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NEW YORK (
Patriot Coal's(PCXCQ) bankruptcy filing in July took the share price down 72% over a weekend, which didn't please shareholders.
The United Mine Workers union wasn't happy either. St. Louis-based Patriot was created in 2007 when St. Louis-based
Peabody (BTU - Get Report) spun off assets, primarily coal mines in West Virginia and Kentucky. Subsequently, Patriot acquired additional mines, as well as pension and health care obligations, from St. Louis-based
(ACI). Patriot holds pension and health care obligations for about 10,600 pensioners and 20,000 dependents, of whom only about 10% every worked for Patriot, according to the union.
In bankruptcy, the ability to make pension and health care claims would likely be severely diminished. On Thursday, union members and leaders will meet with Patriot executives at the U.S. Attorney's office at 80 Broad Street in New York. "Our people will be able to ask the company how we got into this mess," said UMW president Cecil Roberts, in an interview.
"Both Peabody and Arch took these liabilities off their books and passed them on to somebody else," Roberts said. "Peabody, when it did this spinoff, had no consultation with the union. They spun off their West Virginia and Kentucky operations, and their pension and health care liabilities, and they issued stock in Patriot to their shareholders."
The union objects not only to the spinoff, but also to the bankruptcy case venue.
"There are no coal mines in New York, no coal miners in New York and no coal mine retirees in New York," Roberts said. "But there are thousands of people in West Virginia who are interested in this, because it could have an adverse effect on their lives.
" Patriot shopped around and determined that the Southern District of New York is the best court for them to file bankruptcy, even though they never had an affiliate in New York," he said. "So they set up two dummy companies right before they filed.
"If you're going to do something to us, we expect you to look us in the face when you do it," he said.
In its filing, Patriot argued that the Southern District of New York is "the optimal venue for the Debtors' chapter 11 cases and in the best interests of the debtors, their creditors and other stakeholders and these estates." The legal and financial advisers and the arrangers of the debtor-in-possession financing are in New York, it said. "Had we filed in one of the other jurisdictions that were also available to us, most of our domestic and foreign creditors would have been inconvenienced and the costs and inefficiency of administration of the estates would have materially increased," the filing said.