Patriot’s business has been pummelled by the cancellation of customer contracts, lower thermal coal prices and rising expenditures for environmental and other liabilities.
The Appalachian-focused giant tried reducing production and increasing sales to export markets but to no avail.
The announcement of the Chapter 11 filing was made well after the US stock market closed, although earlier speculation around the filing sent the company’s stock into free fall.
The price dropped 72% to $1.58.
The embattled company said it believed the protection afforded by a court-supervised reorganisation process, including the ability to access fresh financing, would give the company more time to get out from under.
Patriot has been able to obtain a $US802 million commitment for debtor-in-possession finance.
Citigroup Global Markets, Barclays Bank and Merrill Lynch, Pierce, Fenner & Smith are joint lead arrangers. The finance is conditional on bankruptcy court approval.
Should the approval come through, Patriot plans to use the cash – along with returns from its existing operations – to support the business through the reorganisation process.
Among the motions Patriot has filed in the bankruptcy court include having the authorisation to pay employee wages and provide healthcare and other benefits.
It also asked for the authority to maintain existing customer programs and plans to pay suppliers in full under normal terms for goods and services provided after the July 9 filing date.
Patriot chairman and chief executive officer Irl Engelhardt said the company’s existing capital structure kept it from making the necessary adjustments to “achieve long-term success”
“Our objective is to use the reorganisation process to address important issues in an orderly way and make the company stronger and more competitive,” he said.
Pressure has long been building on Patriot.
In May the company shook up its top leadership, appointing Engelhardt chairman and CEO to replace Richard M Whiting who had held the role since 2007, which was the year Patriot was spun off from Peabody Energy.
Patriot is one of the largest coal miners east of the Mississippi River.
It operates 13 mining complexes in West Virginia and Kentucky and controls about 1.9 billion short tons of proven and probable reserves.