Patriot Coal Corporation (fka PCXCQ)

[marayatano]

Same story, different source:

May 17, 2013, 11:48 a.m. ET

Judge Clears Patriot Coal to Pay Nearly $7 Million in Bonuses

A bankruptcy judge has overruled the objection of union members who face wage and benefit cuts to approve nearly $7 million in bonuses for Patriot Coal Corp. (PCXCQ) executives and workers.

Judge Kathy Surratt-States of the U.S. Bankruptcy Court in St. Louis, who several weeks ago oversaw a trial over whether Patriot can impose wage and benefit cuts on its union workers and retirees, Thursday authorized the coal miner to pay out up to $6.9 million in bonuses to about 300 employees during its restructuring.

In doing so, the judge overruled the objection of the United Mine Workers of America union, which had argued that it would be "enormously inequitable" to reward executives while union workers face "substantial, life-altering changes in compensation."

Two months after a hearing on the bonuses, Judge Surratt-States ruled that the maximum $6.9 million payout "is not unreasonable" in light of the company's size, past bonus payouts and restructuring goals.

Bonuses are subject to restrictions in Chapter 11--for instance, companies must tie bonuses for executives and other insiders to challenging goals in order to avoid bankruptcy's ban on retention bonuses for such high-ranking employees. Patriot's top executives have excluded themselves from receiving bonuses.

According to Judge Surratt-States, Patriot's proposal to pay retention bonuses to more than 100 employees falls in line with bankruptcy law because no executives or other insiders will receive those payments.

"The 2013 [critical employee retention plan] aims to reduce or prevent attrition of essential employees, which is in the best interest of all stakeholders, particularly debtors' estates," the judge concluded.

Other bonuses would be payable to about 225 employees [about 5% of Patriot's workforce] in such departments as operations management, finance, human resources, legal engineering and sales if they hit financial, safety, environmental and other benchmarks.

Judge Surratt-States concluded that this bonus plan "is incentive in nature and design" and will motivate the eligible employees "to do what is necessary to positively influence debtors' overall performance and ultimate reorganization."

Patriot and the miners union are awaiting a ruling from Judge Surratt-States over whether Patriot can impose wage and benefit cuts upon its union workers and retirees, which was subject to a week-long trial that began April 29. Patriot sought bankruptcy protection last summer to address labor obligations it said have grown unsustainable.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Jacqueline Palank at [e-mail].

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