| Coal-mining company Patriot Coal Corp. is seeking to broaden an ongoing investigation into the spinoffs it says allowed its predecessors to dump hundreds of millions of dollars in legacy liabilities on its shoulders. In court papers filed Tuesday, Patriot asked a bankruptcy judge to let it expand a pending probe against former parent Peabody Energy Corp. (BTU) to include Arch Coal Inc. (ACI) and private-equity firm ArcLight Capital Partners LLC. Patriot said understanding Arch and ArcLight's creation of Magnum Coal, the mining unit that merged with Patriot in 2008, as well as the companies' role in selecting which assets and liabilities followed Magnum to Patriot, is "essential" to its ongoing investigation. Such an investigation, Patriot added, will determine whether the company can pursue litigation related to the merger as well as its spinoff from Peabody in 2007. Patriot has blamed its high legacy liabilities as a contributing factor to its bankruptcy, which it filed last year. For much of this year, the company and its unsecured creditors have been investigating whether the company's spinoff from Peabody was a fraudulent deal that can be challenged in litigation. If successful, they have said such a claim "could result in sizable recoveries for Patriot and its creditors." Peabody has vowed to defend itself against any spinoff-related claims, which it says would lack merit. Among the topics Patriot hopes to broach in its probe of Arch: the assets and debts it contributed to Magnum upon Magnum's 2005 creation as well as Arch's assessment of Magnum's prospects. Reached Wednesday, Arch spokeswoman Kim Link said the company had "no involvement whatsoever" in ArcLight's decision to sell Magnum to Patriot or Patriot's decision to purchase Magnum. As for ArcLight, Patriot wants to learn more about its role as Magnum's majority shareholder at the time of Patriot's 2008 purchase of Magnum. An ArcLight representative couldn't immediately be reached for comment Wednesday. The U.S. Bankruptcy Court in St. Louis will hold a Sept. 24 hearing to consider Patriot's request to probe Arch and ArcLight. Next week, the court will consider Patriot's request to force Peabody to comply with its investigation. Patriot has accused the Peabody of not cooperating with the probe in a possible bid to run out the clock on any legal claims Patriot may have, though Peabody says it has been "working diligently" to respond to the discovery requests and will continue to do so. The discovery battle escalated Tuesday, when Patriot filed a lawsuit in bankruptcy court to block Peabody from dragging it into a legal battle with the miners' union. The United Mine Workers of America union sued Peabody and Arch in federal district court last fall, seeking to hold them accountable for the benefits they promised to retirees but which were later transferred to Patriot. Both Peabody and Arch have asked the court to dismiss the lawsuit. According to Patriot, Peabody slapped it with a subpoena demanding documents that Patriot says would cost it "multiple millions of dollars and thousands of hours of work" to gather. Such an effort would district Patriot from a crucial time in its restructuring, Patriot said, prompting its request for the court to shield it from Peabody's request. Peabody spokesman Vic Svec said union's lawsuit lacks merit because the health-care obligations at issue belong to Patriot, not Peabody. He defended Peabody's subpoena against Patriot as a means "to ensure that there is a comprehensive discovery process in support of court proceedings. |
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