Patriot and its creditors said separately Wednesday that they are seeking court permission to investigate whether the 2007 spinoff "constituted an actual or constructive fraudulent transfer" that would allow it to recover money under bankruptcy law.
The spinoff rid Peabody of "approximately $600 million of retiree health-care liabilities, along with hundreds of millions of dollars of other liabilities, including environmental reclamation obligations and black lung benefits," the company and creditors said.
Vic Svec, a spokesman for St. Louis-based Peabody, the largest U.S. coal producer, said in an email that the company will vigorously defend any claims against it related to the Patriot spinoff.
Patriot also asked court permission to extend by 120 days its deadlines to file a reorganization plan and win creditors' approval. The company requested a July 4 plan deadline and until Nov. 1 to get approval.
While the company has made progress on stabilizing the business and researching claims against third parties, it needs more time because of its size and complexity, Patriot said.
Patriot has proposed to reduce its obligations by creating a voluntary employees' beneficiary association, or VEBA, trust administered by the UMWA Health and Retirement Funds. The trust would get funding from Patriot in several ways, including an ownership stake in a reorganized company expected to be worth hundreds of millions of dollars, it said.
Patriot will contribute as much as $300 million, an initial $15 million and future recoveries from litigation, the company has said.
Peabody rose 17 cents to $20.09 at 12:08 p.m. in New York.
Patriot's 3.25 percent senior convertible notes due in May last traded at 12 cents on the dollar, and its 8.25 percent notes last traded at 48 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.