Patriot believes the protection afforded by a court-supervised reorganization process, including the ability to access new financing, will provide the company with additional time and flexibility to address its financial challenges and position Patriot for long-term viability and success.
In conjunction with its reorganization, Patriot has obtained a commitment for $802 million in debtor-in-possession (DIP) financing from Citigroup Global Markets Inc., Barclays Bank PLC, Merrill Lynch, and Pierce, Fenner & Smith Inc. as joint lead arrangers. Upon approval by the Bankruptcy Court, the new financing and cash generated from Patriot’s ongoing operations will be used to support the business during the reorganization process.
“The coal industry is undergoing a major transformation and Patriot’s existing capital structure prevents it from making the necessary adjustments to achieve long-term success,” said Patriot Chairman and CEO Irl F. Engelhardt. “Our objective is to use the reorganization process to address important issues in an orderly way and make the company stronger and more competitive.”
“We remain firmly committed to serving our customers and to being a good employer by maintaining safe, productive operations as we undertake this process,” said Patriot President and COO Ben Hatfield. “The skills of our employees and the quality of our service provide an excellent platform for Patriot’s future success. We appreciate the ongoing dedication of our employees, whose hard work is critical to our success and the future of our company.”
Patriot’s business outlook has been impacted by a number of challenges that are affecting the coal industry, including reductions in U.S. thermal coal demand due to competition from low priced natural gas, challenging environmental regulations affecting the cost of producing and using coal, and weaker international and domestic economies. The company has reacted to the lower domestic demand by reducing production and increasing sales to the export markets. During recent months, the cancellation of customer contracts, lower thermal coal prices and rising expenditures for environmental and other liabilities have severely constrained the company’s liquidity and financial flexibility.
Patriot has filed various motions with the Bankruptcy Court in support of its reorganization, including requesting authorization to continue paying employee wages and providing health care and other benefits. Patriot has also asked for authority to continue existing customer programs and intends to pay suppliers in full under normal terms for goods and services provided after the filing date of July 9, 2012.