Bidder's Statement - Peabody Energy

7 Sources of consideration
7.1 Maximum funding obligation
The total amount that PEAMCoal would be required to pay to
Macarthur Shareholders under the Offer if it acquires all of the Shares
currently on issue is approximately A$4,682,431,317.
In the Co-operation and Contribution Agreement, Peabody Energy
and ArcelorMittal have, through their respective subsidiaries PAC2
and AM BV2, have each unconditionally agreed to provide funding to
cover the total amount that PEAMCoal may be required to pay under
the Offer to PEAMCoal Holdings on a basis proportionate to their
shareholdings in PEAMCoal Holdings and PEAMCoal Holdings has,
in turn, undertaken to provide that amount to PEAMCoal to ensure
that PEAMCoal has sufficient funds to pay the total amount that
PEAMCoal may be required to pay under the Offer.
7.2 Funding from Peabody Energy and PAC2
(a) Overview of Peabody Energy’s funding sources
PAC2’s proportionate share of the total amount that may be
required to be paid by PEAMCoal to Macarthur Shareholders
under the Offer is approximately A$2,809,458,790.1 14 To meet
this funding obligation, Peabody Energy has available to it:
• a financing commitment from Bank of America N.A., UBS
Loan Finance LLC and Morgan Stanley Senior Funding,
Inc. (together the Financiers) for up to US$2 billion (being
approximately A$1.83 billion (at an exchange rate of US$1.00
to A$1.09)) (the Peabody Bridge Facility);
• a revolver facility, with an undrawn amount of at least US$1.0
billion (being approximately A$917 million (at an exchange
rate of US$1.00 to A$1.09)) (the Peabody Revolver
Facility); and
• immediately available cash on hand of at least US$750 million
(being approximately A$688 million (at an exchange rate of
US$1.00 to A$1.09)) (the Peabody Cash Reserves),
(together, the Peabody Funding).
Peabody Energy and its wholly owned subsidiaries have agreed
inter-group funding arrangements which will provide PAC2 with
access to the Peabody Funding to meet Peabody’s funding
obligations under the Co-operation and Contribution Agreement.
Set out below are further details of the Peabody Funding.
(b) Peabody Bridge Facility
Peabody Energy has executed a legally binding commitment
letter with the Financiers, pursuant to which the Financiers have
agreed to provide the Peabody Bridge Facility, the proceeds of
which shall be used for the purposes of PEAMCoal acquiring
Shares under the Offer and to pay fees and expenses associated
with the Offer subject to the satisfaction of a number of conditions
precedent. The conditions precedent are usual for a facility of this
nature and include:
• PEAMCoal having acquired a Relevant Interest in at least
50.01% of the Shares;
• evidence that all of the defeating conditions to the Offer have
been fulfilled or freed by PEAMCoal;
• executed formal documentation of the Peabody Bridge
Facility agreements (the Loan Documents);
• limited representations and warranties (including the
enforceability of the Loan Documents, no contravention of
the Loan Documents with law and other agreements and
solvency) being true and correct in all material respects on
drawdown dates;
• other procedural conditions precedent usual for a facility
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AM has the right to terminate the Co-operation and Contribution Agreement. AM BV2’s
obligation to continue funding PEAMCoal following the exercise of such termination
right is summarised in section 10.2(f). The effect of those obligations is that, even if AM
exercised its termination right, PEAMCoal would continue to have funding available
from Peabody Energy and ArcelorMittal to pay accepting Macarthur Shareholders. See
section 10.2(f) for further details.
of this nature (including customary closing certificates,
resolutions, legal opinions and required know your client and
anti-money laundering deliverables); and
• payment of all fees and invoiced expenses owing in respect of
the Peabody Bridge Facility.
At the date of this Bidder’s Statement, neither Peabody Energy
nor PAC2 is aware of any reason why the conditions precedent
will not be satisfied in time to allow the proceeds to be available
to pay the total amount that PEAMCoal may be required to pay
under the Offer as and when it is due under the terms of the Offer.
(c) Peabody Revolver Facility
The availability of funds under the Peabody Revolver Facility
is subject to the following conditions precedent (i) the
representations and warranties in the Credit Agreement dated 18
June 2010 between, among others, Peabody and several major
commercial banks or financing providers (the Existing Credit
Agreement) being true and correct in all material respects on
drawdown dates and (ii) there being no default or event of default
in existence or resulting from the borrowing of such funds. The
representations and warranties include (i) there being no event
or circumstance, either individually or in the aggregate, that
has had or could reasonably be expected to have a “material
adverse effect” (as defined below), (ii) there being no litigation or
similar action as to which there is a reasonable possibility of an
adverse determination and that could reasonably be expected
to have a “material adverse effect” and (iii) there being no default
under or with respect to any contractual obligation which could
reasonably be expected to have a “material adverse effect”. The
term “material adverse effect” means a material adverse effect
upon (i) the business, assets, operations, property or condition
(financial or otherwise) of Peabody Energy and its subsidiaries
(subject to limited exceptions, which may apply to Macarthur and
its subsidiaries once they are Subsidiaries of Peabody Energy) or
(ii) the validity or enforceability of the Existing Credit Agreement
and the associated loan documents or the rights or remedies
of the agents or the lenders thereunder. The no default or event
of default condition referred to above requires that Peabody
Energy be in compliance with its covenants. These include two
financial maintenance covenants which require that Peabody
Energy maintains a minimum interest coverage ratio and does not
exceed a maximum leverage ratio. The condition also requires
that no event of default has occurred under a set of customary
event of defaults.
At the date of this Bidder’s Statement, neither Peabody Energy
nor PAC2 is aware of any reason why such conditions precedent
will not be satisfied in time to allow the proceeds to be available to
pay any amounts that PEAMCoal may be required to pay under
the Offer as and when such amounts are due under the terms of
the Offer.
(d) Peabody Cash Reserves
The Peabody Cash Reserves consist of highly liquid investments
in money market funds, bank commercial paper and deposits
with major commercial banks.
7.3 Funding from ArcelorMittal
(a) Overview of ArcelorMittal’s sources of funding
AM BV2’s proportionate share of the total amount that may be
required to be paid by PEAMCoal to Macarthur Shareholders
under the Offer is approximately A$1,120,415,566 (which is the
net amount after taking into account the A$752,556,961 that
AM BV2 will be entitled to receive under the Offer in respect
of the 48,552,062 Shares that are the subject of the Pre-Bid
Acceptance Deed – see section 10.4). To meet this funding
obligation, ArcelorMittal has available to it a revolver facility of
US$6 billion, with an undrawn amount of at least US$4.8 billion
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