By Jacqueline Palank
The St. Louis bankruptcy court next week will host a trial over
whether Patriot Coal Corp. (PCXCQ) can impose wage and benefit
concessions upon its unionized miners and retirees.
Beginning Monday, Patriot will argue for the right to shed
obligations it says are unsustainable and may keep it from
successfully reorganizing.
"Unfortunately, Patriot simply does not have the financial
resources to support its current benefit levels and will not
survive without substantial changes across its cost structure," the
company said in court papers.
The United Mine Workers Association, whose members plan to
gather outside bankruptcy court Monday to protest the looming cuts,
will argue against concessions it calls "harsh and radical."
According to the union, Patriot's proposal unfairly forces its
members, especially retirees "broken by a lifetime of working in
the mines," to bear the brunt of the pain in the coal-mining
company's reorganization.
The coal-mining company is specifically proposing to terminate
its retirees' current benefits at the start of next year. A trust
would be created to administer their benefits, funded by up to $300
million in future profit-sharing contributions and royalty payments
tied to mine production.
Patriot also sweetened its offer to include 35% of its new
stock, which the union could sell at any time and use the proceeds
to boost the trust's funding levels.
With regard to its 1,600-plus current union workers, Patriot
would implement new labor terms that incorporate such concessions
as reduced overtime, the loss of several holidays and reductions in
planned wage increases and vacation time.
Patriot, which mines for coal in West Virginia and Kentucky,
sought Chapter 11 protection last July.
Also Monday, Ambac Financial Group Inc. (ABKFQ) will seek the
Manhattan bankruptcy court's permission to pay $101.9 million to
resolve claims brought by the Internal Revenue Service tied to its
treatment of credit-default swaps.
If approved, the deal could clear the way for the bond insurer
to emerge from the Chapter 11 case it filed in November 2010. Ambac
won confirmation of its bankruptcy-exit plan more than a year ago,
but it hasn't been able to emerge yet.
Ambac said it will pay $1.9 million to the U.S. under the
settlement, while its Ambac Assurance Corp. and segregated account
of Ambac Assurance Corp. will pay $100 million. The company also
will pay additional amounts, based on any payments received under
an existing tax-sharing agreement.
The IRS has disputed the eligibility of billions of dollars of
tax refunds Ambac said it could claim as a result of its net
operating losses. The settlement will reduce Ambac's entitlement to
these refunds by $1.1 billion.
Wednesday, a Manhattan bankruptcy judge will take up Eastman
Kodak Co.'s (EKDKQ) plan to sell some of its document-imaging
assets to Brother Industries Ltd. (BRTHY) for $210 million, subject
to higher bids at auction.
Kodak is proposing a June 12 auction for the assets, which would
be preceded by a June 5 bid deadline. It wants to offer leading
bidder Brother such protections as an $8.3 million breakup fee as
well as up to $5.5 million in expense reimbursements.
Kodak's document-imaging business designs, makes and sells
document and picture scanners, as well as related software, and
includes such Kodak product lines as Info Activate, Info Insight
and Capture Pro.
Kodak began searching for a buyer for the document-imaging
business last year as part of its quest to streamline its
operations and reorganize around commercial imaging operations that
include digital printers and motion picture film.
Also at Wednesday's hearing, Kodak will seek approval of a
settlement to end a long-running patent dispute with Kyocera Corp.
(KYO).
The deal calls for Kyocera to drop its $80 million claim against
Kodak and to pay Kodak $5 million. Not only will they both drop
lawsuits against each other, but they've also agreed not to pursue
any further patent fights against the other until at least three
years after Kodak has exited Chapter 11 protection.
-Kristin Jones in New York contributed to this article.
Write to Jacqueline Palank at jacqueline.palank@dowjones.com
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