Reuters: Bankruptcy News: UPDATE 1-Peabody on hook for some Patriot Coal retiree benefits -US court

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UPDATE 1-Peabody on hook for some Patriot Coal retiree benefits -US court Aug 21st 2013, 20:29 Wed Aug 21, 2013 4:29pm EDT By Nick Brown Aug 21 (Reuters) - A federal appeals court on Wednesday said Peabody Energy Co must remain on the hook for retiree benefit costs for 3,100 retired workers at a unit of Patriot Coal Corp, its former subsidiary now in bankruptcy. The decision, handed down by the Eighth Circuit Bankruptcy Appellate Panel, reverses an earlier ruling that abrogated Peabody's agreement to fund those costs. The reversal is a small victory for workers in their fight against Peabody, which they allege knowingly bankrupted Patriot by spinning it off in 2007 with heavy debts and few strong assets. Overall, though, coal miners are still expected to sustain major cuts to benefits as a result of Patriot's collapse. "This is a bright ray of good news in what has been a long, dreary period for the retirees," Cecil Roberts, president of the United Mine Workers of America, said in a statement on Wednesday. Peabody created Patriot through a 2007 spin-off, agreeing to continue funding benefits for a group of 3,100 retirees at Patriot's Heritage unit. A spokesman for Peabody did not immediately respond to a request for a comment. In a statement, Patriot Chief Executive Bennett Hatfield said he was "pleased" with the ruling. "Peabody should not be permitted to use Patriot's bankruptcy to escape its healthcare obligations to thousands of retirees," Hatfield said. Patriot declared bankruptcy in 2012, saying it needed $150 million in annual labor cost savings to regain profitability. In May, it got permission from bankruptcy Judge Kathy Surratt-States to abandon its current labor and retiree obligations with an eye toward implementing more affordable ones. In granting that request, Judge Surratt-States also abrogated Peabody's commitment to fund the Heritage group benefits. She said that while the funding for the benefits was coming from Peabody, the responsibility to pay remained with Heritage, and that Patriot's request to abandon that responsibility could not be parsed out to include some retiree groups and not others. The appellate panel disagreed, saying Heritage and Patriot expressly exempted the Heritage group from their efforts to abrogate benefits. "Not only did Heritage's motion not request approval to modify the assumed retirees' benefits, it specifically requested that the court not grant it such approval," the panel said. The decision keeps the financial responsibility for the benefits on Peabody's shoulders, though it remained uncertain what those benefits will look like. While Patriot has reached a new labor deal with the United Mine Workers, questions remain as to exactly how it could affect the Heritage group retirees, said Phil Smith, a spokesman for the union. The new deal will give the United Mine Workers an equity stake in post-bankruptcy Patriot, which it could sell to help fund healthcare benefits. The United Mine Workers, which represent 1,700 current Patriot workers and 13,000 retirees and their relatives, have fought tooth and nail to salvage benefits during Patriot's collapse. In a separate lawsuit, it has said Peabody should remain on the hook for all labor and benefit costs that Patriot cannot pay. Link this Share this Digg this Email Reprints

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