American Aluminum producer Ormet Corporation has filed for bankruptcy and secured Debtor-in-Possession (DIP) financing from Wayzata Investment Partners and Wells Fargo to advance a proposed debt restructuring.
Wayzata has committed $30m in DIP financing while Wells Fargo said it will to provide a $60m DIP facility, which will replace its $60m pre-petition revolver with Ormet.
Ormet filed for voluntary Chapter 11 Petition at the US Bankruptcy Court in the District of Delaware on Monday to facilitate the restructuring.
The deal with Wayzata, Ormet's largest pre-petition lender, also includes a definitive asset purchase agreement, under which the lender can purchase all the company's assets, subject to a better offer and approval from the Bankruptcy Court.
As part of the purchase agreement, Wayzata will undertake repayment or assumption of the DIP loans, provide $130m in prepetition debt forgiveness, $1m of buyer securities, and a cash payment for certain fees and expenses to be incurred during the bankruptcy proceedings.
Following court approval, funds will enable Ormet to meet ongoing obligations and continued operations without interruption.
Ormet president and CEO Mike Tanchuk said; "The Chapter 11 filing will allow Ormet to accomplish two important goals. First, to sell the company in a controlled process that is designed to ensure that the highest and best offer is received. Second, to restructure the debt and legacy costs while operations continue.
"We will come out of this process stronger and better positioned for the future," Tanchuk said.
Tanchuk noted that the company tried to repay high debt and legacy costs during very difficult financial times, which affected profitability.
"However, with a low metal price and higher power costs, we no longer have the financial liquidity to continue to do this," Tanchuk added.