Patriot Coal announced that is had achieved several major milestones toward successful emergence from bankruptcy.
The company reached an agreement with Knighthead Capital Management, LLC to financially sponsor Patriot Coal’s emergence from bankruptcy. In addition, after months of litigation and negotiation, Patriot has entered into settlements with both Peabody Energy and Arch Coal.
Emergence from bankruptcy
These agreements will provide Patriot Coal with a significant liquidity infusion and position it to obtain the exit financing necessary to emerge from bankruptcy. Additionally, the agreements will result in funding for the Voluntary Employee Beneficiary Association (VEBA) trust of more than US$ 400 million to provide healthcare coverage for United Mine Workers of America (UMWA) retirees.
"Reaching these agreements represents a pivotal juncture in Patriot's restructuring. With Knighthead's financial backing and the funding provided by Peabody and Arch, Patriot is now well-positioned to secure exit financing," explained Patriot CEO, Bennett Hatfield.
"This sets a clear path forward for Patriot to emerge from Chapter 11 [bankruptcy] by year-end as a strong competitor in the coal industry."
Capital from Knighthead
Under the terms of the agreement, Patriot Coal will receive US$ 250 million in capital from Knighthead. In accordance with UMWA agreements, Patriot will contribute US$ 75 million in direct cash payments to the VEBA, as well as future payments from royalty and profit sharing commitments.
Patriot Coal and the UMWA also reached a settlement with Peabody that will provide the VEBA and Patriot with additional funding. Under the terms of the arrangement, Peabody will provide US$ 310 million to fund the VEBA and settle all Patriot and UMWA claims involving the Patriot bankruptcy.
Arch Coal settlement
Under the terms of Patriot Coal’s settlement with Arch, the company will receive US$ 5 million and a release of a US$ 16 million letter of credit posted in Arch Coal's name. In addition, expiring coal leases in Patriot's Logan mining complex will be extended and Patriot will receive US$ 16 million for the sale of a number of metallurgical coal reserves.
"I am pleased that we have been able to reach agreements that provide the UMWA with hundreds of millions of dollars in retiree healthcare funding," concluded Hatfield. "The best result for the UMWA and its members is for Patriot to emerge from bankruptcy as a healthy company that will continue to provide jobs and benefits, and we are now on track to achieve that goal."
Adapted from press release by Katie Woodward
Read the article online at: https://www.worldcoal.com/coal/10102013/patriot_coal_reaches_bankruptcy_exit_milestone_118/