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Patriot Coal Secures Financial Sponsor And Reaches Key Funding Settlements; Plans Emergence From Bankruptcy By Year-End

ST. LOUIS, Oct. 9, 2013 /PRNewswire/ -- Patriot Coal Corporation (OTC: PCXCQ) today announced that it has achieved several major milestones toward successful emergence from bankruptcy, which the Company detailed in a Disclosure Statement and an amended Plan of Reorganization (the Plan) filed today with the U.S. Bankruptcy Court for the Eastern District of Missouri. 

As described in the documents, the Company reached an agreement with Knighthead Capital Management, LLC (Knighthead) to financially sponsor Patriot's emergence from bankruptcy.  In addition, after months of litigation and negotiation with Peabody Energy Corporation (Peabody) and Arch Coal, Inc. (Arch), Patriot has entered into settlements with both companies.  These agreements will provide the Company with a significant liquidity infusion and position it to obtain the exit financing necessary to emerge from Chapter 11 as a strong, well-capitalized business.  Additionally, the agreements will result in funding for the United Mine Workers of America (UMWA)-sponsored Voluntary Employee Beneficiary Association (VEBA) trust of more than $400 million to provide healthcare coverage for UMWA retirees.

"Reaching these agreements represents a pivotal juncture in Patriot's restructuring.  With Knighthead's financial backing and the funding provided by Peabody and Arch, Patriot is now well-positioned to secure exit financing," said Patriot President and Chief Executive Officer Bennett K. Hatfield.  "This sets a clear path forward for Patriot to emerge from Chapter 11 by year-end as a strong competitor in the coal industry."

Under the terms of the Plan, the Company will receive an infusion of $250 million in new capital through a rights offering backstopped by Knighthead.  Pursuant to agreements with the UMWA, the Company will make $75 million in direct cash payments to the VEBA, plus future payments from royalty and profit sharing commitments.

The Company and the UMWA also reached a global settlement with Peabody that will provide the VEBA and the Company with significant additional funding.  Under the terms of the settlement, Peabody will provide $310 million, payable over four years through 2017, to fund the VEBA and settle all Patriot and UMWA claims involving the Patriot bankruptcy.  Additionally, Peabody will provide liquidity totaling approximately $140 million to the Company in the form of letters of credit.  The final agreement is expected to be signed in the coming weeks and presented to the Court for approval at the November 6 hearing. 

Under the terms of the Company's settlement with Arch, the Company will receive $5 million in cash and a release of a $16 million letter of credit posted in Arch's name.  In addition, certain expiring coal leases in Patriot's Logan County mining complex will be extended and Patriot will receive $16 million in cash for the sale of certain non-strategic metallurgical coal reserves.  As with the Peabody settlement, the final Arch agreement is expected to be signed in the coming weeks and presented to the Court for approval at the November 6 hearing. 

As a result of the transaction with Knighthead and the Company's settlement with Peabody, the VEBA is expected to receive more than $400 million in cash over the next four years, and will have continuing income from royalty payments and profit sharing opportunities.  These agreements resolve all matters with the UMWA. 

"I am pleased that we have been able to reach agreements that provide the UMWA with hundreds of millions of dollars in retiree healthcare funding," added Hatfield.  "The best result for the UMWA and its members is for Patriot to emerge from bankruptcy as a healthy company that will continue to provide jobs and benefits, and we are now on track to achieve that goal."     

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