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Peabody Owes Retiree Health Benefits, Appeals Court Rules

Aug. 21 (Bloomberg) -- Peabody Energy Corp.’s health-care obligations to certain retirees remain in effect despite the actions of its former subsidiary Patriot Coal Corp. in bankruptcy, an appeals court ruled.

U.S. Bankruptcy Judge Kathy Surratt-States in St. Louis in May ruled in Peabody’s favor, denying Patriot’s request to hold Peabody to its retiree obligations even as it scaled back its own in bankruptcy. Peabody’s duty could change because of Patriot’s actions in bankruptcy, the judge said.

Three judges of the U.S. Court of Appeals’ bankruptcy appellate panel in St. Louis today reversed Surratt-States’s ruling. Their decision covers benefits for about 3,100 retirees of Heritage Coal Co., which with Patriot was once part of Peabody Holding Co.

When Peabody spun the companies off in 2007, it said it would be primarily responsible for the retiree benefits.

“Akin to a once amicable divorce gone awry, the parties here disagree about the nature of their dissolution agreement after one of them has experienced a change in circumstances,” the judges wrote.

Patriot said it was pleased with the decision.

“Peabody should not be permitted to use Patriot’s bankruptcy to escape its health-care obligations to thousands of retirees,” Patriot Chief Executive Officer Bennett K. Hatfield said in a statement.

Meg Gallagher, a Peabody spokeswoman, didn’t immediately return a call for comment on the ruling. Both companies are based in St. Louis.

Union Contract

Patriot yesterday won bankruptcy court approval of a hard-fought agreement with the mining company’s union, paving the way toward an exit from bankruptcy this year.

Patriot will enter a five-year contract with the United Mine Workers of America that calls for wage changes, including raises of 50 cents an hour every year from 2015 to 2018, and health-care benefits similar to those of nonunion employees. Patriot’s costs will be reduced by $130 million as a result of the changes.

The case In re Patriot Coal Corp., 12-bk-51502, U.S. Bankruptcy Court, Eastern District of Missouri (St. Louis).

To contact the reporters on this story: Tiffany Kary in U.S. Bankruptcy Court in New York at tkary@bloomberg.net; Andrew Harris in federal court in Chicago at aharris16@bloomberg.net.

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net.

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