Aleris forced into bankruptcy by financial constraints stemming from global economic woes

By Caroline Salls

Pittsburgh, Feb. 12 - Aleris International, Inc. and its wholly owned U.S. subsidiaries filed for Chapter 11 bankruptcy Thursday in the U.S. Bankruptcy Court for the District of Delaware as a result of financial constraints related to deteriorating demand, earnings and liquidity caused by the steep decline in global economic conditions, according to a company news release.

The company said its European, Asian, South American, Mexican and Canadian operations were not included in the filing.

"We have moved aggressively to reduce our costs and eliminate capacity to offset the negative effects of the global economic slowdown," chairman and chief executive officer Steven J. Demetriou said in the release.

"However, given the unpredictability of the speed and severity of the downturn over the last few months, these actions were not sufficient to counter the combination of challenges Aleris faces, including a sharp deterioration in demand for our products by the automotive, housing, and general industrial products sectors and an unprecedented decline in aluminum prices, which limited our borrowing ability.

"After careful deliberation with our advisors, the company's board of directors concluded that seeking the protection of Chapter 11 for our U.S. operations is the only option to preserve and maximize value for all of our economic stakeholders.

"This should allow us the time to work through the current dislocations and the opportunity to pursue a financial and operational restructuring that creates a more competitive foundation for the long term."

To fund its global operations during the restructuring, Aleris has secured $1.075 billion of debtor-in possession financing, including a new $500 million term loan and a $575 million revolving credit facility that replaces Aleris' previous revolver.

Proceeds of the DIP financing will be used for the company's normal operating and working capital requirements, including employee wages and benefits, supplier payments, and other operating expenses during the reorganization process.

Deutsche Bank AG New York Branch is the administrative agent, and Deutsche Bank Securities, Inc. is the arranger, bookrunner and syndication agent.

The facility will mature on the earliest of 12 months, the effective date of a reorganization plan and 45 days after the interim order if the final order has not been entered.

Interest on U.S. dollar term loans will be Libor plus 1,000 basis points, with a 3% Libor floor; interest on Euro term loans will be Eurobor plus 600 bps with a 3% Eurobor floor; and interest on the roll-up portion of the term loan facility will be either 12.5% paid in kind or 10% cash, at Aleris' option.

Meanwhile, interest on the ABL facility will be Base rate plus 550 bps, with a 4% floor, for Base rate loans and either Eurodollar rate or Libor plus 650 bps, each with a 3% floor.

The company is requesting interim access to $150 million of the DIP financing.

Debt details

According to the release, Aleris reported $4.9 billion in total assets and $4.2 billion in total debt as of Sept. 30.

The company's largest unsecured creditors include:

• Indenture trustee LaSalle Bank NA, Chicago, with a $600 million claim for the company's 9% senior notes due Dec. 15, 2014, a $400 million claim for its 10% senior subordinated notes due Dec. 15, 2016 and a $105.4 million claim for its 9% new senior notes due Dec. 15, 2014;

• Rusal America Corp., Harrison, N.Y., with a $7.85 million trade vendor claim;

• Glencore Ltd., Stamford, Conn., with a $7.03 million trade vendor claim;

• Trustee JPMorgan Chase Bank, Houston, with a $4.74 million claim for the company's 7.65% revenue bonds series 1996 due May 1, 2016, a $4.6 million claim for the 7.45% revenue bonds series 1997 due May 1, 2022 and a $4.1 million claim for the 6% revenue bonds series 1998 due May 1, 2023;

• McKinsey & Co., Chicago, with a $2.56 million trade vendor claim;

• United Scrap Metal Inc. Metal Buyers & Recyclers, Cicero, Ill., with a $2.21 million trade vendor claim;

• Schnitzer Northeast, Portland, Ore., with a $2.07 million trade vendor claim;

• Huron Valley Steel Corp., Trenton, Mich., with a $1.89 million trade vendor claim;

• Commercial Metals Co., Irving, Texas, with a $1.58 million trade claim; and

• Ferropem - Silicon division, Medina, Ohio, with a $1.46 million trade vendor claim.

Aleris is a Beachwood, Ohio-based producer of aluminum rolled products and extrusions, aluminum recycling and specification alloy. Its Chapter 11 case number is 09-10478.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.