UPDATE 5-Patriot Coal files for bankruptcy protection

Tue Jul 10, 2012 5:17am IST

Stocks

   

* Chapter 11 filing comes as demand for natural gas rises

* Patriot lines up $802 mln bankruptcy financing

* Shares fall 72 percent to 61 cents

* Alpha Natural, Arch, Peabody shares also fall

By Matt Daily and Caroline Humer

July 9 (Reuters) - Patriot Coal Corp filed for bankruptcy on Monday, the first U.S. coal producer to seek court protection since prices began to plummet as electricity producers turned to cheaper natural gas.

The company and nearly 100 affiliates were part of the Chapter 11 filing in the U.S. bankruptcy court in Manhattan. Patriot said it had $3.57 billion of assets and $3.07 billion of debts, and has arranged for $802 million of financing to help it continue mining and shipments during the reorganization.

Coal producers' shares have plummeted as natural gas prices tumbled to the lowest in a decade this year, and the U.S. Environmental Protection Agency proposed new rules that would make it nearly impossible to build coal-fired power plants.

Patriot said these factors, weaker economies worldwide and the cancellation of customer contracts led to reduced liquidity and financial flexibility.

While still the largest single fuel for electricity, coal's share fell to 36 percent in this year's first quarter from 45 percent a year earlier, according to the Energy Information Administration.

"The coal industry is undergoing a major transformation and Patriot's existing capital structure prevents it from making the necessary adjustments to achieve long-term success," Chairman and Chief Executive Irl Engelhardt said in a statement.

Patriot had also been hurt by its admission in May that a key customer might default on a sales contract, forcing the St. Louis-based company to seek a new loan package.

SHARES PLUNGE, DRAG DOWN RIVALS

Shares in Patriot slid 72.1 percent on Monday, closing down $1.58 at 61 cents, after Bloomberg News reported that a bankruptcy filing was imminent.

Patriot shares had traded as high as $24.99 last July. Its 8.25 percent notes maturing in 2018 closed down 8.5 cents on the dollar at 34.5 cents, yielding 35.7 percent, according to the bond price reporting service Trace.

The selloff drove down shares of rivals Alpha Natural Resources Inc, Arch Coal Inc and Peabody Energy Corp, which fell a respective 7.5 percent and 6.7 percent and 6.2 percent.

Spun off from Peabody in 2007, Patriot has 12 active mining complexes in Appalachia and the Illinois Basin, and controls about 1.9 billion tons of proven and probable coal reserves.

Patriot said Citigroup Inc, Barclays Plc and Bank of America Corp's Merrill Lynch unit will provide bankruptcy filing.

In May, Patriot said it had hired Blackstone Group LP to work on a new financing package. It also installed Engelhardt as chief executive, replacing Richard Whiting. Patriot hired Davis Polk & Wardwell as its law firm.

The case is In re: Patriot Coal Corp, U.S. Bankruptcy Court, Southern District of New York, No. 12-12900.

Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Barack Obama in India

Reuters Showcase

Coal Mining

Coal Mining

India to open coal to commercial mining firms soon, minister says  Full Article 

RBI Loan Rules

RBI Loan Rules

RBI relaxes overseas loan recast rules   Full Article 

E-commerce Firms

E-commerce Firms

Amazon, e-commerce rivals fuel commercial property boom in India  Full Article 

Growth Forecasts

Growth Forecasts

Indian economic growth forecasts pegged back, despite rate cuts: Reuters Poll.  Full Article 

Uber is Back

Uber is Back

Uber back in Delhi; govt says must await approval.  Full Article 

Markets at Record

Markets at Record

Sensex rises to record after ECB stimulus programme.  Full Article 

Pharma Sector

Pharma Sector

Ipca Labs hit by FDA ban on plant for standard violations.  Full Article | Related Story 

Forex Reserves

Forex Reserves

India FX reserves at record high as RBI fortifies defences  Full Article 

QE for Euro Zone

QE for Euro Zone

ECB launches 1 trillion euro rescue plan to revive euro economy.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage