Asset sales not required for Chemtura reorganisation

By Joseph Chang

NEW YORK (ICIS news)--Chemtura chief executive Craig Rogerson would not comment on reports of potential asset sales but said on Friday such sales would not be necessary in order for the US specialties producer to emerge from bankruptcy.

“Asset sales are not a requirement of filing our plan of reorganisation,” said Rogerson, who is also chairman and president of the company.

Rogerson declined to comment on whether any asset sales were ongoing.

However, “Project Hoover” and “Project Cloud” were mentioned under “merger and acquisition activity” in a 15 December filing to the US bankruptcy court by Chemtura’s financial advisor, Lazard, outlining $1.05m (€0.73m) in fees and expenses billed to Chemtura from July to October 2009.

During the period, of the 1,874 hours billed, 955 hours were for “merger and acquisition activity,” according to the document.

Among the M&A activities were multiple references to Project Hoover and Project Cloud throughout the period.

Project Hoover was also mentioned in a 16 December filing to the US bankruptcy court by law firm Baker & McKenzie billing Chemtura for $456,963 in fees for services from July to October.

“This project matter describes Baker’s services provided in connection with the marketing and sale of certain of the Debtors’ international subsidiaries,” states the document.

“Baker is lead corporate counsel for the Debtors in a contemplated transaction, providing all necessary legal support during the marketing process as well as specific negotiations with potential ‘stalking horse’ purchasers…,” it added.

A stalking horse bid is a binding offer made for a bankrupt company’s assets but it is subject to a higher bid being made through an auction process. Any offer has to be approved by the bankruptcy court.

Baker billed Chemtura $281,219 in fees and $3,437 in expenses for 606 hours relating to Project Hoover.

On 17 August, ICIS reported that Chemtura had put up its polyvinyl chloride (PVC) assets on the selling block, according to a source in the financial community.

On Thursday, Chemtura pushed back its target to emerge from bankruptcy from March 2010, to the summer of 2010, to fully evaluate the more than 14,000 claims against the company.

“Like many other chemical companies, we have a variety of product liability and environmental liability claims. Now we have to analyse the validity and potential value of these claims,” said Rogerson.

“We need to get a relatively narrower range of numbers to give some level of certainty - both to people who could have equity in the new company as well as to the banks for the exit financing,” he added.

Rogerson said a court decision on the formation of an official equity committee of Chemtura shareholders would be based on incomplete information.

The Chemtura Stock Alliance, representing shareholders controlling 33m shares, or 13.6% of the 243m outstanding common shares, is seeking the formation of an official equity committee to represent the interests of shareholders.

“I don’t know if it’s a good or bad idea. The bankruptcy code says there has to be potential for substantial recovery of equity - that depends on the valuation of the company based on our 5-year long-range plan, and the potential value of these claims,” said Rogerson.

“Until we have more certainty, it’s tough to determine whether there will be substantial recovery. It will be or won’t be formed based on information that’s still being developed,” he added.

A plan of reorganisation must be filed a minimum of 90 days before a company emerges from Chapter 11 bankruptcy, noted Rogerson.

“We will emerge from bankruptcy with a very strong balance sheet and a portfolio of specialty chemical companies that are positioned for profitable growth,” he said.

“We will manage that portfolio actively, both with regard to M&A and divestitures. Plus, we are executing plans to be more nimble and customer-focused,” he added.

Chemtura businesses include bromine and intermediates, flame retardants, fumigants, plastic chemicals and rubber chemicals, among others.

($1 = €0.70)

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