Another coal company bites the dust. Again.
Patriot Coal, a miner of coal in several Appalachian states, filed for Chapter 11 bankruptcy on May 12. Patriot said it is “in active negotiations for the sale of substantially all of the Company’s operating assets to a strategic partner.”
The move comes just a year and a half after the company emerged from its previous bankruptcy. At the time, some secured creditors received repayments, but shareholders bore the brunt of the restructuring.
The initial bankruptcy came as Patriot struggled with high costs during a downturn in the coal industry. But after the company came up with a restructuring plan that included a cut in labor costs and the closure of high-cost mines, Patriot thought it would rebound. But it wasn’t to be. As Taylor Kuykendall of SNL Energy notes, “Patriot was plagued by a union strike, infrastructure failures, fatal accidents and persistently weak coal markets that ultimately resulted in the company again filing for Chapter 11 bankruptcy reorganization.”
In one sense, the problems at Patriot Coal were unique to the company. It was originally a spin off from Peabody Energy, which unloaded healthcare liabilities onto the newfound Patriot Coal. That weighed down the company from the start, freeing Peabody from the costs. SNL’s Kuykendall chronicles a series of mishaps in 2014, from lawsuits for environmental damages to a series of safety accidents. Patriot’s CEO called it “one of the worst years in Patriot’s recent history.”
The poor performance affected output. In the first three months of this year, Patriot produced 4.1 million tons of coal, a 15.1 percent decline from the first quarter in 2014.
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