Walter Energy gets court approval to scrap union obligations

[Omaha Steve]

Source: Stl Today

By Dawn McCarty Bloomberg

Walter Energy Inc. can scrap its union obligations in order to facilitate a sale, a move that will affect multi-employer funds covering health and retirement benefits for thousands of former miners but hopefully allow the company to keep operating, a judge said.

After hearings that spanned two days, U.S. Bankruptcy Judge Tamara O. Mitchell in Birmingham, Ala., found that the company's assets can be sold without the liabilities associated with union benefits. In doing so, she overruled objections by funds that are responsible for paying retiree and health benefits to former miners from Walter and other companies.

"This court finds that maintaining the coal operations as a going concern, keeping the mines open, offering future job opportunities and continuing to be a productive member of the business community all require this Court to overrule" the objections, Mitchell said in an opinion filed Monday. She said that she assumed an offer to buy the company wouldn't go forward without such a ruling.

Walter Energy filed for bankruptcy in July and is set to put its assets up for auction Jan. 5. As an opening bid, lenders who banded together as Coal Acquisition have offered to exchange $1.25 billion of debt and pay $5.4 million in cash.

FULL story at link.

Read more: http://www.stltoday.com/business/local/walter-energy-gets-court-approval-to-scrap-union-obligations/article_3076e79f-2be4-56a4-8fb3-52a022306c03.html

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Thanks judge Tamara O. Mitchell!

[farleftlib]

1. Wow. 89,000 ppl thrown into poverty with the stroke of a pen.

I can't imagine retired miners were collecting all that much anyway. This is truly a disturbing decision.

[trillion]

10. Wonder if they can sue.

[sulphurdunn]

2. The message is unequivocal.

The owners and assets of the company have value. The workers and retirees have none.

[saturnsring]

3. do ceo contracts ever get scraped

[SharonAnn]

4. Of course not. They have a completely separate retirement account form any of their workers.

Their contracts stipulate that it must be fully funded at all times, and lots of other details to be sure they get their money. The epitome of "I got mine. Screw you."

[Matthew28]

5. No, of course not

They own the system and so they're never effected.

[cstanleytech]

8. No, and thats a large part of whats wrong the ceos and others at the corporate level rarely suffer

for the decisions they make.

[TexasMommaWithAHat]

6. There are not enough words to describe

the predator class.

[cstanleytech]

7. On one hand I am angry because there are alot of people who are getting screwed over this but

on the other hand I also can see the point of view of the judge because if the mine closes for good then what will the people in those areas do for jobs?

[Chan790]

9. We need to make pension and union obligations non-dischargeable like student loans are.

Make it the one debt the company can't discharge and see how quickly the tune of corporations changes regarding bankruptcy.

As an added benefit, it would likely result in increased cooperatives as any prospective buyer would need to bring in the union/pension-fund as an acquisition partner in order to get that debt managed.

[Yo_Mama]

13. Well, the company is bankrupt. If it ceases operating, the pension/medical funds won't get a penny

more anyway.

From this extract:

Walter Energy filed for bankruptcy in July and is set to put its assets up for auction Jan. 5. As an opening bid, lenders who banded together as Coal Acquisition have offered to exchange $1.25 billion of debt and pay $5.4 million in cash.

That agreement hinged on a resolution with unions or court approval to reject the collective-bargaining agreements. Walter pays about $25 million to $35 million per year for retiree benefits, according to court papers.

The funds had said the move would spark a $1 billion liability, and further erode their already precarious financial position. The 1974 Pension Plan said it provides benefits to 89,000 retired or disabled coal workers or surviving spouses, which are threatened by the move.

Look at the figures there - the company is so deep in the hole that it is worthless except for future operating capacity, and it will never have any unless the workers lose those collective bargaining promises. So they wouldn't get paid regardless.

It does seem like there should be a provision that would allow workers' claims to be converted into equity and for them to get a share of future earnings, but with the current future of coal there may not be anything left.

Just very, very sad. The separate funds belong to the workers, but they are not enough to fund the promises made. But that's true in most BKs.

[mdbl]

11. Does the PBGC come into play

I don't know if the pensioners are covered or not but if so it might offer some relief. It's still not a good solutions but it's better than nothing.

[cynzke]

12. Back In The Early Seventies...

The spouse of a friend worked for a brewery in the Mid-West. The brewery was bought out by a Californian know for his corporate raider tactics. The mangers knew in advance of the pending sale and they had an opportunity to withdraw or transfer their retirement funds elsewhere. For the workers who had retirements funds, those funds were FROZEN. They could not access the funds until they reached a certain age. My friend's spouse hadn't been enrolled in a retirement program for long when this happened so he only had about $1200 placed in the frozen account that was managed by Met Life. When this man reached retirement, Met Life notified him of his options for accessing the funds, which differed in amounts depending on whether he wanted to extend them to his wife, upon his death. The monthly benefit would be less if he extended them to his spouse. And the largest monthly benefit he could collect.....$8.99. Apparently the frozen fund that Met Life managed was one NOT bearing any interest. No doubt Met Life benefited from maintaining the funds, but the employees got screwed. They could have placed their retirement funds into a simple savings account and could have compounded the interest which was forty threes years for my friend's spouse.