* Plan would pay back secured creditors, wipe out shareholders
* Mine workers' union would receive equity stake in reorganized Patriot
By Nick Brown
Sept 6 Patriot Coal Corp on Friday filed a restructuring plan that would pay back secured creditors and wipe out shareholders, four weeks after reaching new, cost-saving labor contracts with unionized workers.
In court papers filed in U.S. Bankruptcy Court in St. Louis, Patriot detailed a plan that would pay back secured creditors in cash while cutting recoveries for unsecured creditors, who would be given equity in the restructured Patriot. Current equity holders are not expected to recover anything.
Patriot in a statement said it will provide more detail on the plan next week. A spokesman for the company declined to comment. The plan still needs the support of creditors, along with approval by Judge Kathy Surratt-States.
Patriot's restructuring is closely tied to its efforts to cut back on the high labor costs it listed as a key factor in its bankruptcy filing last year. The company reached new labor deals in August after a long fight with unionized workers, enabling it to forecast creditor recoveries and draw up a payback plan.
Under the new labor terms, Patriot will reduce wages, overtime pay and vacation, and eliminate shift differentials for 1,700 unionized workers. Retiree healthcare and pension benefits, meanwhile, will be transferred to an outside trust. The United Mine Workers of America, which represents 13,000 Patriot retirees and their relatives, will receive a roughly 35 percent equity stake in the reorganized Patriot, which it can sell to help bolster those benefits.
Patriot was a casualty of a coal industry hurt by weak coal prices, caused in part by a glut of natural gas. That Patriot's miners will sustain much of the pain of the company's restructuring has made the case vitriolic, with the union staging myriad protests and rallies before reluctantly agreeing to new deals.
The union has bargained for lifetime healthcare and pension benefits since the 1940s, considering those benefits sacrosanct. But companies have become less able to afford them in the face of modernization, a shrinking workforce and the growing prevalence of new sources of energy.
The union has said any benefits Patriot cannot afford should be paid by Peabody Energy Co, which created Patriot through a 2007 spinoff. In a lawsuit filed last year, the union said Peabody designed Patriot to fail by loading it with hefty debt and weak assets, and should remain on the hook for worker benefits.