Kaiser files for protection (February 12, 2002)

Faced with a heavy debt load, depressed metal prices and a broad economic slowdown, Houston-based Kaiser Aluminum (KLU-N) and its operating subsidiary Kaiser Aluminum & Chemical filed for protection from its creditors under Chapter 11 of the U.S. federal bankruptcy laws on Tuesday.

The company also cites the heavy burden of asbestos-related litigation and medical and pension costs.

Kaiser’s president and CEO Jack Hockema said in a prepared statement, "The decision to seek protection under Chapter 11 will provide Kaiser with the opportunity to reorganize its financial structure and implement a strategic plan to return to sustained profitability.

Not included under the filing are Kaiser’s: 65%-owned Alpart alumina refinery and 49%-owned Kaiser Jamaica Bauxite Co. in Jamaica; the 20%-owned QAL alumina refinery in Australia; the 90%-owned Valco aluminum smelter in Ghana; the 49%-owned Anglesey aluminum smelter in Wales, and the 100%-owned extrusion plant in Ontario.

The company says it has taken steps to ensure that its participation in each the operations, including certain costs and expenses, will remain unaffected by the filings.

In conjunction with the filing, Kaiser has executed a definitive loan agreement with Bank of America for US$300 million in Debtor in Possession financing, subject to Bankruptcy Court approval. The financing, plus the company’s current invested cash, should be enough to cover operating needs while it restructures its business. The company says the production and shipment of bauxite, alumina, primary aluminum products and fabricated aluminum products will continue uninterrupted.

Kaiser raised a red flag at the end of January when it warned it would not make a Feb. 1 US$25.5-million interest payment on its 12.75% senior subordinated notes and would delay the release of its fourth-quarter earnings. In mid-December, the company warned that fourth-quarter losses could come to between US35 and US45 per share, excluding unusual items.

Also at that time, the company cautioned that it might miss principal and interest payments on its 9.875% senior notes slated for Feb. 15., plus interest due April 15 on its 10.875% senior notes.

After dipping below US30 early on Tuesday, Kaiser’s shares recovered slightly by late-afternoon to sit at US35, 16 or 31% off its previous close on the New York Stock Exchange. Over the past 52 weeks, the shares have traded in a US40-to-US4.90 range.