PEABODY ENERGY CORP Plans $225M Offering

By Chris Stiles • Thursday, May 28 10:31 • Permanent Link

Peabody said May 28 it plans to raise $225 million through a private offering of convertible senior notes due 2031, with an option for initial purchasers to buy another $25 million. If that full option is exercised, the deal would total $250 million.

The company said it expects to use the proceeds in three main ways: to fund capped call transactions, to repurchase part of its 3.250% convertible senior notes due 2028, and, if anything remains, for general corporate purposes.

The new notes will mature on June 1, 2031. Peabody said the notes will carry semi-annual interest, with the rate, conversion price and other terms to be set at pricing. Holders will be able to convert the notes in certain circumstances and during specified periods, and Peabody said it will settle conversions in cash, shares, or a mix of both, at its election.

The company also laid out the timing on redemption. It cannot redeem the notes before June 5, 2029, except in a cleanup redemption. On or after that date, and before the 31st scheduled trading day ahead of maturity, Peabody may redeem the notes for cash if its stock trades above 130% of the conversion price for a specified period and other conditions are met. The redemption price would equal 100% of principal plus accrued interest.

Peabody said if a fundamental change occurs, noteholders can require the company to repurchase their notes for cash at 100% of principal plus accrued interest.

The company said the capped call transactions are expected to reduce dilution from conversions before May 30, 2030, and/or offset cash payments above principal, subject to a cap. Those hedges are expected to expire over trading days beginning April 17, 2030.

Peabody also said holders of its 2028 convertible notes who agree to be repurchased may unwind hedges by buying Peabody stock or entering into derivative transactions. The company said that activity could be substantial relative to Peabody’s historic average daily trading volume and could affect the stock price around the pricing of the new notes. The market has reacted to these announcements by moving the company's shares 1.81% to a price of $26.37. If you want to know more, read the company's complete 8-K report here.

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