Ormet seeks settlement OK; unsecured creditors to get $1 million more

By Jim Witters

Wilmington, Del., July 3 - Ormet Corp. is seeking court approval of an agreement that would bring general unsecured creditors an additional $1 million in recoveries and settle other issues surrounding the sale of the debtors' assets to an affiliate of Wayzata Investment Partners LLC, according to a July 2 filing with the U.S. Bankruptcy Court for the District of Delaware.

The agreement resolves the official committee of unsecured creditors' original objections to the $130 million sale of substantially all of Ormet's assets to stalking horse bidder Smelter Acquisition LLC.

The court approved that sale on June 3, with the understanding that the debtors, buyer and the creditors committee had negotiated a term sheet that would be formalized and filed later.

The committee and its advisers "engaged in a comprehensive investigation to determine whether the debtors' estates held any potential claims against the debtors, the Wayzata entities and the debtors' other secured lenders and whether there were grounds to object to the sale and [asset purchase agreement] in their original format," the filing states.

Settlement terms

The proposed agreement calls for the following:

• A trust for general unsecured creditors that would receive a $2 million unsecured note due in 2019. Previously, the note was to be for $1 million.

Wayzata maintains its right to participate in the proportional share distribution of recoveries to general unsecured creditors;

• A warrant authorizing the general unsecured creditors to receive 2.5% of the equity of the buyer.

The warrant, called Warrant A, carries a "strike price equal to a par plus accrued recovery with respect to the pre-petition term loan obligations owing as of the petition date and debtor-in-possession obligations, plus any additional loans made by the Wayzata entities or their affiliates into Smelter Acquisition LLC post-closing to fund the existing operations of the business, including any exit financing;"

• A warrant equal to 2% of the equity of the buyer at a strike price equal to 200% of the Warrant A strike price.

The Wayzata entities waive their right to participate in the warrant recoveries;

• The buyer will become the sponsor of the so-called IUKA pension plan for Ormet Aluminun Mill Products Corp.;

• Unless the buyer assumes the remaining pension plans, "the committee agrees that they shall support, and shall not object to or solicit others to object to, the termination of the remaining pension plans;"

• The buyer agrees not to bring business-related avoidance actions;

• The parties will exchange mutual releases; and

• The buyer will fund the costs and expenses to administer the trust, not to exceed $100,000.

A hearing to approve the settlement is scheduled for 10:30 a.m. ET on July 23.

Ormet, a Hannibal, Ohio-based producer of aluminum, filed for bankruptcy on Feb. 26. The Chapter 11 case number is 13-10334.

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