Strategic Materials exits Chapter 11 with $300 million less debt

By Sarah Lizee

Olympia, Wash., Jan. 23 – Strategic Materials Inc. has emerged from Chapter 11 bankruptcy, according to a Tuesday press release from the company.

“Today marks a major milestone, with a right-sized balance sheet that provides great financial strength and positions us well for future success,” chief executive officer Chris Dods said in the release.

“Our business model is built around sustainability, and we are excited that SMI's future has been made fundamentally more sustainable for the benefit of our customers, employees and communities.”

Now that it has emerged, the company said it has reduced its total debt by over $300 million with substantial new liquidity injected into the business.

As previously reported, the company’s pre-packaged Chapter 11 plan of reorganization was confirmed by the U.S. Bankruptcy Court for the Southern District of Texas on Jan. 10.

The debt-to-equity restructuring transaction contemplated in the plan results in holders of first-lien credit facility claims holding 96.5% of reorganized Topco interests, subject to dilution by the management incentive plan.

Holders of 1.5-lien credit facility claims will get 2.5% of the reorganized Topco interests, and holders of second-lien facility claims will hold 1%, in each case subject to dilution.

Holders of first-lien credit facility claims will provide new money exit financing in the amount of approximately 40% of the total exit facility amount of $150 million, which will provide the reorganized debtors with liquidity to fund restructuring expenses, some claims, and ongoing operations, including paying off Canadian credit agreement obligations in full.

The plan also provides that general unsecured claims and trade claims are unimpaired.

The exit financing consists of first- and second-out term loans, with Acquiom Agency Services LLC and Seaport Loan Products LLC as co-administrative agents.

Second-out exit term loans shall be issued in an aggregate principal amount equal to $150 million less the principal amount of the first-out new money exit term loans and the first-out roll-up loans. The initial amount of second-out U.S. term loans is expected to be about $30 million to $40 million.

Interest on initial first-out U.S. term loans and Canadian term loans, during any first-out PIK interest accrual period, will be SOFR plus 750 basis points. At all other times, interest on these loans will be SOFR plus 650 bps.

For second-out U.S. term loans, during any second-out PIK interest accrual period, interest will be SOFR plus 850 bps. At all other times, interest will be SOFR plus 750 bps.

Strategic Materials is a Houston-based comprehensive glass recycler. The company filed bankruptcy on Dec. 4 under Chapter 11 case number 23-90907.

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