Oglebay Norton Co. to complete restructuring within chapter 11
Oglebay Norton Company, a producer of minerals and industrial materials, on Monday filed for Chapter 11 bankruptcy protection after struggling with heavy debt, weak product demand and rising costs. The Cleveland-based company and 32 affiliates, which include Michigan Limestone Operations in Rogers City, filed for protection from creditors with the U.S. Bankruptcy Court in Wilmington, Delaware.
Oglebay, which had tried for several months to restructure its finances, listed $650.3 million of assets and $561.3 million of debts in its court filing. ?This at least clarifies what?s been in the rumor mill for months,? said Rogers City mayor Beach Hall.
OGLEBAY NORTON PRESIDENT and Chief Executive Officer Michael D. Lundin said, “For months we have been engaged in discussions to determine the best way to restructure while preserving the greatest value for all stakeholders. ?We ultimately concluded that it was not possible to adequately restructure our long-term debt outside of court protection. Filing for Chapter 11 became the only viable option to complete the restructuring plan and preserve the value of the businesses.”
The company also said its common shares will ?likely have little or no value? after a restructuring. Its shares opened at 78 cents Tuesday morning on the NASDAQ. A year ago, the stock was trading at $6.45 a share.
?I certainly wouldn?t be buying this stock,? said stock analyst Bill Dempsey of Edward Jones of Rogers City, reiterating comments from earlier this month. ?There will be no value of the current stock, and that?s important. They are going to issue new stock after they come out of bankruptcy.?
THE COMPANY INTENDS to continue operations ?without interruption and fulfill our commitments to our employees, retirees and customers during the reorganization process,? Lundin stated in a press release posted Monday on the O-N website. Oglebay employs about 1,770 employees in 13 states, including 150 at the Rogers City operation. The company said it has made substantial progress toward obtaining a new credit facility that would retire its existing bank debt. O-N said it believes these events will enable it to pursue a process to emerge from Chapter 11 on an expedited basis.
The company also announced that it is seeking immediate interim bankruptcy court approval of a $75 million debtor-in-possession (DIP) credit facility from a syndicate led by Silver Point Finance. The DIP facility, together with funds from operations, is expected to provide the liquidity necessary to enable the company to meet its obligations to its suppliers, customers and employees during the chapter 11 reorganization process.
?IT CAN TAKE months and months,? said Dempsey. ?The quicker the better, it just depends on the plan they put together for the courts.? Lundin said O-N intends to continue to pursue the strategic operating plan it put in place over the last two years but has been unable to execute fully because of the financial issues it has faced.
“The strategic operating plan is based on our core competencies of extracting, processing and providing minerals,” Lundin said. “As we have said before, our plan is to expand our current markets and develop new ones for our limestone and fillers groups while maximizing the profitability of our sand, lime and marine units.
?We are confident in our ability to implement this strategy and return Oglebay Norton to sustained profitable growth.” Commenting on previously announced plans to sel
HOWEVER, HE SAID the company has chosen to cease its efforts to sell its lime operations as nearly all of the potential new equity investors and new lenders have indicated that they want the company to retain the lime business. Beginning in 1998, O-N incurred significant debt in connection with a series of acquisitions. These acquisitions also resulted in a highly leveraged balance sheet. When the U.S. economy slipped into recession in 2001, the debt became an increasing financial burden.
Over the past three years, the company has been impacted particularly by the decline of the nation’s integrated steel industry, rising energy costs and adverse market conditions in commercial and residential building materials. Together, these factors resulted in decreased demand for limestone and mica from the company’s quarries and for the services of its Great Lakes fleet. “We had hoped to achieve an out-of-court financial restructuring, but even with the best efforts of all parties, that proved impossible to do,” said Lundin. “We now must complete the process under court protection.?