Chemtura Files for Chapter 11


A New York bankruptcy court on Friday approved Chemturas first day motions in its recent Chapter 11 bankruptcy filing, which will allow for continuation of normal business operations during the specialty chemical manufacturers restructuring process.

Chemtura and 26 of its U.S. affiliates filed for Chapter 11 bankruptcy protection on March 18, citing significant decreases in liquidity and cash flow due to a market decline in order volumes in recent months because of the global economic recession. The company on Feb. 25 reported an operating loss of $737 million for 2008s fourth quarter, and $929 million for the year 2008.

Middlebury, Conn.-based Chemtura has received a commitment for up to $400 million in debtor-in-possession financing from Citibank, N.A., as administrative agent. Debtor in possession refers to a company that continues to operate while in Chapter 11 bankruptcy. Upon court approval, Chemtura will use the financing, combined with cash from its ongoing operations, to support the business during the Chapter 11 process. The manufacturer said it anticipated meeting its obligations going forward to employees, customers and suppliers.

Despite our efforts to increase liquidity, including through the potential sale of a business, our reduced liquidity position, combined with the anticipated expiration of our bank waiver, led us to determine that a court-supervised restructuring was the best course of action, said Craig Rogerson, Chemtura chairman, president and chief executive officer. Chemtura had entered into a 90-day amendment and waiver agreement with lenders under its senior credit facility on Dec. 30 last year.

The Chapter 11 filing affects only our U.S. operations, not overseas operations in any way, shape or form, Chemtura spokesman John Gustavsen told Lube Report. He said the companys Canadians operations are also not part of the filing. The purpose of Chapter 11 is to allow us to continue to operate our U.S. entities, as we continue to operate all of our overseas entities, and to provide the liquidity we need to buy raw materials, pay employees, keep the lights on and make products for customers.

Because Chapter 11 will help remedy the liquidity situation, selling a business or part of a business is not considered an urgent matter at this point, according to Gustavsen. From a business point of view, well do what makes sense – which is to say, were not ruling that out as part of the strategy, he said.

On Feb. 25, Chemtura announced plans to further reduce inventories and to restrict capital expenditures to $60 million during fiscal year 2009.

Late last year, the company began trimming its workforce, with layoffs that began in December and affected about 500 professional and administrative staff worldwide, or about 10 percent of its entire workforce. Those cuts were expected to save the company $50 million a year in costs, but would also hurt its fourth-quarter 2008 results, it advised investors at the time.

In January this year Chemtura announced it would realign as two business groups, Performance Products and Engineered Products, with its petroleum additives, lubricants and greases reporting under the former. The Performance Products segment also holds Chemturas consumer products, urethanes and antioxidant plastic additives. It represented the companys third major reorganization since 2005, when it was formed from the merger of Great Lakes Chemical and Crompton.

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