Monday, April 29, 2013

Reuters: Bankruptcy News: Bankrupt Patriot Coal asks court to slash union pensions

Reuters: Bankruptcy News
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Bankrupt Patriot Coal asks court to slash union pensions
Apr 29th 2013, 09:59

Mon Apr 29, 2013 5:59am EDT

  By Nick Brown      April 29 (Reuters) - Patriot Coal Corp on Monday  will seek court permission to slash healthcare and pension  benefits for about 13,000 union workers, an issue that has set  off weeks of street protests by affected workers.      The company, which declared bankruptcy last year, said it  wants to save $150 million a year on its labor obligations to  help it regain profitability.      But the United Mine Workers of America, the nation's  biggest coal miners' union, says the cuts are unfair and plans  to protest outside U.S. Bankruptcy Court in St. Louis when the  hearing starts on Monday.      Under bankruptcy law, if companies cannot negotiate  compromises with unions, they can seek court permission to  impose cuts unilaterally. And because employees' claims are  subordinate to secured debt like loans and bonds, worker  benefits are often the first place bankrupt companies look for  cost savings.      This is especially pertinent in the coal industry, where  benefits for generations of retirees are shouldered by an  ever-shrinking workforce.      At the hearing starting Monday before Judge Kathy  Surratt-States, Patriot must show that the cuts are crucial to  its survival and that a good-faith effort was made to achieve  them cooperatively.      Patriot will call witnesses, and then the union will begin  its rebuttal with its own set of witnesses, in a process that  could go all week.      Patriot has said the cuts are not a matter of stinginess,  saying that current benefit obligations could send the company  into liquidation.      Under its latest offer, Patriot would cease pension  contributions and replace current health benefits with a  voluntary employees' beneficiary association. The VEBA would be  funded by $15 million in up-front cash, plus $300 million in  profit-sharing contributions and recoveries from litigation. The  union would also receive a 35 percent equity stake in  post-bankruptcy Patriot, which it could sell to help fund the  VEBA.      Lawyers for the union have acknowledged Patriot's financial  woes, which were brought on by high labor costs combined with  weak coal prices caused in part by a glut of natural gas.      But they say that Patriot's bankruptcy is even harder on  workers and retirees than most, alleging that former parent  Peabody Energy Corp set Patriot up to fail when it spun  it off in 2007.      Peabody, which retained profitable coal mines throughout the  United States and Australia after the spinoff, loaded Patriot up  with pension and benefit liabilities for retirees, many of whom  retired before the spinoff and never worked for Patriot.      The union has filed a separate lawsuit in federal court in  West Virginia, where many of Patriot's operations are centered,  seeking to hold Peabody liable for the benefits workers might  lose through Patriot's insolvency.      Led by Cecil Roberts, the union has staged protests in New  York, Appalachia and St. Louis since Patriot declared bankruptcy  in July.      Patriot also has several thousand non-union employees, with  whom it reached new, consensual labor terms last week.      The bankruptcy is In Re Patriot Coal Corp, U.S. Bankruptcy  Court, Eastern District of Missouri, No. 12-51502.  
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