The US Bankruptcy Court for the eastern district of Missouri has confirmed Patriot Coal Corp.’s plan of reorganisation. This sets the company up to emerge from bankruptcy. Patriot will close on its exit financing, complete the rights offerings and emerge from Chapter 11 reorganisation on December 18.
“This marks the final step in Patriot’s financial restructuring,” Patriot president and CEO, Bennett K Hatfield, commented. “We look forward to a new beginning, as a well-capitalised company providing a competitive product to the electric utility and steel industries.”
The reorganisation plan will allow Patriot to exit from bankruptcy with fewer retiree obligations, saving US$ 130/year for the next four years.
In October, Patriot Coal reached an agreement with Knighthead Capital Management, LLC, to financially sponsor the company’s emergence from bankruptcy. The US$ 250 million agreement will backstop two rights offerings in a reorganised Patriot.
The confirmation of Patriot’s plan of reorganisation is the latest turn in a long-running saga that began in July 2012, when the company first filed for bankruptcy, citing a decreasing demand for coal and an obligation to pay US$ 1.6 billion in lifetime healthcare benefits for its 8100 retirees.
The reorganisation plan also contains two settlements with Arch Coal and Peabody Energy, which spun-off the mining units that came to comprise Patriot. The deals seeks to resolve the dispute over who is responsible for the liabilities Patriot took on as a result of the spinoffs.
For many months, Patriot was caught up in a battle with the largest mining union in the US: the United Mineworkers Union (UMWA). The UMWA accused Peabody Energy, which created Patriot in 2007, of giving Patriot 16% of its assets and 40% of its retiree liability, thus setting it up to fail as a means of disposing of unprofitable assets.
The UMWA reached an agreement with Patriot in August, which included a limit to wage cuts to US$ 1/hour, down from US$ 6/hour that was allowed by Judge Cathy Surratt States in her initial bankruptcy ruling in June. As of January 2015, workers will be eligible for a US$ 0.50/hour pay rise.
Patriot Coal Corp. is a producer and marketer of coal in the eastern US, with 10 active mining complexes in Appalachia and the Illinois Coal Basin. The company ships to domestic and international electricity generators, industrial users and metallurgical coal customers, controlling approximately 1.8 billion t of proven and probable coal reserves.
Adapted from press release by Sam Dodson
Read the article online at: https://www.worldcoal.com/coal/18122013/patriot_coal_to_emerge_from_bankruptcy_367/