Patriot Coal Files for Bankruptcy Amid Commodity Price Slump

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Patriot Coal Corp. joined at least a half-dozen other mining companies in bankruptcy court, filing for protection for the second time in less than three years amid a slump in the price of the commodity.

The company listed assets and liabilities of more than $1 billion each in court filings Tuesday in Richmond, Virginia. It said it’s engaged in negotiations for the sale of substantially all of its operating assets to a strategic partner.

A group of secured creditors have committed to providing $100 million in financing during the bankruptcy, Patriot Coal said in a statement. Shipments and mining will continue as usual. The company emerged from bankruptcy in December 2013, slashing its debt to $545 million from $3.07 billion by selling assets and closing some mines.

Coal companies are fighting through the sector’s worst downturn in decades. The thermal coal used by power plants is facing pressure from low-cost natural gas and tougher emissions standards. The metallurgical coal used in steelmaking is at a seven-year low amid slowing Chinese demand.

“The space has been broadsided here for a number of years, especially in the east,” said Lucas Pipes, a New York-based analyst for Brean Capital LLC. “A company like Patriot really gets the full shock of the structural changes” as well as the weaker export opportunities, he said.

Among the coal-related energy producers to file for protection since 2012 are Longview Power LLC, Dynegy Inc. and Edison Mission Energy. They and other filings -- including those of James River Coal Co., America West Resources Inc., Trinity Coal Corp., Americas Energy Co., Clearwater Resources LP and Consolidated Energy -- point to the deteriorating market for U.S. coal.

Distressed Companies

James River sought protection in April 2014 for a second time. The Richmond, Virginia-based company listed assets of about $1.07 billion and debt of about $818.7 million as of Sept. 30, 2014. The company’s prior bankruptcy ended with a confirmed reorganization plan in April 2004.

“Capital is starting to dry up for the space,” Pipes said in an interview. “Three years ago, when Patriot went bankrupt, there seemed to be quite a bit of interest in terms of the restructuring opportunity. We’ll have to see how it plays out this year.”

Other coal companies are in distress. Walter Energy Inc. said this month there’s “substantial doubt” about its ability to continue as a going concern and raised the possibility of a bankruptcy filing amid low prices and a high debt.

Alpha Natural Resources Inc., the country’s second-biggest coal producer by sales, was warned by the New York Stock Exchange in April that it could be delisted if its shares continue to trade below $1.

Shares in Arch Coal Inc. are down 78 percent and Peabody Energy Corp. -- the country’s largest coal producer -- are down 76 percent over the past year. Both companies have traded in recent months at all-time lows.

The case is In re Patriot Coal Corp., 15-32450, U.S. Bankruptcy Court, Eastern District of Virginia (Richmond).

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