Last evening, Patriot Coal lawyer made this filing to the U.S. Bankruptcy Court out in St. Louis, asking for court approval of the company’s proposed deal with the United Mine Workers of America.
Michael Niven over at SNL Financial is reporting on some of the details of the proposed deal:
The proposed equity arrangement is in line with what Patriot originally proposed in April when it offered the union a 35% stake in the reorganized company. The UMWA later submitted a counter proposal calling for a 57% stake in a reorganized Patriot.
The trust would also be funded by other income sources, including additional payments from Patriot, the amounts of which would be determined by the company’s financial performance. Patriot would also fund the retirement trust through royalty payments on coal production. The agreed upon royalty rates are 20 cents/ton on targeted production levels established in Patriot’s five-year business plan and $1/ton on any production that exceeds targeted levels.
The complex settlement deal also includes a wide range of other terms including wage concessions from the union and obligations that Patriot facilitate union representation at some non-union mines.
Additional documents that are available about this today include three exhibits to that court filing: A proposed new Collective Bargaining Agreement between the UMWA and Patriot Coal operations, a Memorandum of Understanding between the company and the union, and a list of existing Collective Bargaining Agreements between various parties to the bankruptcy proceeding.
UPDATED: The UMWA has released this video in which the proposed deal with Patriot is explained:
Here’s a summary, taken from the court documents, of the changes proposed to the collective bargaining agreement for current Patriot workers:
A. Modifications to Wages
(1) Wage rates for employees working at underground mines, surface mines, and coal preparation plants will be reduced to those wage rates in effect on June 1, 2012.
(2) Raises of $0.50 per hour on January 1, 2015, January 1, 2016, January 1, 2017, and January 1, 2018.
(3) Shift differential payments, which had increased wages for UMWA-represented employees who worked during an afternoon or night shift, will be eliminated.
(4) Overtime will be paid after 40 hours per week at 1.5 times regular pay, and premium overtime will be eliminated, but all hours worked on holidays will be paid at 1.5 times regular pay.
(5) The Obligor Debtors and the UMWA agree to a wage reopener in 2016 to permit wage adjustments for 2017 and 2018. The wage reopener would require good-faith bargaining in light of thencurrent market conditions and would permit a maximum wage increase of ten percent, inclusive of the wage increases scheduled for January 1, 2017 and January 1, 2018.
B. Active Employee Healthcare Benefits
(1) The Obligor Debtors will implement a healthcare plan designed to more closely match the plan currently available to non-union
employees, although, among other things, UMWA Employees will be subject to lower out-of-pocket maximums than non-union employees and UMWA Employees will not be required to pay healthcare premiums.
(2) The Obligor Debtors will continue to provide the currently available life and accidental death and dismemberment benefits, vision care, and dental plan. The Obligor Debtors also will provide lifetime healthcare for UMWA Employees and/or surviving spouses of UMWA Employees who become totally disabled or die as a result of a mine accident, subject to (a) the beneficiary becoming eligible for Medicare, or (b) the remarriage of the surviving spouse beneficiary.
(3) Spouses of UMWA Employees who have their own healthcare
coverage must use that as their primary coverage as of January 1, 2014.
(4) Extended healthcare coverage following layoff from employment will be reduced to 90 days from the date of layoff.
(5) The Obligor Debtors will contribute three percent of gross wages into a 401(k) or similar plan in lieu of retiree healthcare.
C. Paid Time Off
(1) As of January 1, 2014, the Obligor Debtors will reduce paid vacations days from twelve to ten and will schedule three oneweek vacation outage periods to coincide with July 4, Thanksgiving, and Christmas.
(2) Floating vacation days will be reduced from four to two for 2013 through 2015 and one additional floating vacation day will be provided beginning in 2016.
(3) The graduated vacation schedule will not be altered, but the Obligor Debtors will be permitted to limit the number of graduated vacation days used in 2014 through 2016 to five, provided that all unused days will be paid in full by January 31 of the following year. The maximum number of graduated vacation days that can be used will increase to six on January 1, 2017 and to seven on January 1, 2018.
(4) Personal and sick leave days will be reduced from six, or five where applicable, to three for 2013 through 2015. The number of available personal and sick leave days will increase to four in 2016 and to five in 2017.
