Chemtura Got Court Approval for $1 Billion Agreement to Finance Bankruptcy Emergence
Chemtura Corp a manufacturer of numerous specialty chemicals needed by other businesses was granted by the court permission to enter an agreement to fund the plastic-additives maker's escape from bankruptcy with about $1 billion in new debt.
As a successor to Crompton & Knowles Corp., a chemical manufacturer since 1954, Chemtura said it was choked with "legacy liabilities" from mergers including the 1996 acquisition of Uniroyal Chemical Co., a 1999 merger with Witco and the 2005 acquirement of Great Lakes Chemical Corp.
Robert Gerber a U.S. Bankruptcy Judge in Manhattan said Chemtura can accept loan of $275 million in a revolving credit facility and as much as $750 million through an unsecured term loan or notes. Gerber also granted Chemtura's Canadian branch to join in the U.S. Bankruptcy case of its parent company.
According to Bloomberg the company's Canadian unit filed for Chapter 11 last August 8, the day before its parent company won court approval. That case will allow Chemtura to resolve accountability from a chemical known as diacetyl, used as an additive for food products like microwave popcorn, to add butter flavor to it.
Bloomberg also reported that the company filed its restructuring plan in July and will prefund new debt of somewhere between $23.1 million and $34.3 million, with breakup fees that could soar as high as $32.5 million.
Bank of America Corp., with joint lead arrangers Banc of America Securities LLC and Wells Fargo Capital Finance LLC will be the agent for the loan. Chemtura Corp. Will request for final approval for the financing when it affirms a Chapter 11 plan.
Chemtura made preliminary agreement with some governmental agencies battling for about $2 billion in cleanup costs. The company, which filed for bankruptcy protection in March 2009, brought legal charges against the United States and several states, saying it should be able to drop some environmental claims because of its bankruptcy. The United States won its bid to have the case transferred to district court from bankruptcy court.
The United States said in court papers, that as many as 197 sites may be included,. The Environmental Protection Agency demanded for about $2 billion in cleanup costs for at least 19 sites where it affirms Chemtura is partly responsible. The largest estimated cost, $1 billion, is for a cleanup of the Gowanus Canal in Brooklyn, N.Y.
Plastics News, industry's news source, reported that Chemtura plans to put the notes it receives into escrow, and will use proceeds from that to make payments and further fund the rise from bankruptcy. The company's final bankruptcy hearing is scheduled for September 16.
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