The bankruptcy court for Patriot Coal on Sept. 11 approved an Aug. 28 Patriot request to assume several contracts with Peabody Energy (NYSE: BTU), which spun Patriot off in an IPO in 2007.
Patriot and subsidiaries sought an order approving an agreement between certain of the debtors and Peabody COALTRADE LLC, Peabody Terminals LLC, James River Coal Terminal LLC and Elkland Holdings LLC where Patriot will assume:
- a Throughput and Storage Agreement, dated October 2007, by and among Peabody Terminals, James River Coal Terminal and Patriot Coal Sales LLC, as amended in 2010 and 2011:
- a Coal Terminaling Agreement dated May 2011 by and between Peabody Terminals and James River Coal Terminal and Patriot Coal Sales;
- the Second Amended and Restated Transloading Agreement dated December 2011 by and among Patriot’s Eastern Associated Coal LLC unit and Elkland Holdings;
- the Amended and Restated Road Use Agreement dated January 2011 by and between Eastern Associated Coal and Elkland Holdings;
- the Amended and Restated Road Use Agreement dated January 2011 by and between Pine Ridge Coal Co. LLC and Elkland Holdings;
- the Coal Washing Agreement dated May 2011 by and between Eastern Associated Coal and Elkland Holdings; and
- the Transaction Confirmation dated November 2011 between Patriot Coal Sales and Peabody COALTRADE.
Also, certain coal supply agreements between Patriot Coal Sales and Peabody COALTRADE will be replaced and superseded by an agreement dated Aug. 24 between Patriot Coal Sales and Peabody COALTRADE.
“The Agreement, which incorporates the Debtors’ assumption of the Assumed Agreements and the execution of the Coal Supply Agreement, which replaces and supersedes the Prior Agreements, is in the best interests of the Debtors and their estates,” said the Patriot motion. “Patriot and Peabody have numerous business arrangements, including those memorialized in the Assumed Agreements, that are mutually beneficial, and assumption of the Assumed Agreements will ensure the continuation of benefits to Patriot. Replacement of the Prior Agreements with the Coal Supply Agreement will result in an improvement to Patriot of the negotiated terms on which it will sell certain coal to Peabody. Further, the Agreement contains an express reservation of rights and preservation of claims between the Parties. Consequently, the Debtors seek entry of the Order authorizing the Debtors to assume the Assumed Agreements and enter into the Coal Supply Agreement pursuant to sections 363(b) and 365(a) of the Bankruptcy Code.”
Patriot and subsidiaries sought Chapter 11 protection on July 9 at the U.S. Bankruptcy Court for the Southern District of New York. In the first six months of 2012, Patriot sold 13 million tons of coal, of which 78% was sold to domestic and global electricity generators and industrial customers and 22% was sold to domestic and global steel and coke producers. Patriot’s mines are in western Kentucky and in West Virginia.