Aleris International files for bankruptcy protection
Posted by Robert Schoenberger/Plain Dealer Reporter
BEACHWOOD — Beachwood-based aluminum company Aleris International filed for bankruptcy protection Thursday, saying the financial drain of the weak economy was too great.
“Even though this is a tough process to go through, it will clearly make us a stronger company,” Aleris Chairman and Chief Executive Steven Demetriou said during an interview late Thursday. The owner of the Erie BayHawks NBA D-League squad added that Aleris’ operations are not the problem. The company’s massive debt load is.
The company will continue operating during bankruptcy, although it has already idled several plants in Indiana and North Carolina.
Aleris said it has arranged for $1.1 billion in financing (a $500 million loan and a $575 million credit arrangement) to keep it operating through bankruptcy. That financing will let it continue to pay employees and run facilities as it restructures.
The bulk of the company’s debt comes from its rapid expansion since its formation less than five years ago.
Investors formed Aleris in 2004 by merging Kentucky’s Commonwealth Aluminum with Texas-based IMCO Recycling. In 2006, the company went private when the Texas Pacific Group bought it for $3.3 billion.
The Texas Pacific purchase was a leveraged buyout, meaning the company borrowed nearly all the money for the purchase. Demetriou said the $2.5 billion in debt raised in 2006 is the main reason the company had to file for bankruptcy protection.
“At the time we did the deal, the $2.5 billion of debt we had was the right amount,” Demetriou said. At the time, aluminum prices were high and climbing, and analysts expected prices to increase for years.
But over the past six months, aluminum prices have tumbled along with steel, oil and other commodities.
“With today’s operating environment, clearly the debt is unsupportable,” Demetriou said. He added that the company may need to take other restructuring steps but that the main focus will be financial.
In its filing with the U.S. Bankruptcy Court in Delaware, Aleris said it had assets worth about $4.9 billion and about $4.2 billion in debt.
Under Chapter 11 of the U.S. Bankruptcy Code, companies can stop paying creditors while they work out new payment schedules. Typically, the company’s creditors end up owning most or all of the restructured company.
In Ohio, Aleris has its Beachwood headquarters and an aluminum rolling mill in Uhrichsville. The company had another mill in Walton Hills, but it was closed last year.
Only two of the company’s 30 largest creditors are in Northeast Ohio, according to the court filings. Aleris said it owes about $1.5 million to Ferropem, a Medina sales office for a European silicon company. Aleris owes $840,486 to Metal Conversions Ltd., a Mansfield company that makes aluminum-processing equipment.
Aleris’ European, Asian, South American, Mexican and Canadian operations were not included in the filing.
ADDITIONAL NOTES ABOUT DIE CASTING COMPANY CLOSURES:
Coast Die Casting Company closed their doors for a final time July 3, 2009. Coast Die Casting Company sold their business operations to Kinetic Die Casting Company.
