ST. LOUIS – Patriot Coal Corp. says it’s still on pace to emerge from bankruptcy by the end of the year now that a judge has given the company the go-ahead to send its reorganization plan to creditors for a vote.
The terms approved Wednesday by U.S. Bankruptcy Judge Kathy Surratt-States include a previously announced deal with former Patriot corporate parent Peabody Coal Corp. that settled a drawn-out legal dispute over health care benefits for thousands of Patriot retirees, St. Louis-based Patriot said.
Bennett Hatfield, Patriot’s president and chief executive, called Wednesday’s signoffs by Surratt-States “important milestones on Patriot’s path to emergence as a strong, well-capitalized competitor in the coal industry,” laying the groundwork for the company’s freeing itself of Chapter 11 bankruptcy protection in mid- to late December.
As part of its push to regain its financial footing, Patriot said it has lined up $586 million in financing from Barclays and Deutsche Bank, having already obtained a $250 million infusion through a rights offering backstopped by Knighthead Capital Management LLC.
Key to Patriot’s push to exit bankruptcy was its settlement last month with Peabody of months of legal tangling over retiree health benefits. Under that deal, Peabody, which spun off Patriot in 2007, will spend $310 million over four years to fund the benefits and provide about $140 million in letters of credit to Patriot.
Peabody’s payments will be funneled into a voluntary employee benefit association fund from which benefits to the retirees would be disbursed. Patriot also will contribute $75 million to the fund, plus future payments from royalty and profit-sharing commitments.
The deal also requires the United Mine Workers of America to give up most of its recently granted stake in Patriot.
Kathy Surratt-States had ruled in May that Peabody wasn’t obligated to continue health care benefits for some 3,100 retirees, only to be reversed in August by an 8th U.S. Court of Appeals bankruptcy panel.
Patriot earlier this year sued Peabody, seeking to ensure it didn’t try to use the bankruptcy to avoid the debated health care obligations.