Patriot Coal Corp. (PCXCQ:US) won court approval of a hard-fought agreement with the mining company’s union, paving the way toward an exit from bankruptcy this year.
U.S. Bankruptcy Judge Kathy Surratt-States in St. Louis today approved Patriot’s request to enter a five-year contract with the United Mine Workers of America. The agreement calls for fewer concessions than one Surratt-States authorized in May. The union had appealed her ruling and threatened a strike.
The new agreement calls for wage changes including raises of 50 cents an hour every year from 2015 to 2018, and health-care benefits similar to those of nonunion employees.
“These agreements should set Patriot on a path to emerge from bankruptcy by the end of 2013,” Patriot Chief Executive Officer Bennett K. Hatfield said in an Aug. 16 statement. The union and the company’s committee of unsecured creditors have said they support the new agreement.
Separately, Surratt-States granted the company’s request to change its loan agreement to avoid a default.
During the past year, falling prices for metallurgical coal have cut into earnings forecasts and could cause the company to default on loans this year if it can’t change its current loan agreement, Patriot said in a July 30 request.
The amendment to its $375 million loan would drop an earnings threshold to $101.3 million. Under the previous agreement, Patriot needed a minimum of consolidated earnings of $205 million by Dec. 31.
The St. Louis-based company filed for bankruptcy in July 2012, citing a drop in demand and $1.6 billion in lifetime health-care obligations for its retirees.
Patriot, which has $802 million in operating loans, has about 13,000 unionized workers and retirees.
The union has said the company hasn’t been quick enough to take action against former parent Peabody Energy Corp. (BTU:US), which profited by spinning off Patriot in 2007, giving it 16 percent of its assets and 40 percent of its retiree liability.
Peabody says the UMWA has made false claims about the transaction, and that Peabody kept 86 percent of total liabilities after the spinoff.
The case In re Patriot Coal Corp., 12-51502, U.S. Bankruptcy Court, Eastern District of Missouri (St. Louis).
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