Horsehead Holding Seeks Bankruptcy Protection -- Update

By Peg Brickley 

Horsehead Holding Corp., a maker of zinc-based products, filed for chapter 11 bankruptcy protection Tuesday, hit by low commodity prices and weaker global demand for base metals.

The Pittsburgh, company is carrying $420.7 million in funded debt, secured and unsecured, court papers say.

Horsehead is in talks with senior secured bondholders about a deal that would require it to file a chapter 11 reorganization plan within 40 days, and get out of bankruptcy within 130 days of the bankruptcy filing.

Horsehead sought chapter 11 protection following a move on Jan. 5 by Macquarie Bank Ltd., as the agent for lenders. Macquarie declared a default on a loan and froze some of Horsehead's bank accounts, further stressing the company's liquidity.

In a filing with the U.S. Bankruptcy Court in Wilmington, Del., Horsehead sought approval for a $90 million bankruptcy loan. The financing is coming from holders of more than 80% of the secured notes, a $205 million issue of debt that is the single largest class of funded debt in the capital structure. The same set of investors is believed to own or control about 80% of the unsecured bond debt, according to Horsehead's lawyers.

Horsehead needs access to cash to avert a hard shutdown that could create environmental trouble, court papers say. The company handles, transports and recycles approximately 60% of all the electronic arc furnace dust generated by the North American steel industry. EAF dust is classified a hazardous waste, and if Horsehead stops operations, there isn't enough alternative capacity to handle the volume Horsehead now handles, the company says. Money from the bankruptcy financing "is an immediate solution to this dire liquidity need," Horsehead's lawyers said.

Operational problems at a North Carolina zinc processing facility have amplified the macroeconomic factors that made Horsehead's debt load difficult to carry, according to a declaration from James Hensler, chairman, president and chief executive officer of Horsehead.

Construction began on the facility in 2011, which uses state-of-the-art technology for processing zinc. Cost overruns and the inability to get the facility up to full capacity caused Horsehead to temporarily halt production at the North Carolina plant.

Horsehead Holdings is the parent company of three entities that produce zinc metal and zinc oxide and recycle other materials, including nickel-bearing waste, in North America. Its products are used in the galvanizing of steel products and as components in rubber tires, alkaline batteries, paint, chemicals and pharmaceuticals.

--Stephanie Gleason contributed to this article.

Write to Peg Brickley at [e-mail]

(END) Dow Jones Newswires

February 02, 2016 10:47 ET (15:47 GMT)

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