NEW YORK--Patriot Coal Corp. (PCX) filed for Chapter 11
bankruptcy on Monday, the largest casualty of the worst U.S. market
for the power-plant fuel in decades.
U.S. demand for coal has slumped this year as utilities favored
cheaper natural gas, as prices of that fuel hit decade lows amid a
supply glut. Coal miners, including Patriot Coal, have slashed
production and laid off workers in an effort to match supply to
weakening demand.
Coal accounted for 35% of U.S. electricity generation during the
first four months of the year, according to the Energy Information
Administration, down from 44% during the same period in 2011.
Patriot Coal said it has obtained a commitment for $802 million
in debtor-in-possession financing. 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 company said.
"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 Chairman
and Chief Executive Officer 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."
In May, Patriot said it was working with private-equity firm
Blackstone Group LP (BX) on a refinancing effort.
Shares plummeted 43%, to 35 cents after hours. The coal
producer's stock sank 72% during regular session trading after a
report from Bloomberg News said the bankruptcy filing could come as
early as Monday.
The company said Monday it has reacted to lower domestic demand
by reducing production and increasing sales to export markets.
However, in recent months, the cancellation of customer contracts,
lower power-plant coal prices and rising expenditures for
environmental and other liabilities have severely constrained its
liquidity and financial flexibility, the company said.
The company's 19-page petition was filed in U.S. Bankruptcy
Court in Manhattan and was immediately assigned to Judge Shelley C.
Chapman. Company executives placed Patriot Beaver Dam Holdings LLC
under Chapter 11 protection first and indicated in court papers
that 100 other affiliates would join it, including Patriot Coal
Corp.
The company valued its assets and debts at more than $1 billion.
It said it has more than 10,000 creditors, according to the
petition.
Among its top trade creditors were railroad CSX Corp. (CSX),
owed about $6.3 million, and mining technology provider Jennmar
Corp., owed about $4.8 million, according to the petition.
--Katy Stech contributed to this article.
-Write to Matt Day at matt.day@dowjones.com