Reuters: Bankruptcy News: UPDATE 1-Patriot, coal miners square off over benefits

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UPDATE 1-Patriot, coal miners square off over benefits Apr 29th 2013, 19:25 Mon Apr 29, 2013 3:25pm EDT By Tim Bross and Nick Brown ST. LOUIS/NEW YORK, April 29 (Reuters) - Arguments got under way on Monday over the fate of healthcare and pension benefits for unionized Patriot Coal Corp workers, as thousands of miners rallied against massive cuts proposed by the company. The morning began with Patriot's contention that Peabody Energy Corp, its former parent, is still on the hook for the liabilities that Patriot assumed when it was spun off from Peabody in 2007. In an afternoon session, Patriot was expected to begin arguments supporting its proposal to cease pension contributions and convert healthcare funding to a voluntary employees' beneficiary association, or VEBA. Patriot filed for bankruptcy in July 2012, and has said it must cut $150 million in annual employee obligations to regain profitability. It argued on Monday that Peabody, which is still profitable, should foot the bill for the roughly 13,000 current and retired union workers and their dependents. Judge Kathy Surratt-States, of U.S. bankruptcy court in St. Louis, said she would not rule on that question today. "What Peabody is doing is wrong, just plan wrong," Jonathan Martin, an attorney for Patriot, told the court. Peabody in a statement said it lived up to its obligations when it spun off Patriot. "This is a matter between the union and Patriot Coal," the company said On Monday afternoon, arguments were expected to turn to the substance of Patriot's proposed cuts, and whether they are necessary for the company's survival. Patriot has offered to cease pension contributions and convert healthcare to a VEBA funded by $15 million in up-front cash and $300 million in profit-sharing contributions. The union would receive a 35 percent equity stake in post-bankruptcy Patriot, which it could sell to help fund the VEBA. Under bankruptcy law, if companies cannot negotiate compromises with unions, they can seek court permission to impose cuts unilaterally. But the companies must show that the cuts are crucial to survival and that a good-faith effort has been made to achieve them cooperatively. The United Mine Workers of America have called the cuts "nowhere near" fair. The union has also argued that Peabody should shoulder the cost if Patriot cannot, filing a separate lawsuit on that issue in a West Virginia federal court. The union on Monday rallied in St. Louis, home to Patriot, attracting about 6,000 people, most of them mine workers, union spokesman Phil Smith told Reuters. That's more than the 4,000 or so protesters the union was expecting, Smith said. Inside the courtroom, about half of the 60 seats were occupied by miners and their families, many wearing t-Shirts saying "Peabody promised." Because employees' claims in bankruptcy 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. Patriot is expected to call witnesses, with the union then beginning a rebuttal with its own set of witnesses. The process could go all week. 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 when it spun off Patriot, many of whom retired before the spinoff and never worked for Patriot. In its statement, Peabody said Patriot was "highly successful" following the spinoff and had "significant assets" that helped its market value "quadruple in less than a year." 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. Link this Share this Digg this Email Reprints

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