UPDATE: Patriot Coal Says Refinancing Efforts Continuing

NEW YORK (Dow Jones)--Patriot Coal Corp. (PCX) said its refinancing plans are continuing and confirmed it is working with private-equity firm Blackstone Group LP (BX) on the effort.

The short statement came after a sharp and sudden selloff of Patriot's shares following a Debtwire report on the company's alleged plans to restructure.

Late Monday, Debtwire, citing unnamed sources, reported Patriot was fielding pitches from restructuring advisers in the event the company can't satisfy its near-term financing needs. Debtwire said Blackstone and Centerview Partners LLC were involved and law firm Davis Polk & Wardwell LLP was organizing the talks on Patriot's behalf.

Patriot said earlier this month it entered into a commitment letter for a new revolving credit facility and new term loan facility for $625 million from three lenders: Citigroup Inc. (C), Barclays PLC (BCS, BARC.LN) and Natixis (NTXFY, KN.FR).

"Patriot Coal Corp. is continuing to work with these lenders to strengthen its finances, including the replacement of its current credit facilities well before certain of its debt obligations become due in March 2013," the company said.

In its statement, Patriot confirmed it is working with Davis Polk, its longtime counsel, and Blackstone "to achieve an optimal financing package," it said.

Patriot, like other U.S. coal producers, has struggled this year as a warm spring and decade-low natural gas prices limited power-plant demand for coal. The company said this month that its first-quarter loss more than quadrupled from the same period in 2011, to $75.3 million, and announced a series of cost-cutting measures, including mine shutdowns and job cuts.

The company had about $115 million in cash and cash equivalents at the end of March, down 41% from Dec. 31.

Analysts say Patriot in particular is under pressure because the bulk of its production comes from mines in Central Appalachia, a region plagued by high costs and difficult geology after more than a century of mining tapped much of the easy-to-access coal. Patriot this month pegged the low end of its cost guidance at its Appalachian operations at $72 a short ton. Power-plant coal from the region is currency selling at less than $60 a ton.

The company last week lowered its sales volume outlook for metallurgical, or steelmaking, coal, citing the potential default of a key customer. Two ratings firms soon after downgraded the company's credit ratings.

Shares were down 36% at $2.14 in Tuesday afternoon trading, after falling 85% in the year ended Monday. Following the Debtwire report, shares shed more than 50% of their value before bouncing back somewhat, triggering two brief, automatic trading halts as the stock recouped some losses in the wake of the company's statement.

Patriot bonds also were shellacked on Tuesday. Risk premiums on the company's 8.25% bonds due April 2018 were around 4 percentage points wider on the day to trade at a spread of 23.4 percentage points over Treasurys of a comparable maturity, according to MarketAxess data.

The bonds now yield 23.8%, up from 20.165% earlier in the session, and their price was last quoted by MarketAxess at 51.75 cents on the dollar, down from 60 cents earlier Tuesday and 60-63 cents Monday.

-By Matt Day and Ben Fox Rubin, Dow Jones Newswires; 212-416-4986; matt.day@dowjones.com

(Katy Burne contributed to this article.)

Patriot Coal Corp. (NYSE:PCX)
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