Ormet Can Continue Operations Through Month's End, Judge Says

   By Stephanie Gleason 
 

A bankruptcy judge Thursday allowed Ormet Corp. (ORMTQ) to continue minimal operations through the end of November as it attempts to complete a sale of its Burnside, La., facility.

Absent this decision from Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., Almatis Inc. could have backed out of its offer to purchase the Burnside facility for $37 million. The sale of that facility would preserve more than 200 jobs and begin to repay the bankruptcy loan provided to Ormet to fund its Chapter 11 case. That sale could close by the end of the month.

Judge Walrath approved a budget that will permit Ormet to continue to pay some expenses as they come due, which will support an orderly winddown of the company and preventing a forced immediate shut down. She declined for now to convert the case to a Chapter 7 liquidation, which would have placed a trustee in control of the company going forward.

The budget drew ire from several creditor groups because it doesn't address payment of approximately $20 million in administrative claims.

American Electric Power Co. (AEP) is only being paid on a go-forward basis for power drawn since Oct. 31 under the terms of the approved budget. AEP won't be paid under this interim budget for power bills for July, September and October totalling approximately $10 million.

"We don't oppose the sale of Burnside--and that's a separate issue," Russell R. Johnson said on behalf of AEP during the hearing. "But this winddown budget is insufficient as drafted. It leaved AEP holding the bag."

The comment reflects what Richard L. Schepacarter from the office of the U.S. Trustee, which oversees bankruptcy cases on behalf of the U.S. Department of Justice, said has become "the tale of two cases," because of the extremely different circumstances surrounding the two facilities.

The sale of the facility in Burnside is a sort of "shining star," he said, where the facility will restart, preserving jobs and bringing money into the estate. On the other hand, the future of the smelter in Hannibal, Ohio, "is the problem in this case."

That facility is shut down, and Ormet plans to sell the raw materials and other assets present in the facility.

The Hannibal smelter is down to just 85 employees who are responsible for maintaining minimum operations to prevent the facility from contaminating the environment. Ormet said it hopes to find a purchaser for the facility, who could eventually restart operations there, an undertaking the company estimated would cost between $6 million and $8 million.

However, it hasn't identified a purchaser at this time, the company said.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Stephanie Gleason at [e-mail]

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