Peabody official denies company role in Patriot bankruptcy
CHARLESTON, W.Va. -- A Peabody Energy spokesman denied Wednesday that Patriot Coal's July 2012 bankruptcy had anything to do with Patriot assuming the health-care and pension financial obligations from Peabody's union mines.
Patriot Coal was founded in 2007 when Peabody sold its union mines to the newly created company. In 2008, Patriot bought Magnum Coal, a company that had taken over union mines once operated by Arch Coal.
"The UMWA is fully aware that Patriot was highly successful following its launch more than five years ago with significant assets, low debt levels and a market value that more than quadrupled in less than a year," Vic Svec, Peabody's senior vice president of investor relations and corporate communications, said in a statement.
In addition to the UMW, Patriot Coal officials have also said that health-care costs from retired miners who spent most or all of their careers working for Peabody Energy or Arch Coal were a major factor that forced Patriot into declaring bankruptcy.
When Patriot was created, Svec said, "Analysts cited a bright future for the company's based on its 'strong balance sheet,' 'strong management team' and 'excellent valuation prospects.'"
He cited a recent research study by Todd Milbourn, a professor at Washington University in St. Louis (where Peabody has its headquarters), stating that Patriot's stock performance since the 2007 spin-off was "wholly inconsistent with an entity that was expected to fail. In fact, its first year of performance was spectacular."
Svec pointed to a series of "unforeseen events" that affected all coal companies in the years shortly after Patriot was founded.
Those events, he said, included "an unprecedented global financial crisis," development of low-cost shale natural gas that reduced coal demand and sales, tougher environmental and mine safety regulations that increased Patriot's operating costs, and a significant drop in the price of metallurgical coal.
"The stock price performance of Patriot Coal in the years since the spin-off in 2007 is wholly inconsistent with an entity that was expected to fail. In fact, its first year of performance was spectacular," Milbourn wrote.
Reach Paul J. Nyden at firstname.lastname@example.org or 304-348-5164.
CORRECTION: An earlier version of this story incorrectly attributed comments to a Peabody spokesman, rather than Svec.