It is difficult to imagine any more blatant corporate attack on labor and retired workers than the situation surrounding the bankruptcy of Patriot Coal. Two parent companies, Peabody Energy and Arch Coal spun off Patriot Coal and Magnum Coal in 2007 and 2005 respectfully, specifically for one ultimate purpose – to avoid paying the health care and pension benefits to its retired employees. Both spinoff entities were saddled with a large share of their parent corporation’s liabilities, while receiving little of their assets. In effect, Patriot Coal and Magnum Coal – which merged in 2008 – were designed to go bankrupt.
From: Patriot Coal Wins Leave to Cut Retiree Pensions, Benefits
Patriot Coal Corp. (PCXCQ), the bankrupt mining company, won court approval of a proposal to reduce pensions and benefits to 13,000 unionized workers and retirees.
U.S. Bankruptcy Judge Kathy Surratt-States in St. Louis today approved the company’s request after a week-long hearing earlier this month in which protesters gathered outside the courthouse. The union said in a statement after her ruling that it intends to appeal in a federal court. Patriot said it won’t impose the cuts without first trying to negotiate a resolution.
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The UMWA has contended that Patriot hasn’t been quick enough to take action against Peabody, which profited by spinning off Patriot in 2007, giving it 16 percent of its assets and 40 percent of its retiree liability.
Patriot acquired more retiree liabilities when it bought Magnum Coal in 2008. Magnum had been cut from a similar cloth, as Arch Coal created it in 2005, designing it to fail by giving it 12 percent of its assets and 97 percent of its retiree health-care liabilities, the UMWA has said in court papers.
Patriot has more than three times as many retirees as miners, and 90 percent of its retirees never worked for Patriot.
Patriot has said in court papers that it is considering whether the 2007 transaction that created it “constituted an actual or constructive fraudulent transfer” that could recoup money to be shared among all its creditors. It says the spinoff rid Peabody of $600 million in health-care and environmental liabilities, and on April 23, won court permission to deepen its probe of whether a lawsuit is possible.
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