NEW MADRID, Mo. – Noranda Aluminum announced Monday they have initiated court-supervised restructuring under Chapter 11 of the United States Bankruptcy Code. Noranda has taken this action to have additional time and financial flexibility to evaluate options for its various business operations.
There has been a great deal of discussion about a potential legislative deal between Noranda and its energy provider Ameren Missouri. In light of the recent industrial incident and Monday’s bankruptcy filing, it appears that a legislative solution is the only way to maintain the employer’s presence in the bootheel.
“In light of the challenging market conditions for the aluminum industry and the recent disruptions in our primary business operations, the Board and management team, with the support of our principal lenders, determined that undertaking this court-supervised process is in the best interests of Noranda and its stakeholders,” Kip Smith, Noranda’s President and Chief Executive Officer, said. “We believe this court-supervised process will provide us with time and financial flexibility to evaluate options to enhance the sustainability of our major business operations.”
Noranda has also entered into an agreement for new debtor-in-possession (DIP) financing for up to $130 million with another commitment for up to $35 million in incremental DIP financing, for a total of $165 million in new financing which the company expects to enhance liquidity. The new financing will be used to maintain company operations as Noranda goes through the filing.
“Our objective is to stabilize our upstream operations as we explore ways to make them economically viable,” Smith said, describing the current operating status of each of the Company’s businesses. Our downstream Flat-Rolled Products business is profitable, generates positive cash flow and continues to serve customers in the ordinary course. As we move forward, we remain committed to strong relationships with our customers and suppliers and continuing our longstanding dedication to operational safety and environmental stewardship in our communities.”
Noranda has filed a number of customary motions seeking court authorization to support its business operations during the court-supervised process, including the payment of employee wages, salaries and health and disability benefits. The Company expects to receive court approval for these requests shortly. For goods and services provided post-Chapter 11 filing, the Company intends to pay suppliers in full under normal terms.
Noranda further expects to maintain the single remaining pot line at the New Madrid smelter until March 2016. At that point, all remaining operations at New Madrid will be curtailed, although Noranda will maintain the flexibility to restart operations at New Madrid should conditions allow.
The Missouri Industrial Electric Consumers (MIEC) is asking the Public Service Commission to grant Noranda a form of temporary rate relief, but some observers see Noranda’s borrowing needs requiring a more permanent solution to save the plant. Noranda expected to oppose to focus on a longterm legislative solution.
An electrical circuit failure in January 2016 resulted in the idling of two of the three pot lines at the New Madrid facility.
Ameren has already signed its intent to file a rate case with the PSC based of the loss of revenue from the smelter. Other consumer’s rates could increase as much as $60 million dollars a year if Noranda were to cease operations as well as crippling the economy in the bootheel of Missouri.
Rachael Herndon was the editor at The Missouri Times and also produced This Week in Missouri Politics, published Missouri Times Magazine, and co-hosted the #MoLeg podcast. She joined The Missouri Times in 2014, returning to political reporting after working as a campaign and legislative staffer.
Rachael studied at the University of Missouri – Columbia. She lives in Jefferson City with her husband, Brandon, and their two children.