At the core of the dispute between Patriot and the union is the company's value, which depends on the market for coal and any success Patriot has in recovering money through a potential lawsuit against former parent Peabody Energy Corp.
The UMWA says Patriot's arguments are based on the flawed idea that coal prices will remain low for the foreseeable future. Srinivas Akunuri, a valuation expert with PricewaterhouseCoopers' energy practice and a consultant for the union, predicts that coal prices will rebound as consumers seek cheaper alternatives to natural gas.
Patriot "manufactured" its liquidity crisis by setting covenants on its bankruptcy operating loan so the company would default if it doesn't meet its own goals of reducing labor costs, the union said.
The UMWA also contends that Patriot hasn't been quick enough to take action against Peabody, which profited by spinning off Patriot in 2007 and leaving the former unit with 16 percent of Peabody's assets and 40 percent of its retiree liability, according to the union.
Patriot acquired more retiree liabilities when it bought Magnum Coal in 2008. Arch Coal Inc. created Magnum in 2005 and designed it to fail by giving it 12 percent of Arch's assets and 97 percent of its retiree health care liabilities, the UMWA said. Patriot has more than three times as many retirees as miners, and 90 percent of its retirees never worked for Patriot.
Patriot said the bankruptcy loan didn't cause its liquidity problems and was instead a "necessary lifeline." Natural gas prices have risen in recent months while thermal coal prices have not, the company said.
As to Peabody, Patriot has said in court papers that it is considering whether the 2007 transaction that created it "constituted an actual or constructive fraudulent transfer" that could recoup money to be shared among all its creditors. The spinoff rid Peabody of $600 million in health-care and environmental liabilities, said Patriot, which won court permission April 23 to deepen its probe into whether a lawsuit is possible.
Patriot also seeks court permission to get information for its probe from Duff & Phelps Corp. and Morgan Stanley, both of which advised Peabody on the spinoff. Patriot said in court papers filed April 26 that it believes Morgan Stanley has "information related to the liabilities and financial condition of Patriot at the time of the spinoff, as well as the motives for the spinoff."
Patriot gave the bank until April 10 to say whether it would voluntarily share information and didn't receive any commitment, Patriot said.
Separately, Patriot has already sued Peabody over whether the former parent can reduce benefits to retirees if Patriot does. Surratt-States heard arguments on Peabody's motion to dismiss that lawsuit Monday and has yet to rule on the issue.
"Patriot is here to preserve benefits for 3,100 retirees," Jonathan Martin, a lawyer for the company, said in court. "Peabody is here out of pure, unadulterated greed."