Aleris International Inc., a maker of rolled aluminum products that has been owned by
Those funds, managed by
Under the reorganization plan, holders of Aleris International’s U.S. and European term loans would have the option to receive cash or equity in the company and the chance to participate in the rights offering of securities. That money would be used to pay off its creditors as well as finance its operations after bankruptcy. The plan proposes wiping $2.5 billion from the company’s balance sheet, including nearly $1.196 billion in unsecured bond debt.
Prior to its bankruptcy filing, Aleris International was a portfolio company of TPG, which acquired the Beachwood, Ohio-based company in 2006 by delisting it from the New York Stock Exchange in a $3.3 billion deal. The company had been taking cost-cutting measures, but it was caught off guard by the speed and severity of the downturn. Hit hard by a sharp deterioration in demand for its automotive and housing-related products, the company filed for Chapter 11 bankruptcy protection in February 2009.
The three funds managed by Apollo, Oaktree Capital and Sankaty were among the providers of the company’s debtor-in-possession, or DIP, loan. At the time the company filed for bankruptcy protection, the tight credit markets forced it to put together a “roll-up” DIP loan, which encouraged those with secured claims to provide fresh money.
There were two portions to the DIP loan, a term loan of fresh money and a revolving credit facility. Lenders that participated in the $500 million term loan were allowed to roll their pre-petition claims into a $575 million revolving credit facility. That allowed them to accelerate the priority of those pre-petition loans, ensuring they would be repaid before lenders and creditors who did not partake in the roll-up.
Going forward, the company must put its reorganization plan to a vote of creditors and receive approval of a bankruptcy judge before it can exit Chapter 11. It expects to emerge in the first half of the year.
—Tom Hals is a Reuters correspondent based in Swarthmore, Pa.