March 15 Patriot Coal Corp has asked
a court to terminate about $1.6 billion in retiree health
benefits for thousands of its unionized U.S. mine workers as
part of its plan to survive Chapter 11 bankruptcy, a court
Patriot said United Mine Workers of America's (UMWA's) labor
costs are not competitive with other coal producers that operate
"under more flexible work rules and a significantly lower labor
"The actions we have taken today are necessary for the
survival of Patriot and the preservation of more than 4,000
jobs," Patriot Chief Executive Bennett Hatfield said in a
As an alternative to terminating retiree health benefits,
Patriot has proposed creating a trust, known as a Voluntary
Employee Beneficiary Association (VEBA), that includes profit
sharing of up to a maximum of $300 million and an initial cash
contribution of $15 million.
For its part, the union is concerned that Patriot will take
advantage of bankruptcy laws allowing companies to shed much of
their retiree healthcare and pension costs.
"These demands by the company are totally unacceptable, and
unnecessary for the company's survival," UMWA International
President Cecil Roberts said in a statement.
LAWSUIT AGAINST PEABODY
Patriot Coal, which filed for bankruptcy last year, was
spun-off from Peabody Energy Corp five years ago and
later acquired an Arch Coal business.
On Thursday, Patriot filed a lawsuit against Peabody to
ensure that Peabody "does not attempt to use Patriot's
bankruptcy to escape Peabody's own healthcare obligations to
In connection with Patriot's 2007 spinoff, Peabody agreed to
pay the healthcare costs for thousands of retirees who were
employed by Peabody entities that were transferred to Patriot in
the spinoff, according to Patriot.
Patriot said it believes that Peabody might argue that
Patriot's financial condition will allow Peabody to stop paying
for or cut the healthcare of more than 3,000 individuals.
In a statement late on Thursday, Peabody said the company
has been providing funds for Patriot's retiree healthcare
expenses under the contract since the spinoff.
"This contract also appropriately states that, should
Patriot's benefit obligations decrease, our funding would
proportionately be reduced. Patriot is taking the untenable
position that our payments should continue in full in the future
even if Patriot's expenses are reduced," Peabody said.
The case is In Re Patriot Coal Corp et al, U.S. Bankruptcy
Court, Eastern District of Missouri, No. 12-51502.