Patriot Coal Judge Says She’s Prepared to Approve Loan
Patriot (PCXCQ) Coal Corp.’s bankruptcy judge said she plans to approve an amended version of an $802 million loan agreement that will help the coal producer fund operations while it tries to reorganize.
U.S. Bankruptcy Judge Shelley Chapman in Manhattan today reviewed last-minute changes to the agreement after Marshall Huebner, a lawyer for St. Louis-based Patriot, said talks with lenders led to an interest-rate reduction of 25 basis points, or 0.25 percentage point, for a portion of the loan.
“Lower interest rates, lower fees to extend the loan, and a partial rebate are coming to the debtor,” Huebner, with the law firm Davis Polk & Wardwell LLP, told Chapman.
Barclays Plc (BARC), Citigroup Inc. (C) and Bank of America Corp. all agreed to cut their fees for the loan, Huebner said. Chapman said her approval is conditional upon the lenders’ completing syndication of the loan, which Huebner said is expected within 48 hours.
The loan already had been provisionally approved in July by another judge who was filling in for Chapman. Patriot sought bankruptcy protection July 9 after milder winters, stricter clean-air rules, and a shift to natural gas by power producers sent U.S. coal demand to a 24-year low.
The company intends to “emerge as a viable and strong competitor in the coal industry,” Chief Financial Officer Mark Schroeder has said in court papers. Patriot needs to trim labor costs because of declining prices and demand for coal, along with regulations that will require the company to spend hundreds of millions of dollars on water-treatment facilities and pension benefits in coming years, he said.
Separately, Chapman today approved requests by Patriot to continue to manage its cash, pay employee wages and customer obligations, and take other steps necessary to run its business while in bankruptcy.
Patriot has 12 active mining complexes in Appalachia and the Illinois Basin and controls an estimated 1.9 billion tons of coal reserves, according to court papers. It sells thermal coal to electricity generators and metallurgical coal to steel and coke producers.
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