’s (Middlebury, CT) U.S. operations voluntarily filed for bankruptcy in a bid to restructure debt some 12 days before a credit-waiver agreement was set to expire. The announcement of the Chapter 11 filing with the U.S. Bankruptcy Court for the Southern District of New York came on the evening of March 18 along with news the company had secured a commitment for $400 million of debtor-in-possession financing from Citibank. The move includes Chemtura and 26 of its U.S. affiliates, but not its overseas businesses.
Craig Rogerson, Chemtura’s chairman, president, and CEO said in a release, “Like other companies in our industry and around the world, Chemtura’s order volumes have declined markedly in recent months due to the impact of the global economic recession on our customers and the industries they serve,” adding the order downturn had impinged liquidity and cash flow. The company had attempted to improve its cash position in several ways, including a bid in February to sell its crop-protection and petroleum-additive businesses, but the failure to find a buyer and anticipated expiration of its bank waiver led the business to opt for a voluntary restructuring.
As its situation worsened towards the end of 2008, Rogerson was elected as president, chief executive, and chairman of the board on Dec. 8, following the resignation of former head, Robert L. Wood. On Dec. 11, Chemtura announced that it would look to reduce costs and improve liquidity through a series of steps, including cutting headcount by 500 or approximately 20%, suspending dividend payments, reducing inventories, slicing fixed costs by $50 million, and adjusting production rates.
On Feb. 25, Chemtura announced plans to further cut inventories and restrict fiscal-year 2009 capital expenditures to approximately $60 million, compared to around $165 million in capital expenditures for 2008. Working on a “make-to-order” basis, the company lowered inventories by $109 million or 15% in the fourth quarter.
For the final quarter of 2008, Chemtura announced a net loss of $737 million, with net sales down 23% from $891 million in the fourth quarter of 2007 to $690 million for the final three months of last year. At the time, Rogerson called the decline in operating profitability “unprecedented” and said Chemtura had been forced to seek relief from the two financial covenants under its senior credit facility. Chemtura’s lenders granted the company a 90-day amendment and waiver agreement that commenced Dec. 30, 2008 and was scheduled to expire March 30.
Rogerson said its Polymer Additives business saw the greatest impact from the “deepening recession” with revenues off by 35% or $154 million for Q4 2008 compared with the fourth quarter of 2007. That included a $46 million reduction from the sales of its oleochemicals and organic peroxides businesses.
In its fourth quarter earnings statement, Chemtura warned how dire the situation it faced was, saying if it needed cash supply for day-to-day operations above and beyond its credit line and accounts receivable “there is no guarantee that the company can obtain additional liquidity on commercially reasonable terms, if at all.”
Chemtura was formed in 2005 through the merger of Great Lakes Chemical and Crompton. —[email protected]