WASHINGTON (dpa-AFX) - In an expected move, Patriot Coal Corp. (PCX) Monday said it has filed for bankruptcy protection due to lesser demand and plunging coal prices. The struggling coal producer also obtained a life-line of $802 million from Citigroup, Barclays and Merrill Lynch.
Patriot Coal stock closed regular trading at $0.61, down $1.58 or 72.10 percent, after initial reports that it would go in for bankruptcy protection. In after hours, the stock further lost $0.26 or 42.72 percent.
The St. Louis, Missouri-based company, along with its subsidiaries, has filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Southern District of New York.
After receiving an approval from bankruptcy court, Patriot expects to use the new financing and cash generated from operations to support the business during the reorganization process. The $802 million in debtor-in-possession is being financed by Citigroup Global Markets Inc., Barclays Bank PLC, and Merrill Lynch, Pierce, and Fenner & Smith Inc as joint lead arrangers.
The recently appointed Chief Executive Irl Engelhardt 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. Our objective is to use the reorganization process to address important issues in an orderly way and make the Company stronger and more competitive.'
Patriot Coal, like other US coal miners, has struggled in 2012 after coal prices dropped significantly as warmer winters reduced the demand for electricity. Moves from regulators to control emissions from burning of coal and shifting to cheaper natural gas by power plants and steel makers also impacted the coal mining industry.
Patriot had reduced its coal production and revised its sales volume outlook for 2012 based on potential default by a key customer. Patriot Coal owns mines in Appalachia and the Illinois Basin.
Patriot Coal was created by spinning off most of the Eastern US operations of Peabody Energy Corp. (BTU). For the year, the company's stock has taken a beating and lost almost 93 percent erasing almost seven billion from its market capitalization.
On May 29, Chairman Engelhardt had taken over the post of CEO after Richard Whiting resigned.
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