Peabody (NYSE: BTU) announced the pricing of $225 million in convertible senior notes due 2031 in a private offering to qualified institutional buyers. The notes carry a 0.50% annual interest rate and are scheduled to settle on June 2, 2026.

The coal producer granted initial purchasers an option to buy an additional $25 million in notes within 13 days of issuance. The notes can be converted at a rate of 26.0970 shares per $1,000 principal amount, representing an initial conversion price of approximately $38.32 per share.

The conversion price reflects a 32.5% premium over the volume weighted average price of $28.92 per share on May 28, 2026. Noteholders can convert before December 1, 2030 only under certain conditions, and at any time after that date until maturity.

Peabody cannot redeem the notes before June 5, 2029, except for cleanup redemptions when less than 15% of the original principal remains outstanding. After June 5, 2029, the company may redeem notes if its stock price exceeds 130% of the conversion price for a specified period.

The company expects net proceeds of approximately $218.9 million, or $243.3 million if the option is fully exercised. Peabody plans to use $15.0 million for capped call transactions and, combined with available cash, will repurchase approximately $241.2 million of its outstanding 3.250% convertible senior notes due 2028 for $388.8 million.

The capped call transactions are designed to reduce potential dilution upon conversion of the new notes before May 30, 2030, with a cap price of $50.61 per share representing a 75% premium over the May 28 volume weighted average price.