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.