|Patriot Coal Files for Bankruptcy Protection |
By MICHAEL J. DE LA MERCED
New York Times
July 9, 2012, 6:54 pm
Patriot Coal filed for bankruptcy protection on Monday, an action prompted by the company’s struggles with low coal prices.
In a document filed in federal bankruptcy court in Manhattan, the company said that it had $3.6 billion in assets and $3.1 billion in debts.
Coal companies have been hit hard by a decline in demand, arising in part from competition from cheap natural gas and a weaker economy. They have also blamed tougher environmental rules for rising costs.
All of these factors eroded Patriot’s financial health, the company argued. It has lost money every year since 2010, reporting a $198.5 million loss in the year that ended March 31.
“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,” Irl F. Engelhardt, Patriot’s chairman and chief executive, said in a statement. “Our objective is to use the reorganization process to address important issues in an orderly way and make the company stronger and more competitive.”
To stay afloat during the Chapter 11 process, Patriot has secured $802 million in bankruptcy financing from a group led by Citigroup, Barclays and Bank of America Merrill Lynch.
In May, Patriot disclosed that it had hired the Blackstone Group and the law firm Davis Polk & Wardwell to provide advice on refinancing its credit facilities. It also announced having secured $625 million in new loans from Citi, Barclays and Natixis.
The company said last month that its chief executive at the time, Richard M. Whiting, had resigned, and that his duties would be assumed by Mr. Engelhardt, then only its chairman.
In a court filing, Patriot listed the Wilmington Trust Company and U.S. Bank, both serving as trustees for bondholders, as its biggest unsecured creditors.
Besides Blackstone and Davis Polk, Patriot is being advised by the consulting firm AlixPartners. The coal company has appointed Ted Stenger, an AlixPartners executive, as its chief restructuring officer, reporting to Mr. Engelhardt.