Patriot Coal contract rejection approved; proposal talks to continue

By Caroline Salls

Pittsburgh, May 29 - Patriot Coal Corp. received approval from the U.S. Bankruptcy Court for the Western District of Missouri to make changes to its collective bargaining agreements with the United Mine Workers of America (UMWA), including changes to benefits for some UMWA-represented retirees, according to a company news release.

The ruling filed by judge Kathy A. Surratt-States sets June 1 as the date for implementation of the contract changes. The retiree benefit changes can take place on July 1, unless conditions are met that move the implementation of those changes to Jan. 1, 2014.

"This ruling represents a major step forward for Patriot, allowing our company to achieve savings that are critical to our reorganization and the preservation of more than 4,000 jobs," president and chief executive officer Bennett K. Hatfield said in the release.

"The savings contemplated by this ruling, together with other cost reductions implemented across our company, will put Patriot on course to becoming a viable business.

"For the coming days, we plan to continue operating in the normal course under our current UMWA contracts. Patriot management will continue diligent negotiations with the UMWA leadership to address their concerns about our court-approved proposals.

"While the court has given Patriot the authority to impose these critical changes to the collective bargaining agreements, and our financial needs mandate implementation by July 1, we continue to believe that a consensual resolution is the best possible outcome for all parties."

According to the release, the ruling would permit Patriot to adjust wages, benefits and work rules for union employees to a level consistent with the regional labor market.

As previously reported, Patriot offered contract modifications that would adjust UMWA wage and benefit packages to non-union levels, specifically seeking savings of $75 million per year.

Contract proposal

The proposed changes to wages, pension plan contributions, paid time off and health-care benefits would include the following:

• Elimination or reduction to specified wage increases scheduled to take effect in 2013 and future years and reduction of wage rates for some union pay grades so that they conform with rates paid at mines operated by Patriot's non-union subsidiaries;

• Modification of provisions concerning overtime, double time, triple time and premium pay;

• Elimination of per-hour shift differential payments;

• Patriot would withdraw from its 1974 pension plan and would stop making contributions to that pension plan. The company said this would not affect pensioners' receipt of payments from this multi-employer fund;

• Elimination of the 20-year service payment included in some of the collective bargaining agreements;

• Elimination of retiree bonus contributions required under some of the agreements;

• Elimination of 2007 and 2012 new inexperienced miner payments;

• Patriot would make contributions equal to 6% of gross hourly wages to a 401(k) or similar plan. The company said this will require increased expenditures by Patriot but will be offset by the pension-related savings;

• A reduction in the number of holidays available to unionized employees to eight per year from 11;

• A reduction in the number of regular vacation days, floating vacation days and graduated vacation days, as well as the number of available sick days per year;

• Patriot would offer a less costly 90/10 healthcare plan, the same plan provided to salaried and non-union employees;

• Patriot would reduce the availability of extended health care for UMWA-represented employees who are laid off, extending health care for 60 calendar days after a layoff, rather than for the balance of the layoff month plus up to 12 months of continuing coverage; and

• Elimination of contributions to a 1993 benefit trust, which provides health care and other non-pension benefits to certain coal industry retirees.

Retiree changes

Patriot also received court approval to modify payments for UMWA-related retiree healthcare liabilities.

The company said it intends to transition some UMWA-related healthcare obligations to a Voluntary Employee Beneficiary Association (VEBA) trust.

Funding for the VEBA trust would consist of a 35% ownership stake in the reorganized company that could be monetized for substantial value, profit sharing contributions up to a maximum of $300 million, a royalty contribution for every ton produced at all existing mining complexes and a portion of future recoveries from specified litigation.

Patriot said its obligations to Coal Industry Retiree Health Benefit Act of 1992 (Coal Act) and Black Lung beneficiaries would not be affected by these modifications.

Union plans appeal

In a separate news release, the UMWA international president Cecil E. Roberts said the ruling is "wrong, unfair and fails to fully recognize the coming wave of human suffering that will be experienced by thousands of people throughout the coalfields."

"The UMWA presented a very clear picture in court of what Patriot actually needed to come out of bankruptcy," Roberts said in the union release.

"Patriot can survive as a viable and profitable company well into the future without inflicting the level of pain on active and retired miners and their families it seeks.

"Patriot is using a temporary liquidity problem to achieve permanent changes that will significantly reduce the living standards of thousands of active and retired miners and their families.

"We are disappointed that the bankruptcy court failed to see that, and we intend to appeal the ruling to the federal district court."

Peabody Energy response

Peabody Energy said in a separate news release that the court fully agreed with its contractual position in Wednesday's order.

Peabody said it will continue to meet its obligations, as affirmed by the ruling.

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 Eastern District of Missouri under Chapter 11 case number 12-51502.

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