| Sept 13
Sept 13 Peabody Energy Corp, the company
responsible for creating now-bankrupt Patriot Coal
through a 2007 spinoff, on Friday said it has no obligation to
fund health and pension benefits for Patriot retirees affected
by the company's insolvency.
In court papers in U.S. Bankruptcy Court in St. Louis,
Peabody said new labor deals between Patriot and the United Mine
Workers of America effectively relieve Peabody of any funding
In a lawsuit relating to Patriot's bankruptcy, Patriot and
Peabody are fighting over the responsibility to fund benefits
for a group of about 3,100 retirees that Peabody agreed to
continue covering after the October 2007 spinoff.
A judge in May declared that Peabody was relieved of that
burden when Patriot abrogated its labor obligations for all
employees and retirees earlier this year and negotiated new,
cost-saving deals as part of its restructuring in Chapter 11
An appeals court last month reversed that ruling, saying the
abrogation of labor deals should have exempted the group in
question, and that the group's benefits remained the
responsibility of Peabody.
But that ruling was "not concerned with, and expressed no
opinion on, what effect a new labor agreement would have on
Peabody's" obligations, Peabody argued in Friday's filing.
Under the new deal, Peabody's funding obligations, which are
tied to the amount of benefits Patriot provides to its workers,
disappear, because the deal transfers all benefits to an outside
trust, Peabody argued.
The trust is to be funded by some up-front cash and equity
in the post-bankruptcy Patriot, but ongoing contributions from
Patriot will cease after Jan. 1, 2014.
Peabody's funding obligation should be proportionately
reduced, in this case to zero, Peabody argued. It asked the
court to confirm the termination of its contractual funding
In a statement, Peabody blamed the union for
"grandstanding," saying it eschewed offers by Peabody to help
fund the new benefits trust.
A union spokesman did not respond to a request for comment,
while a spokesman for Peabody declined to comment.
Under Patriot's restructuring, retiree benefits will be
reduced, while current workers stand to absorb cuts in salary,
vacation time and other perks.
That Patriot's miners will sustain much of the pain of the
company's collapse 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 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.
The union, like Patriot, has made efforts to hold Peabody
responsible for any benefits Patriot cannot afford to maintain.
The union last year sued Peabody saying it designed Patriot to
fail by loading it with hefty debt and weak assets, and should
remain on the hook for worker benefits.
Peabody has denied the allegations, saying Patriot was
"highly successful" in the wake of the spinoff, eventually
falling victim to the realities of the energy market.