U.S. Bankruptcy judge approves Patriot Coal’s exit plan

A U.S. Bankruptcy judge has approved the terms of Patriot Coal’s reorganization which will allow the company to exit bankruptcy.

The company’s disclosure statement was approved Wednesday by Judge Kathy Surratt-States. The statement gives creditors the details of the exit plan so they can vote on it.

The judge also approved an agreement with Peabody Energy, which is part of the exit plan, that will compensate retired miners for health-care benefits.

The Peabody agreement will fund $310 million for Patriot retirees. The company agreed to make payments through 2017 and fund a group that will determine future benefits for the retirees.

St. Louis based Patriot Coal filed for Chapter 11 bankruptcy in July 2012, citing the company was overburdened with liabilities including pension and health-care obligations for union retirees, which it inherited from Peabody Energy and Arch Coal.

The United Mine Workers of America Union claimed Arch and Peabody intentionally set up Patriot to fail in order to drain off pension and health care obligations with them.

Since the bankruptcy, the UMWA had been on a campaign against Patriot Coal to ensure that retirees got their pension and health care benefits. In August, that campaign came to an end with both sides reaching an agreement regarding those benefits. However, the union vowed to continue its fight against Arch and Peabody.

Patriot’s reorganization plan is also based on that August agreement with the UMWA.

According to court papers, the plan also includes funding with a $250 million agreement with Knighthead Capital Management LLC to backstop two rights offerings in a reorganized Patriot.

Patriot believes this exit plan will allow the company to once again be successful when it emerges out of bankruptcy.