The bankruptcy court for Patriot Coal is due to hold a Nov. 6 hearing on an Oct. 31 motion by the company to approve critical “Engagement Documents” related to the financing it needs to exit bankruptcy.
Patriot noted in the Oct. 31 motion that it has made substantial progress toward emergence from Chapter 11. It has a reorganization plan now before the court. In addition to successful restructuring efforts since the July 2012 bankruptcy petition date, in the past two months, the Patriot companies have secured junior financing through committed rights offerings backstopped by Knighthead Capital Management LLC, solely on behalf of certain funds and accounts it manages and/or advises.
It has also reached global settlements with Peabody Energy (NYSE: BTU), the United Mine Workers of America union and Arch Coal (NYSE: ACI).
The rights offerings will provide the Patriot debtors with $250m of capital, and the settlements with Peabody and the UMWA and Arch will provide them with over $175m in incremental liquidity and value. Moreover, as a result of the rights offerings and the settlement with Peabody, the UMWA Voluntary Employee Benefit Association is expected to receive more than $400m in cash over the next four years, all of which will facilitate the debtors’ satisfaction of certain conditions required by the debtors’ labor agreements with the UMWA, which are expected to provide the labor stability and about $130m per year of savings over the next five years.
“The Debtors will request approval of the Exit Facilities in connection with confirmation of the Plan,” the company noted in the Oct. 31 filing. “Nevertheless, given the significant efforts that will need to be expended prior to confirmation in connection with the arrangement and syndication process, the Engagement Parties have requested that the Debtors seek immediate Court approval of the Debtors’ entry into the Engagement Documents.”
The Engagement Parties include lenders like Barclays Bank PLC.
Patriot Coal is a major producer of coal in western Kentucky, southern West Virginia and northern West Virginia.