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(Corrects 2nd paragraph to reflect that Patriot, not Peabody,fought with its union)
By Nick Brown
Nov 6 (Reuters) - Patriot Coal Corp said onWednesday it received court permission to send its bankruptcyexit plan to creditors for a vote, positioning it to leaveChapter 11 by year's end.
The company said in a statement that a bankruptcy judge inSt. Louis approved the plan outline, allowing it to be sent tocreditors for their assessment of the overall plan. Themilestone comes after months of wrangling in which Patriotfought with its unionized workforce, as well as former parentPeabody Energy Corp, over how to cut costs.
Under the plan, retiree benefits would be reduced, whilecurrent workers would absorb cuts in salary, vacation time andother perks. Healthcare benefits would be transferred to anoutside trust. The company would operate after bankruptcy withthe help of $576 million in funding from Barclays Plc and Deutsche Bank AG.
The court also approved a rights offering backstopped byKnighthead Capital Management, Patriot said. The offering,announced last month, will raise $250 million in new capital.
"Today's actions by the court represent important milestoneson Patriot's path to emergence as a strong, well-capitalizedcompetitor in the coal industry," Bennett Hatfield, Patriot'schief executive, said in the statement.
Hatfield added that the company is on schedule to emergefrom bankruptcy in "mid to late December."
Patriot declared bankruptcy in July 2012, saying it neededto cut $150 million a year in employment costs to regainprofitability.
It received court permission earlier this year to scrapcollective bargaining agreements with its union and draw up new,cost-saving contracts. The United Mine Workers of America, whichrepresents some 13,000 Patriot workers, retirees and theirfamilies, fought against the move.
Patriot's miners will sustain much of the pain of thecompany's collapse, which has made the case vitriolic. The unionstaged myriad protests and rallies before reluctantly agreeingto the new contracts.
The union has bargained for lifetime healthcare and pensionbenefits since the 1940s, considering those benefits sacrosanct.But coal companies have become less able to afford them in theface of modernization, a shrinking workforce and the growingprevalence of new sources of energy.
Both Patriot and the union tried to keep Peabody, whichcreated Patriot through a 2007 spinoff, on the hook for some ofthe costs. Peabody agreed in October to contribute $310 millionfor healthcare costs over four years, with an additional $140million in the form of letters of credit.
The union had hoped to force Peabody to cover all benefitsPatriot was unable to maintain, alleging in a 2012 lawsuit thatPeabody designed Patriot to fail by loading it up with heavylegacy liabilities and few valuable assets.
The lawsuit alleged that the move interfered with workers'benefits in violation of the Employee Retirement Income SecurityAct, an argument not previously used by a union in the contextof a spinoff.
Peabody denied the allegations, and a judge in Septembergranted its request to throw the case out. (Reporting by Nick Brown. Editing by Andre Grenon)
