Patriot Said to Get Funding Ahead of Possible Bankruptcy
Patriot Coal Corp. (PCX), the U.S. fuel producer that has lost more than $7 billion in value, has lined up financing ahead of a bankruptcy filing that may come as soon as today, said two people with knowledge of the matter.
The so-called debtor-in-possession financing is being provided by Citigroup Inc., Barclays Plc and Bank of America Corp., said the people, who asked not to be identified as the process is private.
Patriot is the biggest casualty so far of the slump in the U.S. coal industry, which has seen tens of millions of tons of production cutbacks this year. Patriot, which owns mines in Kentucky and West Virginia, this year idled some of its mines, reduced a 2012 forecast for sales of steelmaking coal, and warned of a potential default by a key customer.
Coal miners are struggling because of a combination of a warm winter, utilities switching some generating capacity to cheaper natural gas and regulatory moves to curb emissions from coal-burning power plants. U.S. coal use in the first quarter was the lowest for that period since 1988, according to the Energy Information Administration.
The miner’s shares fell 72 percent to 61 cents by 4:15 p.m. New York time. Spun off five years ago by Peabody Energy Corp. (BTU), Patriot has tumbled 93 percent this year. The company’s market value peaked at $7.5 billion in 2008.
Patriot’s $250 million of 8.25 percent notes due in April 2018 dropped 7.9 cents to 34.1 cents on the dollar as of 4:57 p.m., according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. The bonds are yielding 36 percent, Trace data show.
Working on Loans
Patriot, Citigroup, Barclays and Bank of America didn’t immediately return phone calls seeking comment.
The St. Louis-based company said in May it hired Blackstone Group LP as it worked with lenders to arrange $625 million of loans and credit facilities to refinance other debt. A commitment letter from Citigroup, Barclays and Natixis expired July 6.
Chairman Irl Engelhardt took over as Patriot’s chief executive officer on May 29 after Richard M. Whiting resigned.
Patriot last month sued Keystone Industries LLC over claims it broke a purchase contract for “hundreds of thousands of tons” of coal.
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