Patriot Coal, salaried retirees reach deal
CHARLESTON, W.Va. -- Patriot Coal has reached an agreement in U.S. Bankruptcy Court in St. Louis over benefits for its retired salaried employees.
"Through extensive negotiations, which ended only about 24 hours before the case was due to be litigated, we reached an agreement allowing a significant portion of the benefits to be kept for retirees," Jon Cohen, a lawyer with Stahl Cowen Crowley in Chicago who represents the salaried retirees, said Thursday.
The company's much larger fight, over employee and retiree benefits for union workers, remains.
Nearly 1,000 salaried retirees and their families, Cohen said, represent between 3 percent and 4 percent of all Patriot retirees.
"The salaried benefits at issue constitute only a fraction of the long-term retiree obligations that the company was carrying on its books," Cohen said.
Under the settlement for salaried retirees, money from Patriot Coal will be used to create some kind of HRA (Healthcare Reimbursement Agreement) for those retirees. It also will continue to provide life insurance benefits, which will be capped at $30,000.
"On the whole, the retirees, in the context of a Chapter 11 bankruptcy, fared fairly well, compared to many other Chapter 11 bankruptcies where retirees' benefits are on the chopping block," Cohen said.
The bankruptcy court approved the settlement with salaried retirees Tuesday.
Janine Orf, Patriot Coal's vice president for investor relations, said Thursday, "All of our employees and retirees are being asked to make sacrifices to help Patriot emerge from bankruptcy.
"These sacrifices include reductions in compensation and benefits for salaried, union and nonunion employees. The modifications approved in this order are expected to save Patriot $26.5 million in total cash costs over the next five years."
According to the deal, Patriot will pay $4 million into a plan administered by a trustee to pay benefits for its nonunion salaried retirees.
Brian Resnick, a Patriot lawyer, told the bankruptcy court the company's payment will include $250,000 in cash and stock in the company reorganized under the court's supervision, according to court filings.
"They lost a significant portion of their benefits," Cohen said, "but it was better than Delphi and other bankruptcies, where salaried retirees ended up with next to nothing." (Delphi, which filed for Chapter 11, is a major supplier of electronics for the automotive industry).
Jim Gillenwater, who lives in South Charleston, worked as a salaried supervisor at Peabody Coal for 35 years, then another four years as a private contractor. Earlier this month, Gillenwater expressed fears that he and his wife, Phyllis, would lose all the health-care and pension benefits Peabody promised them over the years
"I don't have enough information about the settlement yet. We don't have any details about what happened in court yesterday," Gillenwater said Thursday. They gave us some money, but we've got to figure out how to distribute it."
Patriot Coal, which filed for Chapter 11 bankruptcy on July 9, 2012, also is negotiating with the United Mine Workers of America about reducing benefits the company provides to union retirees.
When Patriot filed for bankruptcy, it cited reasons that included declining market demands for coal and $1.6 billion in estimated lifetime health-care benefits owed to 8,100 union and salaried retirees.
Patriot Coal was founded Oct. 31, 2007, when Peabody Coal sold all its union operations east of the Mississippi to the newly formed company. In 2008, Patriot bought Magnum Coal, a company that had taken over union mines once operated by Arch Coal.
"As a spinoff of Peabody, Patriot has a lot of strange connections," Cohen said. "Some liabilities were passed through and others were retained. For its salaried employees, Peabody still maintains pension obligations. Their pension obligations were not at issue [in bankruptcy court]. Health insurance and life insurance were.
"Oftentimes, salaried retirees don't fare as well in bankruptcies as union employees because they don't have the same bargaining power. Unions typically have more negotiating power in bankruptcies. It is nice when a salaried group can bargain a reasonable compromise."
Reach Paul J. Nyden at email@example.com or 304-348-5164.