* Plan would pay back secured creditors, wipe out
* Mine workers' union would receive equity stake in
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
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