Ormet granted conditional approval of wind-down budget, DIP facility

By Jim Witters

Wilmington, Del., Dec. 3 - Ormet Corp. was granted conditional approval of its revised wind-down plan and debtor-in-possession financing facility during a Dec. 3 hearing in the U.S. Bankruptcy Court for the District of Delaware.

Judge Mary F. Walrath told the debtors' attorneys that she could not approve the proposed budget, which ran through Jan. 31, because of a pending motion from the U.S. Trustee's Office to convert the case to Chapter 7.

A hearing on the conversion motion has been pushed to Dec. 13 to allow Ormet time to close a $39.4 million sale of its Burnside, La., plant to Almatis, Inc.

The judge granted approval of the DIP facility and the budget only through Dec. 13.

Richard Schepacarter, representing the U.S. Trustee's Office, said that after the Burnside transaction closes, conversion to Chapter 7 "should be the ultimate outcome of this case."

"The Burnside closing is the turning point," he said.

Ormet attorney Kim Martin Lewis said she expects the Almatis transaction to close on Dec. 12.

If the closing is delayed, Almatis will be required to pay a $600,000 fee to retain its option.

The Almatis funding, which includes an initial $2 million deposit, is being used to keep the Burnside plant on "hot idle" so production can resume when a new owner takes over.

After the Burnside sale is complete, Ormet will be left with the assets of its plant in Hannibal, Ohio.

The company has been marketing excess inventory at the Hannibal facility and has been working with lenders Wells Fargo Capital Finance, LLC, Wells Fargo Bank, NA and Wayzata Investment Partners, LLC on a process for liquidating all the Hannibal assets, Lewis said.

The DIP facility amendments provide an additional $10 million under the term loan, bringing the total facility to $35 million, and an additional $10 million of availability under the revolving loan, increasing the total facility to $50 million.

Attorney Mark Minuti, representing Sunstone Development Co., Ltd., renewed his client's objection to the wind-down budget, which includes the payment of some administrative claims, but not Sunstone's.

Judge Walrath has allowed Ormet to pay go-forward administrative expenses and some other administrative claims required under the debtors' Oct. 8 default under the DIP agreement.

Minuti claims any proceeds from the sale of anodes at the Hannibal plant should flow to Sunstone, because Ormet has not paid the $8.7 million due on the pre-petition delivery.

Ormet and its lenders have agreed that any proceeds from the sale of Sunstone anodes will be placed in escrow until the claims are sorted out.

Sunstone has joined the U.S. Trustee in seeking conversion of the case to Chapter 7.

Ormet, a Hannibal, Ohio-based producer of aluminum, filed for bankruptcy on Feb. 26, 2013 in the U.S. Bankruptcy Court for the District of Delaware. The Chapter 11 case number is 13-10334.

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