Ashraf Eassa
Long/short equity, contrarian, independent research, tech

Stay Out Of Bankrupt Patriot Coal's Equity - This Run Up Is Irrational

Patriot Coal Corporation (OTCQB:PCXCQ) is a producer and marketer of coal in the eastern United States - and it's also bankrupt. While I believe that an interesting way to speculate on Patriot's turnaround (albeit highly risky) is to actually own the bonds (convertible debt trades at $0.10 on the dollar, senior debt worth $0.48 on the dollar, and even the debtor-in-possession notes trades slightly below par), the recent doubling of the soon-to-be worthless equity is mind-boggling.

This Business Is In Significant Trouble

It was recently announced that the federal appeals court would keep Peabody Energy (BTU) (Patriot's former parent company) on the hook for the health benefits of about 3,100 retired Patriot Coal miners, which actually turned out...

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