(5) Holidays will be reduced from eleven to eight for 2013 through 2015 by eliminating April 1, Veterans’ Day, and the Employee Birthday holiday. The Employee Birthday holiday will be restored beginning in 2016.
D. Job Opportunities and Job Security
(1) The Obligor Debtors will continue current successorship requirements and will agree to have Pine Ridge Coal Company LLC, Colony Bay Coal Company, Mountain View Coal Company LLC and Rivers Edge Mining, Inc. sign the applicable New CBA.
(2) The Obligor Debtors and the UMWA will retain current provisions concerning job offers.
(3) The Memorandum of Understanding Regarding Job Opportunities
will remain in force.
(4) The applicable New CBA will be implemented at newly organized mines, and the Obligor Debtors will facilitate union representation
at Huff Creek Surface Mine, Buck Fork Surface Mine, Flying Eagle Underground Mine, Buffalo Mountain Surface Mine and Stanley Fork Mine.
(5) Contributions to the UMWA-BCOA Training and Education Fund, the UMWA-BCOA Labor Management Positive Change Process
Fund, and the UMWA-BCOA Resolution of Disputes Trust, and other related requirements will be eliminated.
E. Work Rules
(1) The Obligor Debtors may implement their revised attendance control policy, subject to the development of mutually agreeable
language providing for counseling and/or warning following the first violation.
(2) Supervisors will be permitted to work up to one hour per supervisor per shift.
(3) The requirement to provide helpers on underground face equipment will be eliminated, subject to the Obligor Debtors’
assurance that current personnel in those positions would be reassigned to other positions and not terminated as a result of
eliminating helper positions.
(4) The changing of crews at the location of the work will be
permitted.
(5) The use of contractors will be allowed, subject to the clarification that contractor usage at idle operations will not include coal
production or coal processing, and that contractor usage at active operations will not include direct production of coal. The use of
contractors at active operations will not cause the layoff of employees, nor will contractors hold full-time, permanent positions
that could be filled with panel members.
(6) Alternate seven day a week work schedules may be implemented for operations at Highland, Hobet surface mine, Apogee’s Guyan
surface mine and all Gateway operations no earlier than September 15, 2013 and only upon completion of employee communications of the proposed changes. Alternate work schedules may be implemented at other operations following appropriate communication to the UMWA and 30 days’ notice to affected
UMWA Employees.
F. Multi-Employer Plan Contributions
(1) As described in further detail in paragraph 15 below, the Obligor Debtors will continue their current obligation to participate in and
contribute to the UMWA 1974 Pension Plan. In connection therewith, the UMWA has made certain representations to the Debtors as set forth in a separate confidential side letter.
(2) The Obligor Debtors will withdraw from the United Mine Workers of America 1993 Benefit Plan and the UMWA 2012 Retiree Bonus
Account Trust and Plan, and the Obligor Debtors will cease their 20-Year Service Payments to the UMWA Cash Deferred Savings
Plan.
(3) The Obligor Debtors will make a three percent contribution to a 401(k) or similar plan in lieu of the 2012 New Inexperienced
Miner pension contributions and a three percent contribution to a 401(k) or similar plan in lieu of the 2007 and 2012 New
Inexperienced Miners retiree healthcare contributions.
And here’s the language about the retiree health-care situation:
(1) The UMWA has established a voluntary employees’ beneficiary association trust within the meaning of section 501(c)(9) of the Tax
Code (as defined below) (the “VEBA”) in order to fund the Retiree Benefits.
(2) The Obligor Debtors will provide the Retiree Benefits through December 31, 2013; provided, however, that the Obligor Debtors
shall be obligated to provide such benefits through such date solely to the extent that they receive the cash necessary to do so from the following funding sources: (i) any and all payments or reimbursements for or in respect of such benefits received from Peabody Holding Company and its affiliates (“Peabody”) and/or
(ii) any cash that is remitted from the VEBA to the Obligor
Debtors to pay for such benefits, which may include any royalty or profit sharing interest and any cash balance remaining from the initial $15 million that the Debtors have previously contributed to the VEBA ((i) and (ii) together, the “Funding Sources”).
