U.S. judge says to approve Peabody's bankruptcy exit

ST. LOUIS (Reuters) - Peabody Energy Corp was set to receive court approval on Thursday to exit its Chapter 11 bankruptcy amid dramatically improved short-term prospects for its business compared to a year ago, when it sought Chapter 11 protection.

U.S. Bankruptcy Judge Barry Schermer said he was ready to sign an order to approve Peabody's exit from bankruptcy, pending discussions with the U.S. Department of Justice.

Alan Tenenbaum, an attorney for the U.S. government, told the court he expected to resolve differences over the plan within a half hour.

Peabody expects to emerge from bankruptcy next month with about $2 billion of debt.

Schermer overruled objections to Peabody's reorganization plan, including from a small group of creditors who complained about the company's estimated valuation of its business and the terms of a $750 million private stock sale.

A lawyer for the creditor group said they planned to appeal.

The company struck a series of last-minute deals with some opponents of its plan before Thursday's hearing, including with a group of individual investors who had argued they were wrongly blocked from a private stock sale meant to raise financing for the company.

Peabody also reached a $75 million deal to resolve a dispute with a mine workers union retirement plan.

The company settled earlier this month objections over its environmental liability policy by agreeing to cover $1.14 billion of future mine cleanups with third-party bonds.

The reorganization plan also includes a stock bonus plan for its employees with sizeable packages for Chief Executive Officer Glenn Kellow and his top five directors.

(Reporting by Tracy Rucinski; Editing by Cynthia Osterman, Bernard Orr)