HANNIBAL - Operations at Ormet Corp. are expected to continue as usual after a federal judge approved the sale of the company for $221 million to Smelter Acquisition LLC, a subsidiary of Minnesota-based Wayzata Investment Partners.
The U.S. Bankruptcy Court in Delaware on Tuesday approved the sale of all Ormet's assets. The ruling comes in the wake of a February bankruptcy filing by Ormet, seeking protection during efforts to financially restructure the company.
A hearing regarding the sale originally was set for May 15. That hearing was rescheduled for May 22 after Washington, D.C.-based Pension Benefit Guaranty Corp. objected to the sale, citing Ormet retirement plans that are underfunded by more than $235 million. Prior to Ormet's bankruptcy filing, PBGC officials confirmed Ormet had missed at least $1 million worth of required pension payments.
A bankruptcy judge has approved the $221 million sale of Ormet Corp. to a subisidiary of Wayzata Investment Partners.
Following a second delay, the hearing was rescheduled for Monday. The announcement that the sale had been approved came late Tuesday. According to a press release on the sale, officials do not believe Ormet's ordinary course of operations will be impacted.
"Ormet made a major step forward today in finalizing our purchase agreement with Smelter Acquisition LLC," Ormet President and Chief Executive Officer Mike Tanchuk stated following the ruling. "The remaining gating issue for Ormet to exit from bankruptcy is approval of suitable relief to the current power arrangement authorized by the Public Utilities Commission of Ohio. Ormet will be submitting a proposal to the PUCO shortly."
According to the PBGC objection, that agency believes American Electric Power bills represent as much as one-third of Ormet's overall expenses. A massive amount of electricity - "as much as a city," Tanchuk previously said - is required for the electrolytic process by which Ormet heats and breaks down the raw material alumina to make aluminum. In December, Tanchuk said Ormet's AEP bills were expected to increase by about $20 million per year.
The PBGC insures the retirement incomes of more than 44 million Americans employed in the private sector. When an underfunded pension plan terminates, this agency generally takes over the plan. The PBGC is the same agency that recently took over responsibility for some RG Steel pension plans, following that company's bankruptcy and liquidation last year. Though Ormet has found ways to deal with much of its debt, the major reason for the bankruptcy involves pension costs, Tanchuk said.
Last summer, Ormet issued a Worker Adjustment and Retraining Notification Act notice regarding the possibility of laying off 998 employees, including 837 union workers and 161 management workers. The WARN notice expired Dec. 31 without the massive layoffs taking place.
By a vote of 417-130, members of United Steelworkers Local 5724 at Ormet recently ratified a new contract with Wayzata.
Neither Tanchuk nor officials with the United Steelworkers union that represents employees at Ormet could be reached for comment Tuesday. Wayzata officials declined to comment on the sale.