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UPDATE 1-Noranda Aluminum hit by commodity crash, seeks bankruptcy

Published 2016-02-08, 02:19 p/m
© Reuters.  UPDATE 1-Noranda Aluminum hit by commodity crash, seeks bankruptcy
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(Adds details on sales process, underfunded pensions, legal
disputes and shares)
By Shivam Srivastava and Tracy Rucinski
Feb 8 (Reuters) - Noranda Aluminum Holding Corp NORN.PK ,
which smelts and refines aluminum and mines bauxite, filed for
bankruptcy on Monday and joined a growing list of
commodity-related businesses in Chapter 11.
Over the past year scores of commodity-related businesses
have filed for bankruptcy as prices for metals, energy and coal
have plummeted amid a slowdown in markets such as China and
Brazil.
Noranda is putting its profitable flat-rolled products
business up for sale to raise cash and is winding down a key
smelting plant in New Madrid, Missouri, where production will
halt around March, court documents showed.
The Franklin, Tennessee-based company, whose competitors
include Alcoa Inc (N:AA) AA.N and Kaiser Aluminum Corp KALU.O , said
challenging market conditions made business without court
protection unsustainable.
"This is due to a number of factors, principal among them is
the sustained and dramatic decline in the price of primary
aluminum," Chief Financial Officer Dale Boyles said in a filing
with the U.S. Bankruptcy Court of Eastern Missouri.
Noranda, with $530 million of secured debt, is seeking up to
$130 million in debtor-in-possession (DIP) financing to help
fund its business. It has already received commitments for about
$35 million.
A failure to achieve adequate funding could force it to idle
more facilities and liquidate on a piecemeal basis, CFO Boyles
said.
The company, with 1,857 employees, also faces about $159
million in underfunded pensions as of Dec. 31, 2015. It has four
collective bargaining agreements with two unions that represent
about 54 percent of its U.S. workforce.
It said it will continue to operate a St. Ann, Jamaica,
plant for bauxite that is refined into aluminum in its Gramercy,
Louisiana plant, which will also remain open.
However, Noranda is in dispute with a bankrupt subsidiary of
Glencore GLEN.L , Sherwin, over a supply contract at the
Jamaica plant and is also in arbitration with the Jamaican
government over an increased levy.
Noranda also owes another Glencore subsidiary nearly $17
million for payments under a credit agreement at the same plant.
Noranda, once owned by private equity firm Apollo Management
LP APOLO.UL , made its stock market debut in 2010 and traded at
more than $116 per share in 2011. The stock was recently
delisted from the New York Stock Exchange and now trades on the
pink sheets. It was last down 80 percent at 6.3 cents.
The case is in U.S. Bankruptcy Court, for the Eastern
District of Missouri, Case No 16-10083.

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