Aleris Delays DIP Hearing as Lenders Flight

NEW YORK (Reuters) – Aleris International Inc TXPACA.UL, the bankrupt maker of aluminum rolled products, on Wednesday said it would delay a court hearing to approve its $1.075 billion bankruptcy loan as it works out details with its creditors.

The privately held aluminum recycler, which filed for bankruptcy on Feb 12, already has received interim court approval to access a portion of the loan. The loan, known as debtor-in-posession, or DIP financing, will be used to fund operations during the company’s restructuring efforts.

Several of the company’s creditors also have had disagreements with the company and each other about how the DIP loan is being structured.

Goldman Sachs Group Inc’s (GS.N) commodities unit J.Aron & Co earlier this week filed a complaint against Deutsche Bank (DBKGn.DE) in U.S. bankruptcy court this week, claiming Deutsche’s actions in organizing the loan had hurt the claims J.Aron has on the company’s assets.

Private equity firm TPG TPG.UL, which bought Aleris for about $1.7 billion in 2006 plus the assumption of around $1.6 billion in debt, also has lodged an objection to the loan. Deutsche Bank declined to comment on the complaint.

Aleris plans to build the bankruptcy loan out of a new $500 million term loan and a $575 million revolving credit facility, contributed by a group of lenders. Lenders creating the loan, were allowed to “roll up” portions of pre-bankruptcy loans into the revolving credit facility after providing new money into the DIP loan. The lenders who agreed to the roll-up were allowed to accelerate the priority of those pre-bankruptcy loans through the roll-up, ensuring they would be more likely to get repaid first than other lenders and creditors who did not partake in the roll-up.

Base metal prices and the global aluminum industry have been hit hard by the economic downturn, particularly as the U.S. housing market and auto sales have declined.

Aleris said it has delayed its hearing on the DIP approval until March 16, so that its official Unsecured Creditors’ Committee may have time to complete work in connection with the loan

The case is In re: Aleris International Inc, U.S. Bankruptcy Court, District of Delaware, No. 09-10478.

(Reporting by Emily Chasan; Editing by Bernard Orr)