Patriot Coal Revises Proposal to Union, Offers Equity Stake
Stock Chart for Patriot Coal Corp (PCXCQ)
Patriot Coal Corp. (PCX), the bankrupt mining company facing protests as it seeks to cut benefits to union workers, revised its proposal and offered them an equity stake in a reorganized company.
Patriot submitted a new offer to the United Mine Workers of America yesterday, according to court papers filed in the Eastern District of Missouri today. Under the new proposal, the company’s fifth, UMWA would get a 35 percent stake in a reorganized company. Its initial proposal was made in November, and the latest proposal had been to give the UMWA an unsecured claim in the bankruptcy.
Patriot filed for bankruptcy in July, citing falling demand for coal and obligations to pay $1.6 billion in lifetime health care for its 8,100 retirees. Patriot is seeking to trim costs by negotiating with unionized employees, and the St. Louis-based company said it needs to shed at least $150 million more in labor expenses to avoid liquidating in bankruptcy, an outcome it says would be worse for retirees, employees and creditors.
“Unfortunately, Patriot simply does not have the financial resources to support its current benefit levels and will not survive without substantial changes across its cost structure,” the company said in a copy of the proposal, available on a website about the bankruptcy case.
Patriot has proposed to reduce its obligations by creating a voluntary employees’ beneficiary association, or VEBA, trust administered by the UMWA Health and Retirement Funds. The trust would get funding from Patriot in several ways, and the new proposal would include royalty contribution for every ton produced at all existing mining complexes.
“This royalty will raise additional tens of millions for the Trust based on current production estimates,” Patriot said in its proposal.
The new proposal also extends by six months the date on which retiree health care will be moved to the trust, giving retirees and beneficiaries more time to receive their current level of benefits.
Marchers from Indiana, Kentucky, Pennsylvania, Ohio and Virginia rallied in support of “decent wages, health care and working conditions” for miners, according to a statement from the mineworkers’ union about the protests. The UMWA represents about 42 percent of Patriot’s 4,000 employees.
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