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Patriot Coal UMWA Settlement Approval Sought

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Patriot Coal filed with the U.S. Bankruptcy Court a motion for entry of an order (a) approving a settlement with Peabody Energy and the United Mineworkers of America (UMWA), on behalf of itself and in its capacity as authorized representative of the UMWA employees and UMWA retirees. The motion explains, “The Peabody Settlement is one of three agreements that are the cornerstones of the Debtors’ plan of reorganization. Together with the Arch Settlement and the rights offerings backstopped by Knighthead, the Peabody Settlement will provide the Debtors with critically-needed cash and credit support that will position the Debtors to emerge from bankruptcy. Moreover, the Peabody Settlement will provide hundreds of millions of dollars in funding for the Patriot Retirees Voluntary Employee Benefit Association (the ‘VEBA’), the trust established by the UMWA to provide healthcare benefits for thousands of retirees and their families. Although the Debtors and the UMWA signed a new collective bargaining agreement in August, the agreement left open the question of how the VEBA would be funded, and the Peabody Settlement addresses this final contingency. By resolving all claims between and among the Debtors, Peabody and the UMWA, the Peabody Settlement brings to a close the significant pending and potential litigation between these parties in a manner that will allow the Debtors to emerge from bankruptcy and preserve thousands of jobs for the UMWA Employees and others, while helping the UMWA Retirees continue to receive meaningful healthcare benefits.” Under the settlement, Peabody shall pay an aggregate amount of $90 million to the VEBA and Debtors, Peabody shall also pay the VEBA the following amounts: $75 million on January 2, 2015, $75 million on January 2, 2016 and $70 million on January 2, 2017, On the effective date of the Debtors’ Plan of Reorganization, Peabody shall (i) post a $41.525 million letter of credit to secure the benefits of the retirees covered by the Coal Act Assumption Agreement; (ii) replace, either by letter of credit or surety, $15 million dollar cash collateral posted by Patriot Coal for Black Lung Act liabilities and (iii) post $84 million in letters of credit to replace letters of credit currently posted by the Debtors. The Court scheduled a November 6, 2013 hearing on the motion.

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