More than 750 members and supporters of the United Mine Workers of America (UMWA) rallied Jan. 29 in front of the U.S. Courthouse in St. Louis, then marched to the headquarters of Peabody Energy (NYSE: BTU), in protest of a “long-term scheme” to strip thousands of active and retired coal miners, their dependents and widows of benefits, said the UMWA in a Jan. 29 statement.
The march and rally coincided with the first hearing in St. Louis of Patriot Coal’s Chapter 11 bankruptcy reorganization case. That hearing was at the U. S. Bankruptcy Court for the Eastern District of Missouri. Patriot last July filed its Chapter 11 case at the U.S. Bankruptcy Court for the Southern District of New York, but that court agreed to transfer it to the St. Louis court to be nearer UMWA retirees and dependents affected by the bankruptcy actions of the heavily-unionized Patriot.
Patriot was spun off from Peabody in 2007, and has already identified retiree health care obligations as “unsustainable” in its future plans, the UMWA noted. Ninety percent of the retirees Patriot is responsible for never worked for Patriot, but worked for Peabody and Arch Coal (NYSE: ACI) instead, the union said.
Arch Coal, notably, is also based in St. Louis. Arch last decade put certain unionized subsidiaries in southern West Virginia into Magnum Coal, then Patriot later acquired Magnum and the associated UMWA obligations.
Both Peabody and Arch have previously said that Patriot was an independent company that got itself into bankruptcty, so they were not a factor in its financial problems and are not liable for its UMWA obligations.
“Thousands of retirees across the coalfields of Illinois, Indiana, Ohio, Kentucky and West Virginia are wondering this morning if they will soon have to choose between paying the mortgage or getting needed medications,” UMWA International President Cecil Roberts said in the Jan. 29 statement. “Peabody dumped its health care obligations to these people without a second thought, and now they’re crowing about it.
Roberts promised more rallies and marches in the future. “We are here to let the bankruptcy court know that we care about what happen,” he said. “And we’re letting Patriot, Peabody and Arch know that we are not going to rest until our active and retired members don’t have to lay sleepless at night wondering if they can survive the next week, the next month, the next year. We will be back, again and again, to make sure that message gets heard.”
Peabody has in the past established separation from Patriot
Peabody had to go to Patriot Coal’s bankruptcy court on Nov. 30, 2012, to defend that fact that, according to Peabody, it spun off a “solvent” Patriot Coal in an IPO and that there was no fraud involved with that action. Peabody on Nov. 30 was responding to a motion of certain interested Patriot shareholders for an order directing the appointment of an Official Committee of Equity Security Holders. While Peabody took no position on the motion itself, it rejected as meritless the shareholders’ unsupported assertions that:
- Peabody “saddled” the Patriot companies with more than $1bn in liabilities in connection with the spin-off of Patriot in 2007;
- there may be “significant fraudulent transfer and other claims” against Peabody arising from the spin-off; and
- that a six-year “look-back” period applies to any fraudulent transfer actions related to the spin-off.
“The Shareholders have suggested that there may be claims against Peabody without any basis other than the mere occurrence of the Spin-Off,” Peabody wrote in that response. “Peabody files this Response now to avoid the risk that its silence in the face of such sketchy claims would result in their gaining some unfounded credibility.”
The 2007 spin-off of Patriot was designed to allow Peabody and Patriot to pursue distinct growth plans and business focus, Peabody said. Peabody was, and remains, focused on the transformation of its earnings base as it expands its global operating platform, increases its presence in the Western United States and Illinois Basin and accelerates its worldwide trading activities. Patriot, on the other hand, with assets and operations in West Virginia and western Kentucky, is a leading Eastern U.S. coal producer, it added.
Arch said about the Patriot case in its November 2012 Form 10-Q quarterly report: “Should Patriot not emerge from bankruptcy, or is incapable of paying retiree medical benefits pursuant to Section 9711 of the Coal Industry Retiree Health Benefit Act of 1992 (‘Coal Act’) to a certain subset of retirees, the Company could become responsible for their retiree medical obligations. The retirees were employees of certain subsidiaries sold to Magnum and their predecessor entities who retired prior to October 1, 1994. The Company does not have the information necessary to determine the potential amount of such obligations, but does not expect that the annual benefit payments would have a material impact on the Company’s liquidity.”