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.
(Reporting by Caroline Humer and Matt Daily; Additional reporting by Jonathan Stempel; Editing by Bob Burgdorfer, Richard Chang and M.D. Golan)