CHICAGO Ormet Corp.
struggled to find companies interested in buying the primary
aluminum producer before it filed for bankruptcy protection
last month, court documents show.
Hannibal, Ohio-based Ormet, in
conjunction with investment banker Evercore Partners, reached
out to 21 parties, of which nine expressed initial interest and
entered into nondisclosure agreements. But only two of those
nine expressed interest in a possible transaction, and "neither
was willing to provide terms or conditions to move forward with
a possible sale," according to documents filed Feb. 25 in U.S.
Bankruptcy Court in Delaware.
The only concrete offer came
from Smelter Acquisition LLC, the documents said. Smelter
Acquisition is owned by private equity firm Wayzata (Minn.)
Investment Partners LLC, affiliates of which own at least 5
percent of Ormet (
amm.com, Feb. 26).
The documents also cite the
difficulties that pushed Ormet to file for bankruptcy
protection Feb. 25 as it struggled with high power and legacy
costs, as well as low aluminum prices.
"Recent years have demonstrated
the risks inherent in operating a business with revenues
directly tied to the price of internationally traded
commodities," court documents said.
For example, in late 2010 and
early 2011, London Metal Exchange (LME) aluminum prices were
rising. With prices up and in an effort to cut costs as well as
boost revenue, Ormet decided to restart its
540,000-ton-per-year alumina refinery in Burnside, La., court
documents stated. Ormet restarted the facility in November 2011
amm.com, March 20).
In April 2011, LME aluminum
prices hit a peak of approximately $2,775 per tonne, but over
the next 16 months they dropped to a low of less than $1,800
per tonne, according to court documents. "Given the current
expenses necessary to run the smelter, even at $2,150 (per)
tonne, the price of aluminum is insufficient for the company to
maintain profitability," the document read.
The company looked for ways to
buy more time, obtaining approval from the Public Utility
Commission of Ohio to defer $27 million in electricity payments
to American Electric Power Co. (
amm.com, Oct. 17). Ormet also reached an agreement
with the Pension Benefit Guaranty Corp. to hold off on a lien
on a missed minimum funding contribution due Jan. 15, thereby
providing the company another $3.3 million.
But those efforts ultimately
fell short. "The opportunities for further liquidity easing and
additional time have now passed," the documents said.
Ormet filed to hold a hearing to
approve any sale of the companys assets no later than May
15, according to court documents dated Feb. 27. The company
also wants to hold a March 20 hearing on bidding procedures,
with objections to the process due March 13.