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The $1.47 Billion Problem Threatening Peabody's Finances

  • Groups challenging coal miners' practice of self-bonding
  • The issue threatens to push Peabody ``over the edge'': analyst
KNUTSFORD, UNITED KINGDOM - NOVEMBER 24: Coal waits to be delivered from the yard of traditional coalman Ernie Lockett to homes for winter heating in Northwich on November 24, 2008 in Cheshire, England. Ernie, aged 64, has been a coalman since he was 15 and works alone on his Cheshire delivery round. Coal has seen a resurgence in use as other fuels, such as oil have seen a price increase and the fashion for solid fuel stoves has risen.
Photographer: Christopher Furlong/Getty Images
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While Peabody Energy Corp. has spent months negotiating its debt with lenders, another $1.47 billion problem has surfaced that’s threatening to force the nation’s biggest coal miner down the same road as its bankrupt rivals.

It’s called “self-bonding.” And it’s under attack by groups who’ve lodged complaints about the practice in five states in the past week. For decades, Peabody and other coal producers deemed to have strong balance sheets have saved cash under this privilege that excuses them from having to post collateral or obtain surety bonds that cover future mine clean-up costs. Peabody self-bonds in five states including Wyoming.