Patriot Coal reorganization plan to be confirmed, asset sale approved

New York, Oct. 8 – Patriot Coal Corp. said that the U.S. Bankruptcy Court for the Eastern District of Michigan said that it will enter an order confirming the company’s fourth amended plan of reorganization.

In approving the plan, the court also approved transactions to sell “a substantial majority” of Patriot’s operating assets to Blackhawk Mining, LLC and the remaining assets and liabilities to an affiliate of Virginia Conservation Legacy Fund, Inc., according to a news release from the company.

Closing is expect “in a few weeks,” Patriot said.

Until then, the company’s operation will continue. Patriot expects a majority of its employees will be offered jobs once the transactions close.

“We are pleased to have received court approval for the transactions with Blackhawk and VCLF, which we believe represent the best possible outcome for Patriot and its stakeholders,” said Bob Bennett, president and chief executive officer of Patriot, in the news release.

“These transactions preserve jobs, help ensure environmental obligations are handled in a responsible manner and maximize value for creditors.”

On Wednesday the company revised its proposal for exiting Chapter 11, filing the fourth amended plan.

The latest version altered the proposed treatment for holders of ABL facility claims and reflects the withdrawal of a motion for approval of a settlement with Alcoa Inc.

The confirmation hearing was continued for a second day in a row.

Under the settlement filed on Sept. 21, Alcoa was to pay Patriot Coal debtor Heritage Coal Co. $22 million in connection with the termination of a Squaw Creek Mine joint venture agreement.

Plan terms

As previously reported, treatment of creditors under the fourth amended plan will include the following:

• Administrative claims, other priority claims will be paid in full in cash;

• Debtor-in-possession lenders will receive a distribution, which includes a share of $114.8 million in either tranche B-1 term loans or combined company first-lien single-tranche term loans, at Blackhawk’s option;

• Holders of adequate protection claims that have not already been paid in full will receive cash equal to the unpaid portion of the claim. This class is new to the fourth amended plan;

• Holders of secured tax claims will be paid in cash, either in full on the plan effective date or in installments;

• Holders of other secured claims will either be paid in full in cash or receive the collateral securing the claim;

• If a payout event occurs, holders of pre-bankruptcy ABL facility claims will be paid in full in cash from payout event cash. If the payout event does not occur, these creditors will be assumed and converted into loans drawn under a combined new company ABL facility in connection with debt related to drawn letters of credit and other ABL obligations.

Undrawn letters of credit will be replaced with letters of credit issued under the combined company new ABL facility, provided that each undrawn letter of credit must be returned to the issuer or otherwise cancelled to be deemed replaced. The letter of credit will be deemed issued under the combined company facility in an equal stated face amount.

Under the previous version of the plan, these creditors were to receive a class four distribution if the payout event occurred. In addition, the fourth amended plan removes a provision calling for possible repayment in cash from first-lien term loan proceeds if no payout event occurs and removes a provision providing credit support for undrawn letters of credit;

• Holders of pre-bankruptcy term loan facility claims will receive a class six distribution if the payout occurs and a term loan facility distribution if it does not. The class six distribution includes a share of a cash pool and other distribution, and the term loan distribution includes a share of a general unsecured claims distribution pool and pre-bankruptcy term loan rights;

• Holders of pre-bankruptcy notes claims will receive a class seven distribution if the payout occurs and a pre-bankruptcy notes distribution if it does not. The class seven distribution includes a share of a cash pool and other distribution, and the notes distribution includes a share of a general unsecured claims distribution pool;

• Holders of general unsecured claims will receive a class eight distribution if the payout occurs and a general unsecured claims distribution if it does not. The class eight distribution includes a share of a cash pool and other specified distribution, and the general unsecured claims distribution includes an equity grant or liquidating trust units; and

• Holders of equity interests, intercompany claims and intercompany interests will receive no distribution.

Patriot Coal, a Richmond, Va.-based miner, producer and seller of thermal coal, filed for bankruptcy on May 12. The Chapter 11 case number is 15-32450.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.