Patriot Coal Corporation, a producer and marketer of coal products in the eastern United States, announced that Patriot and substantially all of its wholly owned subsidiaries have filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Southern District of New York. The company’s Chapter 11 petition listed $3.57 billion in assets and $3.07 billion in debts.
Ted Stenger, a managing director at AlixPartners, the parent company of AP Services, has been named chief restructuring officer of Patriot, reporting to the chairman and CEO.
Patriot has taken this action in order to undertake a comprehensive financial restructuring. Patriot expects its mining operations and customer shipments to continue in the ordinary course throughout the reorganization process.
Patriot believes that the protection afforded by a court-supervised reorganization process, including the ability to access new financing, will provide the company with additional time and flexibility to address its financial challenges and position Patriot for long-term viability and success.
In conjunction with its reorganization, Patriot has obtained a commitment for $802 million in debtor-in-possession (DIP) financing from Citigroup Global Markets, Barclays Bank, and Merrill Lynch, Pierce, Fenner & Smith as joint lead arrangers. Upon approval by the bankruptcy court, the new financing and cash generated from Patriot’s ongoing operations will be used to support the business during the reorganization process.
“The coal industry is undergoing a major transformation and Patriot’s existing capital structure prevents it from making the necessary adjustments to achieve long-term success,” said Patriot chairman and CEO Irl F. Engelhardt. “Our objective is to use the reorganization process to address important issues in an orderly way and make the Company stronger and more competitive.”
Patriot’s business outlook has been impacted by a number of challenges that are affecting the coal industry, including reductions in U.S. thermal coal demand due to competition from low priced natural gas, challenging environmental regulations affecting the cost of producing and using coal, and weaker international and domestic economies. The company has reacted to the lower domestic demand by reducing production and increasing sales to the export markets. During recent months, the cancellation of customer contracts, lower thermal coal prices and rising expenditures for environmental and other liabilities have severely constrained the Company’s liquidity and financial flexibility.
Patriot has filed various motions with the court in support of its reorganization, including requesting authorization to continue paying employee wages and providing health care and other benefits. Patriot has also asked for authority to continue existing customer programs and intends to pay suppliers in full under normal terms for goods and services provided after the filing date of July 9, 2012.
Davis Polk & Wardwell is serving as legal advisor, Blackstone Advisory Partners is serving as financial advisor, and AP Services is providing interim management services to Patriot in connection with the reorganization.
Patriot Coal Corporation is a producer and marketer of coal in the eastern United States, with 12 active mining complexes in Appalachia and the Illinois Basin.
Previously on abfjournal.com:
Patriot Coal Receives Financing Commitment From Citigroup, Others, Thursday, May 24, 2012