OREANDA-NEWS. Financially troubled Patriot Coal has "no other choice" but to dismiss or modify its union employee and retiree health care benefit agreements or it will be forced to liquidate within "a matter of weeks," the company told a federal bankruptcy court.

Patriot "will run out of cash and will be forced to liquidate" unless it can complete a sale of substantially all of its operating assets to Blackhawk Mining, Patriot said in a 16 July filing with the US Bankruptcy Court for the Eastern District of Virginia. Blackhawk will pay $643mn in new debt securities and stock.

Benefits for current employees and retirees were a key obstacle in resolving Patriot's prio 2012-13 reorganization. A new collective bargaining agreement was eventually approved by the court but the union later appealed.

Blackhawk is the "only viable bidder" and it "has insisted" as a condition to closing the transaction that Patriot either reach agreement with the United Mine Workers of America (UWMA) on concessions or reject certain agreements, Patriot told the court.

Patriot said it had held "extensive discussions" with UMWA and Blackhawk to establish a new collective bargaining agreement but no agreement has been reached. "Negotiations appear to be at impasse."

UMWA has not filed a response but may comment on the matter during a bankruptcy court hearing on 22 July about Patriot's proposed employee incentive and retention plans. UMWA and others have objected to Patriot paying its five most-senior executives $1.75mn-3.5mn in incentive pay. The company has also proposed paying $2.8mn to retain 47 "critical" employees.

Interested parties have until 27 July to object to Patriot's plea to discard union obligations. The court is scheduled to hear arguments on that on 30 July.

Patriot also wants to finalize deals to sell two remaining assets in western Kentucky that it did not close on before entering bankruptcy protection proceedings. Patriot had agreed on 31 December 2014 to sell its closed Highland and Heritage mine complexes in the Illinois basin to Prairie Mining for $2 plus assumed liabilities. It wants to close the deals immediately after court approval.

It closed agreements to sell its other western Kentucky properties, including transactions with Alliance Resource Partners, before it entered bankruptcy protection.

Patriot is incurring a cash loss of $100,000/month while it holds the Highland and Heritage assets, the company said. It has already received approval for the sales from the unsecured creditors committee and some of its lenders.