Vertellus files bankruptcy, gets $453.8 million lead bid from lenders

By Caroline Salls

Pittsburgh, May 31 – Vertellus Specialties Inc., parent Vertellus Specialties Holding Corp. and U.S.-based subsidiaries filed Chapter 11 bankruptcy Tuesday in the U.S. Bankruptcy Court for the District of Delaware to implement an agreement under which the company’s existing term loan lenders would purchase substantially all of Vertellus Specialties Inc.’s U.S. and international assets for $453.8 million, according to a news release.

Vertellus said the agreement would provide long-term financial stability, allow the company to maintain production and give it the opportunity to implement its go-forward business strategy under the leadership of its existing management team.

The agreement provides for a credit bid by the Vertellus term loan lenders for substantially all of the debtors’ assets, assumption of specified liabilities and funding for payment of administrative expenses claims and wind-down expenses.

If the lenders are not the high bidders for the assets, the company will pay a 3% break-up fee and reimburse the lenders’ sale-related expenses.

Competing bids are due by 4 p.m. ET on Aug. 15 and must at least equal the amount of the stalking horse bid, plus the break-up fee, expense reimbursement and a $500,000 minimum initial overbid amount. An auction will be held on Aug. 18, if necessary. The minimum bidding increment at the auction will be $500,000.

The sale hearing is scheduled for Aug. 23.

The company said it expects to complete the sale process within the next three to four months.

Affected entities

The Chapter 11 filings do not include Vertellus’ international entities in Belgium, the United Kingdom, India and China, although these entities are included in the sale process.

The Chapter 11 case also does not include Vertellus Performance Chemicals, which has separate financing agreements in place. Vertellus Performance Chemicals is not included in the agreement with lenders and will remain under the ownership of Wind Point Partners.

“After evaluating a range of options to address the competitive and macroeconomic challenges facing our agriculture and nutrition business and the corresponding impact on our company’s overall financial performance, it became clear that a sale of the company through the Chapter 11 process was the best, most efficient means of creating a sustainable financial structure for our company,” president and chief executive officer Richard Preziotti said in the release.

“We believe this is a positive outcome for our business, as well as our employees, customers and suppliers, because it allows us to significantly reduce our debt, realize the full benefits of the operational improvements we have already made and position our company for future growth.”

Vertellus said it intends to continue normal operations in all of its plants and corporate offices throughout this process, ensuring its continued ability to fulfill customer orders as usual.

DIP financing

To that end, the company said it secured a commitment from its existing lenders for $110 million of new debtor-in-possession financing to ensure continuity through the sale process.

Wilmington Trust, NA is the administrative and collateral agent for the DIP financing.

Interest on Base rate loans will be the adjusted Base rate plus 800 basis points, and interest on Eurodollar loans will be Eurodollar plus 900 bps.

The facility will mature in 180 days, subject to an 18-month extension.

The company is seeking interim access to $100 million of the DIP financing.

Vertellus also filed motions that would allow its businesses to continue employee wages, medical benefits and other programs without interruption and to pay suppliers on a timely basis for all goods and services delivered on or after May 31.

Debt details

According to court documents, Vertellus has $100 million to $500 million in assets and $500 million to $1 billion in debt.

The company’s largest unsecured creditors are the Pension Benefit Guaranty Corp., based in Washington, D.C., with a pension claim in a to-be-determined amount and Arsenal Capital of New York, with a note claim in a to-be-determined amount. As of Dec. 31, the company had a total of $576 million in total assets and $710 million in total debt.

The company is advised in this transaction by DLA Piper, Jefferies and FTI Consulting. The lenders are advised in this transaction by Milbank, Tweed and Moelis & Co.

Vertellus is an Indianapolis-based provider of specialty chemicals for the agriculture, nutrition, pharmaceutical and medical, personal care, plastics, coatings and industrial markets. The Chapter 11 case number is 16-11290.

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