Buyout-Backed Busts: Aleris International

#4. Aleris International

TPG purchased the Beachwood, Ohio—based company in 2006 for $3.3 billion. The firm invested $849 million in equity from TPG Partners V LP.

What Went Wrong?
The company’s capital structure had very few covenants and a covenant-free revolver. But a sudden and dramatic drop in aluminum prices hurt the automotive and industrial supplier’s sales, while the slow collapse of General Motors and Chrysler, which accounted for around 45% of the company’s revenue, only added to its inability to service its $2.5 billion debt load. The company filed for bankruptcy on February 13, 2009.

The Aftermath
After some intercreditor fighting, the company won more than $1.1 billion in DIP financing from Apollo Management and Oakwood Capital Management. In August Aleris had negative cash flow for its U.S. operations for the second month in a row, but its operating loss decreased. As of May, TPG’s fifth fund was held at 65% of its cost, thanks in part to losses related to Aleris and Washington Mutual.