Patriot Coal seeks reduction in nonunion benefits
Beset by protests as it pursues cutting benefits to its unionized workers, Patriot Coal Corp., the bankrupt mining company, also seeks to reduce or end benefits for nonunion retirees.
The coal producer Tuesday asked the U.S. Bankruptcy Court in St. Louis for permission to cap life insurance benefits for nonunion retirees at $30,000 and end coverage for current nonunion employees. Patriot also asked in court papers to halt medical benefits for nonunion retirees.
Patriot officials "determined, after careful deliberation, that they must also modify the life insurance benefits they provide and terminate substantially all of the retiree medical benefits they provide," the company said in the filing.
More than 6,000 people gathered April 1 in Charleston, W.Va., to protest actions in Patriot's bankruptcy case, the Associated Press reported. The president of United Mine Workers of America and 15 others were arrested, the AP said.
Marchers from Indiana, Kentucky, Pennsylvania, Ohio and Virginia rallied in support of "decent wages, health care and working conditions" for miners, according to a statement from the mineworkers' union. The UMWA represents about 42 percent of Patriot's 4,000 employees.
Patriot filed for bankruptcy in July, citing falling demand for coal and obligations to pay $1.6 billion in lifetime health care for its 8,100 retirees.
Stricter environmental regulations along with increased competition from natural gas and companies that didn't share its labor and retiree costs also hurt business, the company said.
Patriot is seeking to trim costs by negotiating with unionized employees, and a hearing on the issue is set for April 29. The St. Louis-based company said it needs to shed at least $150 million more in labor expenses to avoid liquidating in bankruptcy, an outcome it says would be worse for retirees, employees and creditors.
Benefits to nonunion retirees carry a balance sheet liability of about $51.3 million and have a five-year cash cost of $26.9 million, the company said in court papers yesterday.
The UMWA and protesters have said that if Patriot can't shoulder health-care benefits and retiree costs, Peabody Energy Corp. should be held responsible. Peabody's 2007 spinoff of Patriot gave it about 43 percent of Peabody's pension and health care liabilities and 11 percent of its productive assets, according to the union.
"I never worked a day for Patriot Coal," said Shirley Inman, a retired miner whose health-care benefits are threatened, according to the UMWA. "I don't care what the corporate name is, those executives made us a promise: We'd mine their coal, and in exchange we'd have good health care while we worked and after we retired. I kept my promise; they should keep theirs," Inman said in the April 1 statement.
Patriot and its creditors said separately Wednesday that they are seeking court permission to investigate whether the 2007 spinoff "constituted an actual or constructive fraudulent transfer" that would allow it to recover money under bankruptcy law.
The spinoff rid Peabody of "approximately $600 million of retiree health-care liabilities, along with hundreds of millions of dollars of other liabilities, including environmental reclamation obligations and black lung benefits," the company and creditors said.
Vic Svec, a spokesman for St. Louis-based Peabody, the largest U.S. coal producer, said in an email that the company will vigorously defend any claims against it related to the Patriot spinoff.
Patriot also asked court permission to extend by 120 days its deadlines to file a reorganization plan and win creditors' approval. The company requested a July 4 plan deadline and until Nov. 1 to get approval.
While the company has made progress on stabilizing the business and researching claims against third parties, it needs more time because of its size and complexity, Patriot said.
Patriot has proposed to reduce its obligations by creating a voluntary employees' beneficiary association, or VEBA, trust administered by the UMWA Health and Retirement Funds. The trust would get funding from Patriot in several ways, including an ownership stake in a reorganized company expected to be worth hundreds of millions of dollars, it said.
Patriot will contribute as much as $300 million, an initial $15 million and future recoveries from litigation, the company has said.
Peabody rose 17 cents to $20.09 at 12:08 p.m. in New York.
Patriot's 3.25 percent senior convertible notes due in May last traded at 12 cents on the dollar, and its 8.25 percent notes last traded at 48 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.