Kaiser Aluminum Corporation said yesterday that the company and its operating subsidiary Kaiser Aluminum & Chemical Corporation and certain of its wholly owned subsidiaries have filed voluntary petitions under Chapter 11 of the Federal Bankruptcy Code in the US Bankruptcy Court for the District of Delaware.
In conjunction with the filing, the company expects to enter into definitive documentation for $300 million in Debtor-in-Possession (DIP) financing from Bank of America, subject to court approval.
Kaiser said that the DIP financing, in combination with the company’s current invested cash, should provide sufficient liquidity to meet its ongoing operating needs. Kaiser’s production and shipment of bauxite, alumina, primary aluminium products, and fabricated aluminium products will continue without interruption.
Kaiser has been facing significant near-term debt maturities at a time of unusually weak aluminum industry business conditions, depressed prices, and a broad economic slowdown that was further exacerbated by the events of September 11.
In addition, the company has become increasingly burdened by asbestos litigation and growing legacy obligations for retiree medical and pension costs. The confluence of these factors has created the prospect of continued operating losses and negative cash flow, resulting in lower credit ratings and an inability to access the capital markets.
In October 2001, Jack A. Hockema, who led the turnaround in Kaiser’s fabricated products businesses, was named the company’s President and Chief Executive Officer.
‘The decision to seek protection under Chapter 11 will provide Kaiser with the opportunity to reorganize its financial structure and implement a strategic plan to return to sustained profitability,’ said Hockema. ‘The reorganization process will also allow the company to expand on and quicken the pace of its operational improvements,’ he said.
Although the filing includes certain US subsidiaries through which the company holds an interest in foreign operations, it does not include the operations of the following entities: the 65%-owned Alpart alumina refinery and the 49%-owned Kaiser Jamaica Bauxite Company in Jamaica; the 20%-owned QAL alumina refinery in Australia; the 90%-owned Valco aluminium smelter in Ghana; the 49%-owned Anglesey aluminium smelter in Wales, or the 100%-owned extrusion plant in Ontario, Canada. In this regard, and in conjunction with expected approval of first-day court motions, Kaiser has taken appropriate steps designed to ensure that its participation in each of these entities, including the funding of certain costs and expenses, will not be impacted by the filings.