Secondary Aluminum Supplier Aleris in Chapter 11

Feb. 19, 2009
Weak global demand forces restructuring effort
Aleris International Inc., a producer of secondary aluminum, has filed for bankruptcy. The Chapter 11 claim covers the corporation and its U.S. subsidiaries, but subsidiaries operating in Europe, Asia, South America, Mexico, and Canada are not affected. The company’s secondary aluminum operations include facilities Aleris acquired in its consolidation of IMCO Recycling, Wabash Alloys, and Alumitech Inc. Aleris also has operations that produce aluminum rolled products and aluminum extrusions. In its announcement, Aleris cites “financial constraints related to deteriorating demand, earnings, and liquidity caused by the steep decline in global economic conditions.” Chairman and CEO Steven J. Demetriou sad the Chapter 11 filing "is the only option to preserve and maximize value for all of our economic stakeholders. This should allow us the time to work through the current dislocations and the opportunity to pursue a financial and operational restructuring that creates a more competitive foundation for the long term.” He added that Aleris is conducting business as usual, that customers should maintain confidence that they will receive their orders “on time and as specified,” and that “suppliers can expect timely payment in full for all goods and services provided from today forward.” Aleris has secured debtor-in-possession financing, including a $500-million term loan and a $575-million revolving credit facility to replace its previous revolving credit arrangement. The company said the cash will cover normal operating and working capital requirements, including employee wages and benefits, supplier payments, and other operating expenses during the reorganization. "We have moved aggressively to reduce our costs and eliminate capacity to offset the negative effects of the global economic slowdown,” explained Demetriou. “However, given the unpredictability of the speed and severity of the downturn over the last few months, these actions were not sufficient to counter the combination of challenges Aleris faces, including a sharp deterioration in demand for our products by the automotive, housing, and general industrial products sectors and an unprecedented decline in aluminum prices which limited our borrowing ability." Rumors of a bankruptcy filing by Aleris have been circulating in recent weeks, including reports that it had hired a “restructuring specialist,” i.e., an investment banking group to address the financial community’s concerns and future interests in the company. Aleris was formed in 2004 by a merger of IMCO Recycling Inc. and Commonwealth Industries, and in 2006 it acquired several extrusion plants from Corus Plc.