By Stephanie Gleason
A bankruptcy judge Thursday allowed Ormet Corp. (ORMTQ) to
continue minimal operations through the end of November as it
attempts to complete a sale of its Burnside, La., facility.
Absent this decision from Judge Mary Walrath of the U.S.
Bankruptcy Court in Wilmington, Del., Almatis Inc. could have
backed out of its offer to purchase the Burnside facility for $37
million. The sale of that facility would preserve more than 200
jobs and begin to repay the bankruptcy loan provided to Ormet to
fund its Chapter 11 case. That sale could close by the end of the
month.
Judge Walrath approved a budget that will permit Ormet to
continue to pay some expenses as they come due, which will support
an orderly winddown of the company and preventing a forced
immediate shut down. She declined for now to convert the case to a
Chapter 7 liquidation, which would have placed a trustee in control
of the company going forward.
The budget drew ire from several creditor groups because it
doesn't address payment of approximately $20 million in
administrative claims.
American Electric Power Co. (AEP) is only being paid on a
go-forward basis for power drawn since Oct. 31 under the terms of
the approved budget. AEP won't be paid under this interim budget
for power bills for July, September and October totalling
approximately $10 million.
"We don't oppose the sale of Burnside--and that's a separate
issue," Russell R. Johnson said on behalf of AEP during the
hearing. "But this winddown budget is insufficient as drafted. It
leaved AEP holding the bag."
The comment reflects what Richard L. Schepacarter from the
office of the U.S. Trustee, which oversees bankruptcy cases on
behalf of the U.S. Department of Justice, said has become "the tale
of two cases," because of the extremely different circumstances
surrounding the two facilities.
The sale of the facility in Burnside is a sort of "shining
star," he said, where the facility will restart, preserving jobs
and bringing money into the estate. On the other hand, the future
of the smelter in Hannibal, Ohio, "is the problem in this
case."
That facility is shut down, and Ormet plans to sell the raw
materials and other assets present in the facility.
The Hannibal smelter is down to just 85 employees who are
responsible for maintaining minimum operations to prevent the
facility from contaminating the environment. Ormet said it hopes to
find a purchaser for the facility, who could eventually restart
operations there, an undertaking the company estimated would cost
between $6 million and $8 million.
However, it hasn't identified a purchaser at this time, the
company said.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Stephanie Gleason at stephanie.gleason@wsj.com
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