Here’s the big — but not unexpected — announcement today from again-bankrupt Patriot Coal:
Patriot Coal Corporation a producer and marketer of coal in the eastern United States, today announced that it has filed with the Bankruptcy Court a letter of intent for a proposed sale of a substantial majority of its operating assets to Blackhawk Mining, LLC (“Blackhawk”), as well as a motion outlining bidding procedures. The contemplated transaction would be consummated pursuant to a chapter 11 plan and is subject to documentation of a definitive asset purchase agreement, bankruptcy court approval of the sale, confirmation of a chapter 11 plan, and other customary conditions. Patriot’s mining operations and customer shipments will continue in the ordinary course during the sale process.
Under the terms of the letter of intent, Blackhawk would issue to Patriot’s secured lenders new debt securities totaling approximately $643 million plus Class B Units providing them an ownership stake in Blackhawk. In addition, Blackhawk would assume or replace surety bonds supporting reclamation and related liabilities associated with the purchased assets.
Bob Bennett, President and Chief Executive Officer of Patriot, said:
We feel strongly that the proposed transaction with Blackhawk is in the best interest of Patriot, and its employees and stakeholders. Blackhawk shares our dedication to operational and environmental excellence, and this transaction creates a viable path forward in this challenging market environment, enabling our mining operations to continue serving customers and preserving jobs in the communities in which they operate. As always, we remain committed to operating safely and serving our customers throughout this sale process.
There’s been previous media coverage hinting that Blackhawk was the likely buyer here, and also some coverage that provided background on the closely-held private company (see here and here). (Personally, I found it interesting when the U.S. Mine Safety and Health Administration’s lead investigator at the Upper Big Branch Mine Disaster, Norman Page, showed up at a state mine safety board meeting, having left MSHA and announcing his new job was as a safety officer for Blackhawk).
But to understand part of what’s going on here with Patriot, you have to read beyond the press release to the company’s court filing, which explains that properties excluded from the deal with Blackhawk include Patriot’s Federal No. 2 Mine in Fairview, W.Va., as well as “Corridor G, Jupiter, all other Logan County assets” — in other words, Patriot properties with long-standing United Mine Workers contracts or — in some cases — with really big and long-term environmental liabilities (see here and here).
All that Patriot is saying at this point about its plans for those properties is this:
Certain Patriot assets not included in the proposed transaction with Blackhawk will be subject to a separate sale process outlined in the bidding procedures motion filed today.
UPDATED: Here’s what UMW President Cecil Roberts had to say about this today in a major speech in Morgantown:
We are dealing with the second Patriot Coal bankruptcy, which will be much different from the first. While retirees’ health care will not be in immediate jeopardy due to our success in 2013, our active members’ jobs will be. Our members who work at Federal 2, Hobet and other union Patriot operations are not wanted by the Wall Street financiers who seek to buy Patriot’s assets.
Within the next month, they will go before a bankruptcy judge in Richmond, Virginia and ask that our contract be thrown out at union operations. They want to break the company up into pieces, shut the union operations down and then sell them off to someone who will try to open them up nonunion. We’ve seen this script before. If we follow the path laid out for us by the Wall Street sharks who are now in charge at Patriot, there is no future for our members at those mines.
But I believe there can be a different outcome, which means that once again we must make our own path at Patriot. It’s going to require the support of every member working at a Patriot mine and the support of every other UMWA member as well to make the kind of strong, united stand we need to take to send a message that can be heard all the way in New York.
We did that the last time we took Patriot on, it’s going to take that kind of effort once again.