By Joseph Checkler
NEW YORK--A judge on Thursday gave Patriot Coal Corp. (PCXCQ) final approval to borrow on an $802 million loan from a group of banks, including Citigroup Inc. (C), Barclays PLC (BCS, BARC.LN) and Bank of America Corp. (BAC).
Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan approved the financing, after lawyers with concerns about terms of the loan worked out their differences with Patriot's lawyers.
Davis Polk & Wardwell LLP's Marshall S. Huebner called the agreement with creditors "great news for Patriot," because the loan will have a lower interest rate than originally presented as well as lower fees.
The judge said she would approve the loan but not officially sign off on it until Friday or next Monday, to give the lenders time to get the loan syndicated. Once enough investors are found to fully syndicate the loan, Patriot will ask Judge Chapman to enter the order.
Last month, a judge filling in for Judge Chapman approved Patriot's use of $677 million of the loan, despite his reservations over a $302 million "roll-up" of existing debt into the new loan.
Patriot plans to use the money to refinance its debt and fund its operations during bankruptcy.
Judge Chapman on Thursday also approved several other Patriot requests, including the right to keep paying its more than 4,000 employees, as well as paying taxes and foreign creditors.
Patriot and 98 of its affiliates filed for Chapter 11 protection last month, a victim of widespread problems in the coal industry. The company said it had reacted to lower demand by reducing production and increasing sales to coal-hungry markets overseas. However, in recent months, the cancellation of customer contracts, lower power-plant coal prices and rising expenditures for environmental and other liabilities constrained its liquidity and financial flexibility.
Among its liabilities, Patriot has about $100 million in liabilities related to retiree benefits and almost $200 million related to the 1969 "Black Lung Act" that requires the company to pay benefits on retirees suffering from pneumoconiosis, a disease that can afflict coal workers.
Patriot Coal was formed in 2007 from assets split from top U.S. coal-mining company Peabody Energy (BTU). Patriot's mines are concentrated in central Appalachia, a region plagued by high costs after more than a century of mining there depleted much of the easy-to-access coal.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)
Write to Joseph Checkler at email@example.com
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