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Peabody, union settle dispute over retiree health funding

Peabody, union settle dispute over retiree health funding


ST. LOUIS • The United Mine Workers of America has reached a $400 million agreement with Peabody Energy Corp. and Patriot Coal Corp. that settles a bitter dispute over health care funding for retirees in the wake of Patriot’s bankruptcy.

The complex agreement, filed with the bankruptcy court in St. Louis, calls for Patriot and Peabody, its former corporate parent, to fund a health care trust for four years beginning in 2014. The trust will pay for health care benefits for thousands of retired miners.

In return for the cash contributions, the mine workers union agreed to give up “virtually all” of its 35 percent equity stake in the reorganized Patriot Coal — a key part of an earlier retiree health care funding agreement between the union and the company.

Funding for retiree health benefits has loomed large in Patriot’s bankruptcy case since the Creve Coeur-based coal producer filed for Chapter 11 bankruptcy protection last year.

A messy four-way fight evolved over the past year involving three St. Louis area-based coal producers and the nation’s largest mining union, which accused Peabody Energy and Arch Coal Inc. of ridding themselves of Appalachian subsidiaries to avoid retiree health care obligations. The companies vigorously denied those claims.

Since January, the union has bought television and newspaper advertisements and staged monthly demonstrations in the streets outside of Peabody’s downtown corporate headquarters. Under this week’s settlement, the union agreed to call off its public campaign against Peabody.

“This is a significant amount of money that will help maintain health care for thousands of retirees who earned those benefits through years of labor in America’s coal mines,” UMWA President Cecil Roberts said in a statement.

In a separate statement, Alexander Schoch, Peabody’s chief legal officer, said the company is “pleased to resolve the uncertainty among Patriot retirees by providing substantial funding” for the health care trust fund.”

The agreement still must be approved by U.S. Bankruptcy Judge Kathy Surratt-States. A hearing is set for Nov. 6 in St. Louis.

The other local coal producer involved in the dispute, Arch Coal, said it has addressed all of its legal claims with Patriot and has made an offer to the union to resolve differences concerning retiree health care funding.

“We are in discussions with them on a potential resolution,” Robert Jones, Arch’s general counsel said in a statement.

For Patriot, the retiree health care settlement and a separate agreement that will help raise $250 million in capital represent major milestones that put the company on the path to exit bankruptcy by the end of the year, Bennett Hatfield, Patriot’s chief executive, said in a news release.

“Reaching these agreements represents a pivotal juncture in Patriot’s restructuring,” he said.

Patriot was spun off by Peabody Energy six years ago. A year later the company purchased Magnum Coal Inc., an Appalachian mining company formed by Arch and Arc Light Capital in 2005.

Patriot filed for bankruptcy protection in July 2012, squeezed by a weak economy, eroding coal demand and enormous retiree benefit obligations. The Chapter 11 filing cast doubt over the company’s ability to fund health benefits for thousands of retired miners, most of whom worked for Peabody or Arch, not Patriot.

Hundreds of retired miners and their dependents also sent handwritten letters to the bankruptcy judge describing the hardships they faced if health benefits were discontinued or diminished as part of Patriot’s reorganization.

And the union sued Peabody and Arch in a Charleston, W.Va., federal court a year ago, seeking to force the companies to fund retiree health benefits. A judge dismissed the lawsuit last month.

Patriot and its creditors also won bankruptcy court approval to investigate Peabody and Arch to determine whether the divestitures of subsidiaries constituted a “fraudulent transfer” under bankruptcy law.

The union said the settlement with Peabody and Patriot represents a big step forward in efforts to provide health care funding for thousands of retirees.

But Roberts called on Arch Coal to “step up and meet its obligations to retirees” and said the union would “encourage the company to do so in the coming days.”

Roberts also said the settlement doesn’t provide enough funding to maintain health care for retirees in perpetuity, and the union is asking Congress to pass legislation that would provide long-term health benefits under the Coal Act.

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