March 14, 2007 — A federal bankruptcy court judge has approved Citation Corp.'s motion to continue business as usual, two days after the metalcaster filed its recapitalization plan. The group's strategy, which is largely endorsed and supported by its creditors, is to improve its balance sheet by converting most of its long-term debt into new equity.
While the plan has not been approved, Judge Tamara O. Mitchell agreed there is no need to seek concessions from Citation's creditors. She granted Citation the ability to pay unsecured creditors on schedule, including employees, suppliers and benefits carriers, and to accept existing contracts with customers.
Also, a $25-million debtor-in-possession financing facility was approved, to be used if available cash is not sufficient during the bankruptcy process.
Citation stated it has "significant cash on hand" following the sale of its Navisota, TX, forging operation and its Skokie, IL, iron foundry.
The company continues to stress that this move is different from its 2004 Chapter 11 bankruptcy. "This affects our balance sheet only, greatly reducing our debt and interest expense giving us an enviable financial position within our industry," stated Citation president and CEO Ed Buker. "This plan represents the missing piece in our continuing progress since we exited Chapter 11 in 2005."
Citation predicts the court proceedings will be completed, and the recapitalization will be confirmed, by April 5.