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A bankruptcy court approved Patriot Coal Corporation’s (PINK:PCXCQ) $802 million debtor-in-possession financing.
Patriot Coal filed for bankruptcy earlier this week, becoming the first U.S. coal producer to do so since coal prices began to fall. Coal prices have fallen sharply as electricity producers in the U.S. switch to natural gas, which is cheaper. Coal stocks, in fact, have been among the worst performers this year.
In addition, new rules proposed by the U.S. Environmental Protection Agency would make it virtually impossible to construct coal-fired power plants.
These factors, along with a weaker global economy and cancellation of customer contracts, resulted in reduced liquidity and financial flexibility for Patriot Coal, and prompted the company to file for bankruptcy.
With the coal industry going through a major transformation, Chairman and CEO Irl Engelhardt believes that PCXCQ’s existing capital structure would make it difficult for the company to make required adjustments in order to achieve long-term success.
The $802 million debtor-in-possession financing will help the company to continue its mining activities and customer shipments during the bankruptcy process. The bankruptcy court has authorized the company to immediately access $677 million of the total debtor-in-possession financing.
