| ST. LOUIS
ST. LOUIS May 1 Patriot Coal Corp's
top boss on Wednesday told a court that the bankrupt company's
unionized workers would benefit if Patriot were allowed to
implement $150 million a year in proposed cuts.
At a hearing in U.S. bankruptcy court in St. Louis, Chief
Executive Ben Hatfield said the cuts are the only way to avoid a
liquidation that would cost 1,700 miners their jobs.
Hatfield testified on Patriot's proposed reductions, which
the United Mine Workers of America union has lambasted as
"nowhere near" fair. The plan would end pension contributions
and create a separate entity to fund healthcare, affecting
Patriot's current workers and about 13,000 retirees and their
The company, which filed for bankruptcy in July 2012, has
offered the union a 35 percent stake in the company, which could
be sold to help fund healthcare.
"A reorganized Patriot is worth hundreds of millions of
dollars," Hatfield said. "In a liquidation, Patriot is worth
pennies on the dollar."
The hearing is expected to run through Friday, after which
Judge Kathy Surratt-States has 30 days to rule on Patriot's
Bankrupt companies are allowed to unilaterally change labor
deals, but they must show that cuts are crucial to survival and
that a good-faith effort has been made to reach a deal
Patriot has been at odds with its union since its bankruptcy
filing. The UMWA has staged protests in New York, St. Louis and
Appalachia, and is arguing in court in hopes of salvaging
The issue is especially pertinent in the coal industry,
where workers are uniquely exposed to health hazards, and where
an ever-shrinking workforce is being asked to shoulder the cost
of benefits for generations of retirees.
In cross-examination, UMWA attorney Fred Perillo questioned
whether the healthcare fund would be viable, and suggested the
union was bearing the brunt of Patriot's cost savings.
Hatfield joined Patriot in September 2011 and became its top
officer last October. The Charleston, West Virginia, native
testified that his father and grandfather were coal miners.
He said the current coal market was the worst he had seen
in 30 years, citing low natural gas prices, a mild 2011-12
winter, environmental regulations and a worldwide drop in steel
demand. Coal prices are about half of what they were in 2011,
Last year "was a very, very difficult year," he said.
Hatfield said the company had frozen nonunion wages, cut
nonunion health benefits for employees and retirees, and reduced
A recurring theme in the bankruptcy is the role of former
Patriot parent Peabody Energy Co, which spun off Patriot
in 2007. Both Patriot and the UMWA have said that the
still-profitable Peabody should pay for worker benefits if
Patriot cannot. The union in a separate lawsuit has accused
Peabody of setting Patriot up to fail, loading it with
burdensome legacy liabilities.
Peabody has said the transaction was above-board.
"Patriot was highly successful following its launch more
than five years ago with significant assets, low debt and a
market value that more than quadrupled in less than a year,"
Peabody spokesman Vic Svec said in a statement.
In an interview with the State Journal of Charleston, West
Virginia, Hatfield last month said the Peabody spinoff seemed
"suspect" when it was first announced, at which time Hatfield
was CEO of International Coal Group.
"Frankly, as a competitor, we looked at that and said ... it
looks like a bad balance here - too many liabilities and not
enough assets," Hatfield told the newspaper.
On Wednesday, Hatfield testified that Patriot last year
began looking through files, checking emails, and interviewing
former employees to see if a lawsuit over the spinoff was
warranted. He said he was not sure why the company ultimately
chose not to file one.
Miners say they are entitled to lifetime health and pension
benefits dating back to agreements forged with the Truman
administration in the 1940s.
Monie Harris, who retired from Peabody in 2002 after 36
years with the company, attended Hatfield's testimony on
Wednesday. But the Central City, Kentucky, resident said his
main beef was with Peabody.
"We want Peabody to live up to its agreement," Harris said.
"We signed a contract."
Separately on Wednesday, Hatfield defended Patriot's plan to
seek court approval of $6 million in incentive payments to
retain certain key employees. No top executive would benefit
from the plan, Hatfield said.
"Patriot has lost 67 people since January, some gone to
competitors at lower-paying jobs, because they were worried
about their futures," he said.
Judge Surratt-States has not ruled on the request.
The hearing has drawn hundreds of miners to St. Louis. About
30 attended the hearing on Wednesday, taking up about half the
The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy
Court, Eastern District of Missouri, No. 12-51502.