Patriot Coal Corp. (PCXCQ), the bankrupt mining company, said sharp declines in demand for coal could cause it to default on loans this year if it can’t change its current loan agreement.
Over the past year, falling prices for metallurgical coal have cut into the company’s earnings forecasts, Patriot said in papers filed in Manhattan bankruptcy court July 30. The St. Louis-based company filed for bankruptcy in July 2012, citing a drop in demand and $1.6 billion in lifetime health-care obligations for its retirees.
Patriot is seeking court approval of a proposed amendment to a $375 million loan, which lenders have already consented to. The company said it believes “there is a substantial likelihood that, if the amendment is not approved, they may not comply” with current thresholds for earnings beginning in the third quarter.
Under the previous loan agreement, Patriot was required to have a minimum of consolidated earnings of $205 million by Dec. 31. The proposed amendment would drop the threshold to $101.3 million.
Patriot, which has $802 million in operating loans, is still negotiating with representatives of its unionized workers.
On May 29, Patriot won permission to cut pensions and benefits for 13,000 unionized workers and retirees. The United Mine Workers of America has objected to its plan to reorganize under Chapter 11.
The union said the company hasn’t been quick enough to take action against its former parent, Peabody Energy Corp. (BTU), which profited by spinning off Patriot in 2007, giving it 16 percent of its assets and 40 percent of its retiree liability.