Patriot Coal: Panel orders Peabody Energy to pay health care benefits

By Caroline Salls

Pittsburgh, Aug. 21 - Patriot Coal Corp. said the U.S. Bankruptcy Appellate Panel for the Eighth Circuit ruled that Peabody Energy Corp. must pay health care benefits it assumed when it was spun off of Patriot.

"The appellate court adopted the position that Patriot has advocated all along - Peabody should not be permitted to use Patriot's bankruptcy to escape its health care obligations to thousands of retirees," Patriot president and chief executive officer Bennett K. Hatfield said in a company news release.

"Patriot remains committed to a fair outcome for our stakeholders, while securing the necessary savings to successfully emerge as a long-term coal producer.

"The decision of the Bankruptcy Appellate Panel is a welcome development that will help Patriot achieve these goals."

According to a separate release from the United Mine Workers of America (UMWA), the appellate panel reversed a decision by bankruptcy court judge Kathy Surratt-States that would have allowed Peabody Energy to stop paying health care benefits for some 3,100 retirees that it had assumed in the spinoff of Patriot Coal.

"Peabody has spent years trying to get rid of its obligations to the thousands of retirees who made it the richest coal company in the world," UMWA International president Cecil E. Roberts said in the union release.

"This decision foils part of that plan."

Peabody statement

Peabody said in a separate news release that the appellate panel ruled that it was obligated to make payments, which have been consistently paid, until a new labor agreement was approved between Patriot and the UMWA.

Peabody said the panel did not rule on how its level of funding would be determined with this new agreement in place.

"We are not concerned with, and express no opinion on, what effect a new labor agreement would have on Peabody Holding's obligation to the assumed retirees," Peabody said.

Now that a new labor agreement has been approved, Peabody said the provisions of the contract with Patriot will apply and any future funding levels are yet to be determined.

Ruling background

In preparation for the spinoff of Patriot, Peabody signed a 2007 agreement with Heritage Coal Co., which was at the time a Peabody subsidiary that Peabody included in the Patriot spinoff. The UMWA said that agreement allowed Peabody to reduce its contribution levels for retiree health care benefits to the same level as Heritage would pay if the levels were modified in the future.

Peabody argued that since Heritage was relieved of all of its obligation to pay for retiree health care by the bankruptcy court, that Peabody should be relieved of its obligation as well.

Surratt-States agreed, and issued a ruling in Peabody's favor on May 29. Patriot and Heritage appealed, and their appeal was supported by the UMWA, the union release said.

Patriot Coal, a St. Louis-based miner, producer and seller of thermal coal, filed for bankruptcy on July 9, 2012 in the U.S. Bankruptcy Court for the Southern District of New York. The case was transferred to the U.S. Bankruptcy Court for the Eastern District of Missouri under Chapter 11 case number 12-51502.

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