Bankrupt Patriot Coal asks court to slash union pensions

Mon Apr 29, 2013 5:59am EDT

By Nick Brown
    April 29 (Reuters) - Patriot Coal Corp on Monday
will seek court permission to slash healthcare and pension
benefits for about 13,000 union workers, an issue that has set
off weeks of street protests by affected workers.
    The company, which declared bankruptcy last year, said it
wants to save $150 million a year on its labor obligations to
help it regain profitability.
    But the United Mine Workers of America, the nation's
biggest coal miners' union, says the cuts are unfair and plans
to protest outside U.S. Bankruptcy Court in St. Louis when the
hearing starts on Monday.
    Under bankruptcy law, if companies cannot negotiate
compromises with unions, they can seek court permission to
impose cuts unilaterally. And because employees' claims are
subordinate to secured debt like loans and bonds, worker
benefits are often the first place bankrupt companies look for
cost savings.
    This is especially pertinent in the coal industry, where
benefits for generations of retirees are shouldered by an
ever-shrinking workforce.
    At the hearing starting Monday before Judge Kathy
Surratt-States, Patriot must show that the cuts are crucial to
its survival and that a good-faith effort was made to achieve
them cooperatively.
    Patriot will call witnesses, and then the union will begin
its rebuttal with its own set of witnesses, in a process that
could go all week.
    Patriot has said the cuts are not a matter of stinginess,
saying that current benefit obligations could send the company
into liquidation.
    Under its latest offer, Patriot would cease pension
contributions and replace current health benefits with a
voluntary employees' beneficiary association. The VEBA would be
funded by $15 million in up-front cash, plus $300 million in
profit-sharing contributions and recoveries from litigation. The
union would also receive a 35 percent equity stake in
post-bankruptcy Patriot, which it could sell to help fund the
    Lawyers for the union have acknowledged Patriot's financial
woes, which were brought on by high labor costs combined with
weak coal prices caused in part by a glut of natural gas.
    But they say that Patriot's bankruptcy is even harder on
workers and retirees than most, alleging that former parent
Peabody Energy Corp set Patriot up to fail when it spun
it off in 2007.
    Peabody, which retained profitable coal mines throughout the
United States and Australia after the spinoff, loaded Patriot up
with pension and benefit liabilities for retirees, many of whom
retired before the spinoff and never worked for Patriot.
    The union has filed a separate lawsuit in federal court in
West Virginia, where many of Patriot's operations are centered,
seeking to hold Peabody liable for the benefits workers might
lose through Patriot's insolvency.
    Led by Cecil Roberts, the union has staged protests in New
York, Appalachia and St. Louis since Patriot declared bankruptcy
in July.
    Patriot also has several thousand non-union employees, with
whom it reached new, consensual labor terms last week.
    The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy
Court, Eastern District of Missouri, No. 12-51502.
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