WILMINGTON, Del. (Reuters) – Aleris International Inc, a maker of rolled aluminum products, proposed a reorganization plan on Friday that would leave the company in the hands of the investment funds that financed its bankruptcy, according to court documents.
The funds, affiliates of Oaktree Capital Management, Apollo Management and Sankaty Advisors, would backstop a sale of shares and debt in the reorganized company worth up to $690 million.
Holders of U.S. and European term loans would have the option to receive cash or equity in the company and the chance to participate in the rights offering of securities.
That money would be used to pay off its creditors as well as finance its operations after bankruptcy. The plan proposes wiping $2.5 billion from the company’s balance sheet, including providing just $4 million for $1.196 billion in unsecured bond debt.
The three funds were among the providers of the company’s debtor-in-possession, or DIP, loan.
Aleris filed for bankruptcy in February 2009, and tight credit markets forced it put together a “roll-up” DIP loan which encouraged those with secured claims to provide fresh money.
There were two portions to the DIP loan, a term loan of fresh money and a revolving credit facility.
Lenders who participated in the $500 million term loan were allowed to roll their pre-petition claims into a $575 million revolving credit facility.
That allowed them to accelerate the priority of those pre-petition loans, ensuring they would be repaid before lenders and creditors who did not partake in the roll-up.
Aleris has been hard-hit by the sharp drop in demand for cars.
The company must put its plan to a vote of creditors and receive approval of a bankruptcy judge before it can exit Chapter 11. It expects to emerge in the first half of the year.
The case is In re: Aleris International Inc, U.S. Bankruptcy Court, District of Delaware, No. 09-10478. (Reporting by Tom Hals, editing by Gerald E. McCormick)