Kaiser Aluminum & Chemical Corp. has replaced a $300 million debtor-in-possession financing with a $200 million DIP revolver to continue operations while in Chapter 11. J.P. Morgan leads the new deal and has also committed to lead a five-year, $200 million exit financing and $50 million term loan when the company emerges from bankruptcy. The company's old DIP was set to expire in February 2005.
The company has exited most of the commodity business, which had greater volatility and required a larger DIP, said Scott Lamb, v.p. of investor relations at Kaiser. The new facility has some letters of credit posted against it, but no borrowings. Lamb said Kaiser is close to filing its plan of reorganization.
Bank of America led the old DIP, after leading the pre-petition bank debt. GE Capital, CIT Group andWells Fargo Foothill also took part in the lending group. CIT also participates in the new credit, which is in the process of being syndicated. In advance of that expiration, Kaiser talked to a number of parties about putting in a place a replacement DIP and lining up exit financing, Lamb said. The company did talk to B of A, but it decided to go with J.P. Morgan. "The package from J.P. Morgan was the one we found very attractive," Lamb said, declining to elaborate.
According to Lamb, a combination of circumstances prompted Kaiser's management to file for Chapter 11 with the aim of strengthening the company for longer-term prosperity. The terrorist attack of 9/11 brought a downturn in business. Asbestos and pension and retiree medical liabilities brought additional challenges. Soon it became evident Kaiser would find it difficult to refinance a $175 million debt maturity of 9 7/8% bonds coming due Feb. 2002, he noted. Kaiser filed for bankruptcy in Feb. 2002
Kaiser had a little more than $800 million in bonds outstanding at the time of the filing. Kaiser also had a $300 million revolver, but it had not been drawn. Lamb could not provide comment on the pricing of the old and new DIP facilities.
To exit bankruptcy, Kaiser decided to concentrate on its fabricated products business and is in the process of selling all of the company's aluminum smelters and aluminum refineries. Kaiser has sharpened its strategic focus, addressed its retiree and pension obligations, reached agreement on a term sheet that will resolve asbestos liabilities and has streamlined corporate overhead expenses, Lamb said.