It’s not easy going bankrupt, especially for a coal miner with assets that continue to lose value as the months grind by. According to Dow Jones’ Daily Bankruptcy Review, Patriot Coal’s lenders are ratcheting up the pressure on the bankrupt firm, which is making a valiant effort to work with some creditors to save what it can of its coal-mining operations.
Patriot’s biggest lenders, including Deutsche Bank and other banks owed close to $41 million, claimed in a court filing earlier this week that Patriot was running out of cash and doesn’t even have the financing to undertake its planned creditor-repayment pact.
In a filing with the U.S. Bankruptcy Court in Richmond on Tuesday, Deutsche Bank and other creditors joined the protest first made by Barclays Bank. These lenders are telling the court they believe that Patriot’s plan to transfer some of its operations to new owners will fail given the objections of so many parties involved in the firm’s bankruptcy proceedings..
Patriot Coal’s spokesperson refused to comment regarding the renewed criticism from its top creditors.
More on Patriot Coal bankruptcy
Of note, Patriot Coal’s chapter 11 exit plan is scheduled to be discussed in court on October 5, and the plan includes transactions that would see the firm’s West Virginia mines bought and operated by new, more solvent, owners.
Patriot’s lenders have seen their supposed recoveries shrink in the successive versions of the chapter 11 plan Patriot is trying to finalize. Deutsche Bank commented in court filings that the latest version “represents many steps backwards from what was already unacceptable to many constituents.”
Blackhawk Mining won the right to operate most of Patriot’s coal mines at a bankruptcy auction on Tuesday. The exact terms of the deal have not been disclosed to date.
The Virginia Conservation Legacy Fund has made an offer to take over the remaining two Patriot mines. Virginia health-care executive Tom Clark, a major supporter of the nonprofit organization, commented on Wednesday that transaction was still on track.
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The fund has an “executed commitment letter and term sheet from a major investment firm,” Clarke noted. Furthermore, VCLF has a lined up several experienced coal industry execs and a has deal with the United Mine Workers of America union, he said. The fund has not yet had a formal meeting with West Virginia regulators, however.
In its court filing, Deutsche Bank argued that Blackhawk’s lenders no longer support the takeover of the Patriot Coal mines. Blackhawk exec Jesse Parrish claimed on Wednesday that the filings were a mischaracterization of the situation. “The vast majority of the existing Blackhawk lender group has expressed strong support for this transaction,” Parrish noted.