NEW YORK (AP) â¿¿ The risk to railroad CSX Corp. from the bankruptcy filing of a major coal producer is minimal, analysts said Tuesday.
Patriot Coal Corp., which is based in St. Louis, filed for Chapter 11 bankruptcy protection on Monday as it deals with reduced demand due to a shaky global economy and cheap alternative energy sources like natural gas. CSX was listed on the filing as Patriot's sixth-largest creditor.
In a note to clients, Jefferies analyst Peter Nesvold notes that CSX has already accounted for slowing coal volumes this year and will likely see little impact from the filing. Also, there's a chance that CSX will be deemed a "critical vendor" in the bankruptcy process, which will give it strong leverage to recover owed funds during the court reorganization.
Jacksonville, Fla.-based CSX has also dealt with this issue before, Nesvold noted. Other major customers, including auto makers and steel companies, have filed and emerged from bankruptcy over the last several years, giving the analyst confidence that CSX can successfully navigate its way through again.Citi analyst Christian Wetherbee also believes that CSX will get the key critical vendor status, minimizing the damage done to its business. And since Patriot will continue to operate through bankruptcy, he noted, CSX will continue to move coal from mines to power plants and ships overseas. CSX shares rose 8 cents to $22.48 in premarket trading Tuesday.