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 coating.  Id. 

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 *8.

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.  Id.

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.  Id.

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. 13-10334(MFW).