TROY, MI — Intermet Corp. announced this week that it has filed for voluntary Chapter 11 reorganization with the U.S. Bankruptcy Court in the Eastern District of Michigan. Intermet’s European operations are not included in the Chapter 11 filing.
Intermet said it filed for Chapter 11 in response to the unprecedented rise in raw-material costs, especially for scrap steel, in North America and Europe. Intermet’s cost of scrap steel has increased from an average of approximately $160 per ton at the beginning of 2003 to approximately $395 per ton at the end of August 2004. The company announced earlier this month that raw-material price increases had contributed greatly to a projected loss for the third quarter of 2004.
The company said it expects manufacturing operations to continue without interruption during the reorganization proceedings. To finance its operations and continue an uninterrupted supply of products to its customers, Intermet has applied to the Bankruptcy Court for interim use of cash collateral with the consent of the agent for the lenders that have a security interest in the cash. The company believes that this source of funds, if permitted for use by the Bankruptcy Court, should be sufficient to operate the business at least through mid-October.
To strengthen its liquidity, Intermet has been negotiating secured debtor-in-possession (DIP) financing packages of up to $50 million in principal amount with various of its pre-petition lenders. One firm commitment and another detailed proposal have been received and are under review by the company, with resolution expected in a matter of days. In either case, the DIP financing would be subject to various conditions, including satisfactory results of a due diligence investigation and approval by the Bankruptcy Court. Approval by the pre-petition lenders also might be required.
Gary Ruff, chairman and CEO of Intermet, said the company decided to file under Chapter 11 to provide a measure of stability and protection to all of its constituents, by being able to pursue a comprehensive restructuring.
Intermet and its financial advisor Conway MacKenzie & Dunleavy are developing a restructuring plan, which will be subject to confirmation by the Bankruptcy Court. This plan include a complete review of the company’s current financial condition along with an extensive evaluation of manufacturing operations in North America. Intermet said its restructuring plan will encompass raw-material cost-recovery practices that will be developed in cooperation with its customers and that more accurately reflect current market conditions; improvements in the company’s manufacturing operations; and a revised capital structure.
For more information about Intermet, go to: www.intermet.com.
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