Patriot Coal Corporation (fka PCXCQ)

[marayatano]

UPDATE 1-Patriot, coal miners square off over benefits

Mon Apr 29, 2013 3:25pm EDT

By Tim Bross and Nick Brown
ST. LOUIS/NEW YORK, April 29 (Reuters) - Arguments got under
way on Monday over the fate of healthcare and pension benefits
for unionized Patriot Coal Corp workers, as thousands
of miners rallied against massive cuts proposed by the company.
The morning began with Patriot's contention that Peabody
Energy Corp, its former parent, is still on the hook for
the liabilities that Patriot assumed when it was spun off from
Peabody in 2007.
In an afternoon session, Patriot was expected to begin
arguments supporting its proposal to cease pension contributions
and convert healthcare funding to a voluntary employees'
beneficiary association, or VEBA.
Patriot filed for bankruptcy in July 2012, and has said it
must cut $150 million in annual employee obligations to regain
profitability. It argued on Monday that Peabody, which is still
profitable, should foot the bill for the roughly 13,000 current
and retired union workers and their dependents.
Judge Kathy Surratt-States, of U.S. bankruptcy court in St.
Louis, said she would not rule on that question today.
"What Peabody is doing is wrong, just plan wrong," Jonathan
Martin, an attorney for Patriot, told the court.
Peabody in a statement said it lived up to its obligations
when it spun off Patriot. "This is a matter between the union
and Patriot Coal," the company said
On Monday afternoon, arguments were expected to turn to the
substance of Patriot's proposed cuts, and whether they are
necessary for the company's survival.
Patriot has offered to cease pension contributions and
convert healthcare to a VEBA funded by $15 million in up-front
cash and $300 million in profit-sharing contributions. The union
would receive a 35 percent equity stake in post-bankruptcy
Patriot, which it could sell to help fund the VEBA.
Under bankruptcy law, if companies cannot negotiate
compromises with unions, they can seek court permission to
impose cuts unilaterally. But the companies must show that the
cuts are crucial to survival and that a good-faith effort has
been made to achieve them cooperatively.
The United Mine Workers of America have called the cuts
"nowhere near" fair. The union has also argued that Peabody
should shoulder the cost if Patriot cannot, filing a separate
lawsuit on that issue in a West Virginia federal court.
The union on Monday rallied in St. Louis, home to Patriot,
attracting about 6,000 people, most of them mine workers, union
spokesman Phil Smith told Reuters. That's more than the 4,000 or
so protesters the union was expecting, Smith said.
Inside the courtroom, about half of the 60 seats were
occupied by miners and their families, many wearing t-Shirts
saying "Peabody promised."
Because employees' claims in bankruptcy are subordinate to
secured debt like loans and bonds, worker benefits are often the
first place bankrupt companies look for cost savings.
This is especially pertinent in the coal industry, where
benefits for generations of retirees are shouldered by an
ever-shrinking workforce.
Patriot is expected to call witnesses, with the union then
beginning a rebuttal with its own set of witnesses. The process
could go all week.
Peabody, which retained profitable coal mines throughout the
United States and Australia after the spinoff, loaded Patriot up
with pension and benefit liabilities for retirees when it spun
off Patriot, many of whom retired before the spinoff and never
worked for Patriot.
In its statement, Peabody said Patriot was "highly
successful" following the spinoff and had "significant assets"
that helped its market value "quadruple in less than a year."
Led by Cecil Roberts, the union has staged protests in New
York, Appalachia and St. Louis since Patriot declared bankruptcy
in July.
Patriot also has several thousand non-union employees, with
whom it reached new, consensual labor terms last week.
The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy
Court, Eastern District of Missouri, No. 12-51502.

http://www.reuters.com/article/2013/04/29/patriot-bankruptcy-idUSL2N0DG1C220130429