By Tracy Rucinski
ST. LOUIS (Reuters) - Peabody Energy Corp <BTUUQ.PK>, the world's largest private-sector coal miner, can begin seeking creditor votes for a plan to cut $5 billion of debt and exit its Chapter 11 bankruptcy, a U.S. bankruptcy judge said on Thursday.
U.S. Bankruptcy Judge Barry Schermer overruled objections from opponents including state regulators, shareholders, environmental activists and even former executives. Their complaints can still be debated at a confirmation trial on March 16.
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Peabody has said it hopes to emerge from its $8 billion bankruptcy in April with a plan that will raise what lawyers called "a monster" $1.5 billion in private capital and leave it with under $2 billion of debt.
Judge Schermer also approved the private capital raising over objections regarding some terms of the offering, including large fees to be awarded to certain creditors as part of the deal.
Peabody's biggest creditors support the plan, which the company defended in court over competing proposals by a small group of creditors that would see Peabody exit bankruptcy with about $2.4 billion of debt.
Testifying in a packed courtroom, Peabody Chief Financial Officer Amy Schwetz said it would be "irresponsible" to take on more debt given the cyclical nature of the coal industry and put it at risk of another Chapter 11.
"We only want to do this once," Schwetz said.
Peabody resolved objections from certain noteholders, the United Mine Workers of America and federal bankruptcy watchdog the U.S. Trustee before Thursday's hearing.
Indiana and environmental groups opposed the plan, saying that it fails to address whether Peabody can cover $1 billion in future mine cleanup costs with third-party bonds.
Until now, Peabody has covered cleanup liabilities under "self-bonding." This federal program is under scrutiny for exempting presumably healthy coal companies from providing financial guarantees to cover their legal obligation to return mined land to its natural setting.
Other objectors are generally upset about the way Peabody is allocating its value, which has fluctuated with swings in coal prices.
Shareholders have said the company is worth more than it acknowledges and that their stock should not be canceled.
Peabody's volatile pink sheet ended up 0.9 percent at $2.85 on Thursday. The stock rocketed briefly above $18 in October in response to steps by China to limit its domestic coal production but has since drifted lower.
(Reporting by Tracy Rucinski; Editing by Lisa Shumaker)