Coal news and updates

Patriot Coal in Deal to Sell to Blackhawk Mining

Patriot Coal Corp. has lined up a deal to sell most of its operating mines to Blackhawk Mining LLC, in a debt-fueled transaction that leaves retirees and union contracts behind.

In bankruptcy for the second time in recent years, Patriot has been struggling against declining demand for coal. It is racing to get a deal in place before it runs out of money and is forced to shut down. But it is facing resistance from some creditors to the sale.

Patriot returned to bankruptcy in May, less than 18 months after emerging from chapter 11. The West Virginia mining company said it had a sale in the works that would help it tackle its debt load, which includes $791 million in loans and bond debt.

Blackhawk won’t put up cash for Patriot’s mines. Instead, the transaction will swap out Patriot Coal’s funded debt for new debt securities totaling about $643 million, as well as 30% of the new company to be created out of the bankruptcy buyout.

The new Blackhawk won’t shoulder Patriot’s employee obligations or its contracts with the United Mine Workers of America, said Patriot lawyer Stephen Hessler, speaking at a hearing Wednesday in the U.S. Bankruptcy Court in Richmond, Va.

A multi-employer pension to which Patriot contributes is already deeply underfunded and limited in what it can do to restore its financial health, given woes at its cash-strapped signatories—many of which are highly stressed coal companies.

“We feel strongly that the proposed transaction with Blackhawk is in the best interest of Patriot, and its employees and stakeholders,” said Patriot President and Chief Executive Bob Bennett.

Creditors criticized Blackhawk’s demand for high-speed treatment of its takeover offer. The deal is to be built into a chapter 11 plan for Patriot to be confirmed in September.

“We think there’s a rush to deliver assets to the proposed stalking horse bidder,” said Lorenzo Marinuzzi, lawyer for the creditors’ committee, speaking at Wednesday’s court hearing.

Blackhawk has agreed to serve as “stalking horse,” or lead bidder, at an August auction, if Patriot gets competing offers for the mines. Blackhawk couldn’t immediately be reached for comment.

source: http://www.wsj.com