Horsehead Holding Seeks Bankruptcy Protection -- Update
February 02 2016 - 11:02AM
Dow Jones News
By Peg Brickley
Horsehead Holding Corp., a maker of zinc-based products, filed
for chapter 11 bankruptcy protection Tuesday, hit by low commodity
prices and weaker global demand for base metals.
The Pittsburgh, company is carrying $420.7 million in funded
debt, secured and unsecured, court papers say.
Horsehead is in talks with senior secured bondholders about a
deal that would require it to file a chapter 11 reorganization plan
within 40 days, and get out of bankruptcy within 130 days of the
bankruptcy filing.
Horsehead sought chapter 11 protection following a move on Jan.
5 by Macquarie Bank Ltd., as the agent for lenders. Macquarie
declared a default on a loan and froze some of Horsehead's bank
accounts, further stressing the company's liquidity.
In a filing with the U.S. Bankruptcy Court in Wilmington, Del.,
Horsehead sought approval for a $90 million bankruptcy loan. The
financing is coming from holders of more than 80% of the secured
notes, a $205 million issue of debt that is the single largest
class of funded debt in the capital structure. The same set of
investors is believed to own or control about 80% of the unsecured
bond debt, according to Horsehead's lawyers.
Horsehead needs access to cash to avert a hard shutdown that
could create environmental trouble, court papers say. The company
handles, transports and recycles approximately 60% of all the
electronic arc furnace dust generated by the North American steel
industry. EAF dust is classified a hazardous waste, and if
Horsehead stops operations, there isn't enough alternative capacity
to handle the volume Horsehead now handles, the company says. Money
from the bankruptcy financing "is an immediate solution to this
dire liquidity need," Horsehead's lawyers said.
Operational problems at a North Carolina zinc processing
facility have amplified the macroeconomic factors that made
Horsehead's debt load difficult to carry, according to a
declaration from James Hensler, chairman, president and chief
executive officer of Horsehead.
Construction began on the facility in 2011, which uses
state-of-the-art technology for processing zinc. Cost overruns and
the inability to get the facility up to full capacity caused
Horsehead to temporarily halt production at the North Carolina
plant.
Horsehead Holdings is the parent company of three entities that
produce zinc metal and zinc oxide and recycle other materials,
including nickel-bearing waste, in North America. Its products are
used in the galvanizing of steel products and as components in
rubber tires, alkaline batteries, paint, chemicals and
pharmaceuticals.
--Stephanie Gleason contributed to this article.
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
February 02, 2016 10:47 ET (15:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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