Citibank, Aurelius and Elliott declined to comment on the case, which is being heard in bankruptcy court in St. Louis, where Peabody is based. The judge has said he will rule on the allocation dispute by Oct. 12 if the parties don’t reach a settlement in mediation.

In a statement, Peabody said that its approach “has been appropriate” and its financial statements comply with accepted accounting rules.

At stake is how Peabody will split its assets among holders of about $8.8 billion in various types of debt as it reorganizes. Peabody has said the fight is a barricade to its restructuring efforts.

Called vulture funds by their critics, Elliott Management and Aurelius, founded by Brodsky, a former Elliott money manager, buy assets of troubled companies at deep discounts. Among other strategies, they’ve made a name for themselves in litigation arbitrage -- making investments that turn on an unsettled matter of law that they then pursue in court.

Elliott oversees about $28 billion in assets. Aurelius had almost $5 billion under management, including leverage, as of Dec. 31, according to the latest regulatory filing.

In the funds’ best-known battle, they prevailed earlier this year when they reached a settlement with Argentina that landed them and two other firms $4.6 billion in cash. The funds had sued for full repayment after Argentina defaulted on its bonds in 2001. The contentious affair included former President Cristina Fernandez de Kirchner calling Singer a “Vulture Lord” and “bloodsucker.”

The funds also worked together in General Motors’ bankruptcy, trying to get what one Morgan Stanley analyst called “two straws in one milkshake.” A settlement gave their class 1.8 times the return of other creditors -- a rare departure from the bankruptcy norm that one loss is entitled to one recovery.

In the Peabody battle, the firms’ methods are on full display. Eli Bartov, an accounting professor at New York University’s Stern School of Business, said he found it unusual for investors to lobby a company for an accounting change.

"Management alone is responsible for accounting,” he said.

Accounting Change