Knighthead to Sponsor Patriot Coal’s Bankruptcy Emergence
Patriot Coal announced in a disclosure statement and amended Plan of Reorganization filed with the U.S. Bankruptcy Court for the Eastern District of Missouri that it reached an agreement with Knighthead Capital Management to financially sponsor Patriot’s emergence from bankruptcy.
In addition, after months of litigation and negotiation with Peabody Energy and Arch Coal, Patriot entered into settlements with both companies to provide the company with a liquidity infusion and position it to obtain the exit financing necessary to emerge from Chapter 11 as a strong, well-capitalized business.
Under the terms of the Plan, the company will receive an infusion of $250 million in new capital through a rights offering backstopped by Knighthead. Additionally, the agreements will result in funding for the United Mine Workers of America (UMWA)-sponsored Voluntary Employee Beneficiary Association (VEBA) trust of more than $400 million to provide healthcare coverage for UMWA retirees. Pursuant to agreements with the UMWA, the company will make $75 million in direct cash payments to the VEBA, plus future payments from royalty and profit sharing commitments.
“Reaching these agreements represents a pivotal juncture in Patriot’s restructuring. With Knighthead’s financial backing and the funding provided by Peabody and Arch, Patriot is now well-positioned to secure exit financing,” said Patriot President and Chief Executive Officer Bennett K. Hatfield. “This sets a clear path forward for Patriot to emerge from Chapter 11 by year-end as a strong competitor in the coal industry.”
Patriot Coal Corporation is a producer and marketer of coal in the eastern United States, with 11 active mining complexes in Appalachia and the Illinois Basin.
Previously on abfjournal: Patriot Coal Extends DIP Financing, Sets Disclosure Statement Dates, September 13, 2013