NEW YORK Two bondholders of bankrupt Patriot Coal Corp. are calling for an independent trustee to oversee the companys asset disposal, arguing that most of the companys 99 units in bankruptcy have no obligation to unions or retirees.
New York-based Aurelius Capital Management LP and Knighthead Capital Management LLC claim that the bankruptcy has been mismanaged because it assumes that all the companys units have obligations to current and retired members of the United Mine Workers of America (UMWA) union. The companies say that only 13 units have such obligations, according to court documents.
"The motion filed by the two investment firms is a misguided, costly and a disruptive distraction at a time when the company is focused on achieving the cost savings it needs to reorganize successfully and protect the interests of all stakeholders," Patriot Coal vice president of investor relations Janine Orf said, adding that the motion includes allegations "that are simply not true" and Patriot "will vigorously oppose this motion."
The St. Louis-based company filed for Chapter 11 bankruptcy protection in July 2012. It is seeking relief from paying an estimated $1.6 billion in retiree health-care benefits to avoid "severe business disruption."
The company has proposed the establishment of a Voluntary Employee Beneficiary Association trust to provide health-care services to retired UMWA members, as well as changes to wages, benefits and work rules for employees who are members.
Aurelius and Knighthead own 3.25-percent notes due in 2013 and a majority of Patriots 8.25-percent notes due in 2018, the funds said.
A version of this article was first published by AMM sister publication Steel First.