UMWA misleads when it tries to rewrite history of Patriot Coal
More than five years ago, Patriot Coal was spun off from Peabody Energy to create value and allow both companies to grow and succeed with distinct focus areas. Following its spin-off, Patriot created enormous value that could have been turned into enduring success for its shareholders, customers, employees and retirees alike.
That is the simple history of Patriot Coal as part of its launch as an independent company. And it’s a history that the United Mine Workers of America both understood and agreed to at the time.
Fast forward to 2013, and the UMWA has been doing what the UMWA does: staging a corporate campaign to try to force an outcome it can’t obtain through the legal process. This means trying to rewrite the history of a company that filed for bankruptcy during the worst coal market downturn in memory. It means misleading its members and needlessly scaring many of them. And it means attacking Peabody while ignoring the facts. The latest example: UMWA President Cecil Roberts’ recent op-ed, which is riddled with misinformation and falsehoods.
Consider these facts:
First, Patriot Coal was designed to succeed — and succeed it did. Patriot was highly successful following its launch with significant assets, low debt levels and a market value that more than quadrupled in less than a year. Analysts cited a bright future, “strong balance sheet,” “strong management team” and “excellent valuation prospects.” Even today, a new report by Washington University finance professor Todd Milbourn concludes that Patriot had every chance of success, and that its performance during the first year was “truly spectacular.”
Second, no one at the time of Patriot’s spin-off could have predicted Patriot’s bankruptcy. Since then, the global financial crisis struck. Low-cost shale gas reduced coal use. Patriot’s major product, metallurgical coal, experienced a price plunge. Patriot more than doubled its liabilities with the Magnum Coal acquisition. And that acquisition cost the company hundreds of millions of dollars in added compliance costs due to new U.S. EPA actions.
Third, this issue doesn’t involve other elements such as black lung benefits, which are protected by statute.
Fourth, the retirees that are the focus of the UMWA’s campaign all worked for companies that are now part of Patriot. Peabody Energy was never a signatory to relevant collective bargaining agreements regarding these signatories. And, as the bankruptcy court recently held, health care obligations for these retirees belong to Patriot subsidiaries.
At the time of Patriot’s launch, a Peabody subsidiary agreed to fund Patriot’s health care obligations for a specific group of retirees. This contract provides that, should Patriot’s benefit obligations change, the funding obligations of Peabody’s subsidiary would change as well. The bankruptcy court recently authorized changes in Patriot’s funding obligations for retiree health care, and also upheld the plain language of our contract with Patriot.
The UMWA does not like this outcome, of course. But Roberts’ suggestion that key provisions of our contract with Patriot were unknown to him — or were not known to the public markets — is disingenuous and irresponsible, and exemplifies Roberts’ willingness to mislead and obscure his own role in Patriot’s launch. Roberts conveniently fails to mention that he signed off on Peabody’s payment method for Patriot’s retiree benefits, and that our contract with Patriot was publicly filed by both parties with the Securities and Exchange Commission.
Roberts also doesn’t like the ruling that Patriot can fund retiree health care benefits at a level that will keep Patriot solvent and save thousands of jobs. The judge pointed out that union demands were simply not sustainable, with “likely some responsibility to be absorbed (by the union) to demanding benefits that the employer cannot realistically fund in perpetuity.”
So Roberts takes his discredited arguments to the streets and cynically attempts to point fingers at Peabody, ignoring facts, history and his own involvement. Perhaps more of his resources in recent years should have been spent fighting for the future of the industry that employs his members as the administration he endorsed in 2008 waged a well-publicized war on coal.
Patriot’s bankruptcy was an event that no one desired. But to state, as Roberts does, that it was intended is just false. And to do so ignores the logic of the spin-off, Patriot’s early performance, choices it made as an independent company, and an onslaught of unprecedented external factors.
Rather than rewriting history, Roberts’ time would be better spent constructively working with Patriot to make a plan for the future that best serves UMWA members.
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