Patriot Coal (OTC Pink: PATCA) said Oct. 8 that the U.S. Bankruptcy Court for the Eastern District of Virginia has said it will enter an order confirming Patriot’s Plan of Reorganization.
In doing so, the court approved the transactions to sell a substantial majority of Patriot’s operating assets to Blackhawk Mining LLC and to sell substantially all of its remaining assets and liabilities, including the Federal Nol 2 longwall mine in northern West Virginia, to an affiliate of Virginia Conservation Legacy Fund Inc. (VCLF).
Bob Bennett, President and Chief Executive Officer of Patriot, said: “We are pleased to have received Court approval for the transactions with Blackhawk and VCLF, which we believe represent the best possible outcome for Patriot and its stakeholders. These transactions preserve jobs, help ensure environmental obligations are handled in a responsible manner and maximize value for creditors. I want to thank our employees for their hard work and dedication throughout the sale process. I also want to thank our restructuring professionals and parties in interest, who worked in a dedicated and cooperative manner to help us achieve this successful outcome. We look forward to completing the transactions in the coming weeks and concluding the chapter 11 process.”
The transactions are expected to close within a few weeks, and are subject to certain other customary closing conditions. Until the transactions close, Patriot’s mining operations will continue to operate independently of Blackhawk and VCLF. Patriot said it continues to expect that a majority of Patriot employees at its mining operations will be offered employment once the transactions are completed.
Centerview Partners LLC is serving as financial advisor and investment banker for Patriot, and Kirkland & Ellis LLP is serving as legal advisor to Patriot. Alvarez & Marsal is serving as Chief Restructuring Officer for Patriot.
West Virginia-based Patriot Coal, founded last decade in an IPO based on unionized Peabody Energy (NYSE: BTU) operations, is a producer and marketer of coal in the eastern United States, with eight active mining complexes in Northern and Central Appalachia. In the last couple of years it has shut down its operations in western Kentucky. Patriot mines, processes and sells bituminous metallurgical, thermal, and stoker coal to domestic and international electricity generators, metallurgical coal customers and industrial users, and controls approximately 1.4 billion tons of proven and probable coal reserves.
This is not the only major U.S. coal producer in bankruptcy at a time of unprecedented turmoil in the coal industry. James River Coal, a producer in Central Appalachia and the Illinois Basin, was dismembered in bankruptcy a few months ago. Alpha Natural Resources and Walter Energy more recently entered Chapter 11 protection and are looking to reorganize.
The Patriot court on Oct. 9 issued the written confirmation order, which dealt with a number of claims brought by parties like coal landholding companies. Said the order about claims by an affiliate of Rhino Resource Partners about a met coal joint venture in southern West Virginia: “Notwithstanding anything contained herein or in the Plan, all of Rhino Eastern LLC’s and Rhino Energy WV, LLC’s (together ‘Rhino’) rights, interests, claims, and defences—including, but not limited to, the issues raised in the Objection by Rhino Eastern, LLC and Rhino Energy WV, LLC to Confirmation of Third Amended Plan of Reorganization—with respect to the assumption, assumption and assignment, or rejection of its agreements with the Debtors are reserved and preserved in their entirety until a further order providing otherwise. Notwithstanding anything contained herein or in the Plan, all of the Debtors’ rights, interests, claims, and defenses with respect to the assumption, assumption and assignment, or rejection of its agreements with Rhino are reserved and preserved in their entirety until a further order providing otherwise. To the extent that the Debtors and Blackhawk or VCLF, as applicable, and Rhino are unable to reach resolution with respect to these matters, the Court will consider these matters at the omnibus hearing scheduled for October 22, 2015, at 10:00 a.m. (prevailing Eastern Time).”
The order said about matters related to Kentucky Utilities and shut-down mining operations in western Kentucky: “For the avoidance of doubt, notwithstanding anything in this Confirmation Order, the Plan, the Disclosure Statement, the Blackhawk Transaction Documents, including the Blackhawk APA, the VCLF Transaction Documents, including the VCLF APA, or the order authorizing the Debtors to close the Prairie Transactions, utility deposits held at any time by Kentucky Utilities Company (‘KU’) for Debtors Highland Mining Company, LLC and Heritage Coal Company, LLC are not included in the assets to be transferred pursuant to the Blackhawk Transaction or the VCLF Transaction. Those deposits, and the respective interests of the Debtors and KU in and rights concerning them, remain unaffected by this Confirmation Order, the Blackhawk Transaction Documents, and the VCLF Transaction.”