Patriot Coal Corporation (fka PCXCQ)

[marayatano]

Patriot Coal, Hedge Funds Negotiating Rights Offering

June 19, 2013, 10:04 a.m. ET

By Jacqueline Palank


Patriot Coal Corp. (PCXCQ) says a restructuring plan that would pump "hundreds of millions of dollars" into the coal-mining company is in the works, thanks to the help of two key creditors.

Bondholders Aurelius Capital Management LP and Knighthead Capital Management LLC, both hedge funds that specialize in distressed debt, are currently discussing backstopping a rights offering of new equity in the restructured Patriot Coal, the mining company said Tuesday in court papers. Such a deal would see the funds commit to buying up any of the new shares in the restructured Patriot that may go unsold in the rights offering.

"The debtors anticipate that the potential backstopped rights offering, if consummated, will involve Knighthead and Aurelius providing and/or backstopping hundreds of millions of dollars of financing for the debtors' estates," Patriot said.

To keep negotiations moving forward, Patriot is asking the bankruptcy court to let it cover the fees and expenses that the funds incur, including the legal fees of the funds' lawyers at Kirkland & Ellis LLP.

"Payment of the potential backstop fees and expenses is critical to facilitating Knighthead's and Aurelius's continued work towards negotiating, documenting, and executing a fully backstopped rights offering--which investment, if consummated, would serve as the linchpin of a plan of reorganization and the successful conclusion of these Chapter 11 cases," Patriot said.

The company added that while negotiations with the funds continue, it remains "fully open" to competing financing offers.

The U.S. Bankruptcy Court in St. Louis will consider Patriot's request at a July 23 hearing.

Patriot sought Chapter 11 protection last July and has spent a significant portion of the past year working to address labor obligations it says are unsustainable. The company won court approval to reduce those obligations, first for its nonunion workers and most recently for its union workers.

While Patriot continues to wrangle with its union over concessions the group says force too great a sacrifice upon its miners, the company does have court approval to impose those concessions and has said it needs to do so by July 1.

Based in St. Louis, Patriot mines for coal in West Virginia and Kentucky. It employs about 4,000 people.

(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].

http://online.wsj.com/article/BT-CO-20130619-706247.html


So, we see they are definitely going to raise NEW money by offering NEW equity.


I see Debtors are going to cover all fees, expenses, legal fees incurred by the hedge funds (if approved by the court).