Walter Energy Wins Court Approval to Scrap Union Obligations

  • Ruling will help lender group's bid to acquire coal company
  • Union health, pension funds say move may hurt 89,000 ex-miners

Walter Energy Inc. can scrap its union obligations to facilitate a sale, a move that will affect multi-employer funds covering health and retirement benefits for thousands of former miners but may allow the company to keep operating.

After two days of hearings, U.S. Bankruptcy Judge Tamara O. Mitchell in Birmingham, Alabama, found that the company’s assets can be sold without the liabilities associated with union benefits. She rejected objections by funds that are responsible for paying retiree and health benefits to former miners from Walter and other companies.

“This court finds that maintaining the coal operations as a going concern, keeping the mines open, offering future job opportunities and continuing to be a productive member of the business community all require this court to overrule” the objections, Mitchell said in an opinion filed Monday. She said that she assumed an offer to buy the company wouldn’t go forward without such a ruling.

Walter Energy filed for bankruptcy in July and is set to put its assets up for auction Jan. 5. As an opening bid, lenders who banded together as Coal Acquisition LLC have offered to exchange $1.25 billion of debt and pay $5.4 million in cash.

Coal, Gas

The proposed sale is for the Alabama coal operations, which includes mines, methane gas operations and a coke plant.

The agreement hinged on a resolution with unions or court permission to reject the collective-bargaining agreements. Walter pays about $25 million to $35 million a year for retiree benefits, according to court papers. The labor agreement with the steelworkers, which covered about 120 employees, expired on Dec. 6.

The funds said the move would spark a $1 billion liability and further erode their already precarious financial position. The 1974 pension plan said it provides benefits to 89,000 retired or disabled coal workers or surviving spouses who are threatened by the move.

Sharon Levine, an attorney for the United Mine Workers of America, said issues involving worker safety were too important to bargain away and that the miners were willing to take the chance that the buyer would walk away from the deal. The UMWA labor agreement covers about 700 active employees, according to court papers.

Judge’s Statement

“While the union appears willing to risk the sale by insisting the court deny the motion, the court is not in position to do so,” Mitchell said.

Walter also received approval to pay $2 million in retention bonuses to key employees. The judge found that “without a significant payment” the employees would be tempted to leave. The payments to the 26 individuals are half to all of their base salaries.

“The law is stacked against workers in American bankruptcy courts,” UMWA President Cecil E. Roberts said in a statement after the ruling. “A lifetime of hard work and dedication means nothing to the courts. The life or death decisions vulnerable senior citizens will now be forced to make mean nothing to the courts.”

The company on Dec. 15 got approval of a deal it struck with its nonunion retirees, which extends benefits until Jan. 31. In exchange, the retiree group agreed to withdraw objections to the sale of the company.

The case is In re Walter Energy Inc., 15-02741, U.S. Bankruptcy Court, Northern District of Alabama (Birmingham).

Related ticker: WLTGQ US (Walter Energy Inc.)

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