Peabody Energy Corp. is asking a bankruptcy judge to let it pay up to $12 million in bonuses to the coal-mining company’s top executives.
Peabody President and Chief Executive Glenn Kellow and five other executives are in line for the bonuses, which depend upon the company’s financial performance as well as its achievement of safety, environmental and restructuring goals.
Peabody, which is asking Judge Barry Schermer to approve the payments, says the bonuses are warranted in light of the fact that the success of its restructuring requires “extraordinary efforts” from its leaders.
“The debtors believe that incentives for the [executives] to successfully implement the debtors’ restructuring and enhance value at this critical time will help maximize the value of the debtors’ estates for the benefit of all of the debtors’ stakeholders,” Peabody said in court papers filed Wednesday.
St. Louis-based Peabody said in court papers it expects to soon deliver a go-forward business plan to its lenders. The next few months in its bankruptcy are expected to be focused on resolving a looming battle among creditors over which of the company’s assets are locked up as collateral securing lenders’ claims and which are available to all creditors.
When Congress amended the bankruptcy code in 2005, it required executive bonuses generally to be incentive-based rather than retention-based. Federal bankruptcy watchdogs and creditors have since challenged many executive bonus plans on the grounds that the incentives are too easily achieved, making them disguised retention plans.
Peabody says the two executive bonus plans it is putting forward are in line with the bankruptcy code. One plan would pay bonuses this year and next if Peabody meets profitability and safety-improvement goals. Bonuses would be triggered under another plan depending on when Peabody emerges from bankruptcy and would be tied to the financial performance of its U.S. and Australian divisions, cash flow targets and the extent of the work it does to reclaim the land it mines.
Together, the two plans are capped at $11.9 million, Peabody says.
In addition to Mr. Kellow, court papers say the five other executives eligible for bonuses are: Chief Financial Officer Amy Schwetz; Chief Legal Officer A. Verona Dorch; Charles Meintjes, president of Peabody’s Australian division; Kemal Williamson, president of the Americas division; and Bryan Galli, group executive of marketing and trading.
Court papers show that under the annual bonus plan, Mr. Kellow is eligible for a target bonus payout of 110% of his $1.007 million base salary, or $1.108 million, while the restructuring incentive plan target payout for him is 175% of his base salary, or $1.76 million.
Peabody says that even with the bonuses, executive compensation is expected to fall short of what company leaders stood to earn before the company’s bankruptcy filing. Mr. Kellow’s total postbankruptcy compensation is expected to fall by about 40%, bonuses included, the company added.
The U.S. Bankruptcy Court in St. Louis will review the bonus proposal at an Aug. 17 hearing, along with proposed settlements of environmental obligations with state mining regulators and the company’s request for more time to control its chapter 11 case.
Peabody’s U.S. coal mines are concentrated in the Powder River basin in Colorado and the Illinois basin in the Midwest. It sought chapter 11 protection on April 13 to restructure a debt load that, as of the end of the year, topped $10 billion.
Write to Jacqueline Palank at jacqueline.palank[a]wsj.com