Creditors to vote on Patriot Coal's bankruptcy exit plan
(Reuters) - Patriot Coal Corp PCXCQ.PK said on Wednesday it received court permission to send its bankruptcy exit plan to creditors for a vote, positioning it to leave Chapter 11 by year's end.
The company said in a statement that a bankruptcy judge in St. Louis approved the plan outline, allowing it to be sent to creditors for their assessment of the overall plan. The milestone comes after months of wrangling in which Patriot fought with its unionized workforce, as well as former parent Peabody Energy Corp (BTU.N), over how to cut costs.
Under the plan, retiree benefits would be reduced, while current workers would absorb cuts in salary, vacation time and other perks. Healthcare benefits would be transferred to an outside trust. The company would operate after bankruptcy with the help of $576 million in funding from Barclays Plc (BARC.L) and Deutsche Bank AG (DBKGn.DE).
The court also approved a rights offering backstopped by Knighthead Capital Management, Patriot said. The offering, announced last month, will raise $250 million in new capital.
"Today's actions by the court represent important milestones on Patriot's path to emergence as a strong, well-capitalized competitor in the coal industry," Bennett Hatfield, Patriot's chief executive, said in the statement.
Hatfield added that the company is on schedule to emerge from bankruptcy in "mid to late December."
Patriot declared bankruptcy in July 2012, saying it needed to cut $150 million a year in employment costs to regain profitability.
It received court permission earlier this year to scrap collective bargaining agreements with its union and draw up new, cost-saving contracts. The United Mine Workers of America, which represents some 13,000 Patriot workers, retirees and their families, fought against the move.
Patriot's miners will sustain much of the pain of the company's collapse, which has made the case vitriolic. The union staged myriad protests and rallies before reluctantly agreeing to the new contracts.
The union has bargained for lifetime healthcare and pension benefits since the 1940s, considering those benefits sacrosanct. But coal 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.
Both Patriot and the union tried to keep Peabody, which created Patriot through a 2007 spinoff, on the hook for some of the costs. Peabody agreed in October to contribute $310 million for healthcare costs over four years, with an additional $140 million in the form of letters of credit.
The union had hoped to force Peabody to cover all benefits Patriot was unable to maintain, alleging in a 2012 lawsuit that Peabody designed Patriot to fail by loading it up with heavy legacy liabilities and few valuable assets.
The lawsuit alleged that the move interfered with workers' benefits in violation of the Employee Retirement Income Security Act, an argument not previously used by a union in the context of a spinoff.
Peabody denied the allegations, and a judge in September granted its request to throw the case out.
(Corrects 2nd paragraph to reflect that Patriot, not Peabody, fought with its union)
(Reporting by Nick Brown. Editing by Andre Grenon)