/162/sec-filings, Form 10K, February 25, 2015, Long Term Debt, p. F40.
Peabody's Strategies for Survival Ignore Market Realities and Risk Backfiring 18