July 13, 2012
By: John Clark
Patriot Coal announced in a quiet press release that it was filing for bankruptcy, according to a recent Forbes report.
Hoping to avoid too much public attention, the company announced its filing just minutes after the Stock Markets closed in New York City, but sources say that its stock price fell more than 70 percent in the last few minutes of trading, suggesting that someone leaked the information before the end of the day.
Of course, Patriot Coal’s stock price has experienced a steady drop since late May, when the company announced that it was facing the possible default of what it called a "key client" in the Appalachia region.
After its key client fell on hard economic times, Patriot Coal had to cut its estimated production, and it told investors that it only planned to sell 3.9 million tons of coal during the rest of 2012.
This figure may sound like a substantial amount of coal, but it paled in comparison to the company’s estimated production figure at the beginning of 2012, which was almost 5 million tons.
Patriot Coal officials also cut their production estimates for 2013 by 50 percent. A few days after this revelation in late May, the chief executive officer of the company, Richard Whiting, abruptly resigned, which forced the chairman of the board, Irl Engelhardt, to helm the struggling company.
Before filing for bankruptcy, the company was able to secure $802 million in emergency financing from several different banks, including Citigroup, Barclays and Merrill Lynch.
This extra cash will allow Patriot Coal to try to refinance more than $600 million of loans and credit that it owes to various creditors. Company officials also hope the financing will allow it to continue producing coal during the bankruptcy case.
Patriot Coal was born just five years ago after its parent company, Peabody Energy, decided to spin it off into a separate entity. At the time, Peabody Energy claimed to be the largest private sector coal company in the world.
In addition to the collapse of a key client, Patriot Coal was also hurt by warm weather (which reduced customers’ need for energy provided by coal), and increased competition from natural gas.