(3) Effective January 1, 2014, the Obligor Debtors’ obligations to provide the Retiree Benefits to the UMWA Retirees pursuant to any NBCWA Individual Employer Plan or otherwise, and sponsorship and administration of such plans, shall be assumed by the VEBA. The Obligor Debtors shall have no obligation to the UMWA Retirees or the UMWA with respect to the Retiree Benefits after December 31, 2013, with the sole exception of satisfying its obligation to maintain the NBCWA Individual Employer Plan obligations for UMWA Retirees assumed by the VEBA by making the contributions to the VEBA specified in the
VFA (as defined below). Such contributions to the VEBA shall be in full satisfaction of the Obligor Debtors’ obligations to maintain the NBCWA Individual Employer Plans and provide the Retiree Benefits thereunder. For the avoidance of doubt, after December 31, 2013, the Obligor Debtors shall not be deemed to be a sponsor,
fiduciary or administrator (within the meaning of or under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or any like term under any other applicable law) of the NBCWA Individual Employer Plans or any other plan, agreement or arrangement covering the UMWA Retirees.
(4) Effective September 1, 2013 and on the first business day of each month thereafter through December 2, 2013, the Obligor Debtors shall deliver to the UMWA an estimate, based upon predicted average cost, of the funding requirement for the Retiree Benefits
for the next 60 days (or, if shorter, for the period ending December 31, 2013), which funding shall include fees charged by such thirdpartyadministrators retained by the Obligor Debtors (offset by any payments in excess of the amount required for any prior period and increased by the amount of any unreimbursed benefit costs attributable to any period commencing on or after September 1, 2013), taking into account all of the Funding Sources (the aggregate amount of all such required funding, the “VEBA
Payment”). Within five business days of such delivery, the
UMWA shall cause the VEBA to remit to the Obligor Debtors (or any designated third-party administrator) an amount equal to the full amount of the VEBA Payment. If the VEBA fails to timely
deliver the VEBA Payment, the Obligor Debtors shall notify the UMWA of such failure and provide the UMWA five business days (the “Cure Period”) to cause the VEBA to provide the VEBA Payment. Unless otherwise agreed to in writing by the UMWA and the Obligor Debtors, the Obligor Debtors’ obligations to provide the Retiree Benefits through December 31, 2013 shall immediately cease upon a failure by the VEBA to deliver the full amount of the VEBA Payment at the conclusion of the Cure Period. In such event, (a) the Obligor Debtors will deliver to the
VEBA any cash from or in respect of the Funding Sources that Obligor Debtors receive from or owe to the VEBA and (b) the Obligor Debtors’ obligations to the UMWA Retirees pursuant to the NBCWA Individual Employer Plans or otherwise, and sponsorship or administration of such plans, shall be assumed by the VEBA, and the Obligor Debtors shall have no obligations to the UMWA Retirees or the UMWA with respect to the Retiree Benefits with the sole exception of satisfying its obligation to maintain the NBCWA Individual Employer Plans for UMWA Retirees solely by means of payments and other transfers to the
VEBA specified in the VFA, together with the transfer of any excess amounts of the VEBA Payments not required by the Obligor Debtors to provide benefits for the period prior to the date of such cessation.
(5) The Obligor Debtors and the UMWA will enter into that certain Agreement to Fund the VEBA (the “VFA”), which will obligate the Debtors to fund the VEBA as follows:
(a) Upon the effective date of an approved Plan (as defined below), between 35 and 38 percent of the equity in the reorganized Debtors that can be monetized, in whole or in part, to provide a source of funds to the VEBA;
(b) to the extent that in any calendar period the Debtors’ liquidity exceeds the greater of $125 million or 125% of their then applicable minimum liquidity requirements in the debt covenants contained in the Debtors’ exit financing facility (after taking the amount of any such payment into account), 15 percent of net income over $75 million for 2014 and 2015, and 15 percent of net income over $150 million for 2016 and beyond, subject to an annual cap of $75 million and a lifetime cap of $300 million; and (c) per-ton royalty payments on all tons produced from all mining complexes owned or operated by Patriot or any of its subsidiaries as of the effective date of an approved Plan of (a) $0.20 per ton on annual production up to the levels set forth in the Debtors’ October 2012 five-year business
plan and (b) $1.00 per ton on production in excess of the levels set forth in the Debtors’ October 2012 five-year business plan.