Most Read Contributor in United States, April 2016
On February 25, 2013 (the "Petition Date"), Ormet
Corporation and various related entities filed chapter 11 petitions
for bankruptcy in the United States Bankruptcy Court for the
District of Delaware. As stated in the company's
Declaration in Support of First-Day Motions and
Applications (the "Decl.") at *4, Ormet began in
1956 as an aluminum manufacturer at a facility along the
Ohio River in Hannibal, Ohio. By 2004, the company had grown
to eight facilities in six states with operations that
included aluminum production, rolling, recycling and
Low prices for aluminum and high energy costs forced the company
to file for bankruptcy protection in Ohio in January of
2004. The Bankruptcy Court for the Southern District of Ohio
confirmed Ormet's plan of reorganization in December of
2004. Decl. at *5. As the company enters bankruptcy a
second time, this time in Delaware, Ormet operates an aluminum
smelter facility in Hannibal Ohio (256 acres) and a refinery
in Burnside, Louisiana (1,100 acres). Decl. at *7. In
the weeks leading up to bankruptcy, Ormet employed over 1,100
individuals, 977 of which are represented by the United Steel,
Paper and Forestry, Rubber, Manufacturing, Energy, Allied
Industrial and Service Workers International Union. Decl. at
Reasons for Filing Bankruptcy
According to the company's Declaration, Ormet "is
seeking the protections of chapter 11 of the Bankruptcy Code to
provide breathing room to facilitate a sale of the Company's
assets, maintain operations and maximize the value for the benefit
of the Company, its estates, and the
parties-in-interest." Decl. at *17. Ormet saw a
substantial rise in the price of aluminum in 2010 and 2011.
Based on the increase in prices, the company decided to re-start
its Burnside Refinery in order to produce alumina, a key ingredient
in aluminum production. Id. Since April of 2011, however,
the company has watched aluminum prices drop over $900 per metric
tonne. Id. For each $100 per tonne drop in the price of
aluminum, Ormet experiences a $27 million drop in annual revenue.
Aside from a drop in aluminum prices, Ormet is also experiencing
a rise in costs for electricity, raw materials and employee related
(pension) expenses. Decl. at *17. The company describes its
financial situation over the last six months as a "perfect
storm" that has resulted in a drop in liquidity.
Objectives in Bankruptcy
Prior to filing for bankruptcy, Ormet implemented a program to
improve liquidity by delaying payments for electricity and pension
benefits. Decl. at *18. The company also embarked on a
marketing campaign looking for a potential buyer of Ormet's
assets or equity. Decl. at *19. Despite contacting 21
potential purchasers, none were willing to provide terms or
conditions for a potential sale. Instead, Ormet received a single
offer from an affiliate of its secured lender.That lender has put
together an offer pursuant to a stalking horse purchase
agreement. Id. Under the purchase agreement,
Ormet's lender has agreed to purchase substantially all of the
company's assets subject to higher and better offers. The
lender will also provide an additional $30 million in new money
which will provide the company with the postpetition financing
needed to run a chapter 11 auction and seek related relief through
the bankruptcy court. Decl. at *21.
The Ormet bankruptcy is before Judge Mary F. Walrath.
Ormet is represented by the law firm Morris, Nichols, Arsht &
Tunnell LLP. The case is proceeding under case no.
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As referenced in a prior post, on April 7th, Pacific Sunwear of California, Inc. (aka PacSun, aka Pacific Sunwear) filed for chapter 11 protection in the United States Bankruptcy Court for the District of Delaware.