Magnetation Files Bankruptcy
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowA Minnesota-based iron ore processing company with a presence in Indiana has announced a restructuring agreement. Magnetation LLC, which opened a more than $300 million plant in White County last year, has filed for Chapter 11 bankruptcy reorganization. May 6, 2015
News Release
GRAND RAPIDS, Minn. (May 5, 2015) – Magnetation LLC, an innovative iron ore concentrate and pellet producer, announced today that it has reached an agreement with holders of more than 70 percent of its 11.0 percent senior secured notes due 2018 (Senior Secured Notes) to restructure the Company’s balance sheet and provide liquidity to support long-term operations.
To implement this restructuring, Magnetation LLC and its direct subsidiaries have filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the District of Minnesota. The Company and the noteholders
have agreed to the principal terms of a chapter 11 plan of reorganization, which will be subject to approval by the Bankruptcy Court.
In conjunction with its reorganization, Magnetation has obtained a commitment for $135 million in debtor-in-possession financing (DIP Financing) from certain holders of Senior Secured Notes. All holders of Senior Secured Notes are eligible to participate pro rata in the DIP Financing pursuant to procedures filed with the Bankruptcy Court, which will provide
Magnetation with $63.7 million of incremental liquidity.
Upon approval by the Bankruptcy Court, the DIP Financing and cash generated from
Magnetation’s ongoing operations will be used to support the business during the reorganization process.
Magnetation has filed various motions with the Bankruptcy Court in support of its reorganization.
The Company intends to continue to pay employee wages and provide healthcare and other benefits without interruption in the ordinary course of business and to pay suppliers and vendors in full under normal terms for goods and services provided after the filing date of May 5, 2015.
The Company expects its mining and pelletizing operations and customer shipments to continue in the ordinary course throughout the reorganization.
“We are pleased to have reached an agreement with our noteholders on the terms of a balance sheet restructuring through a chapter 11 reorganization,” said Magnetation Chief Executive Officer Larry Lehtinen. “The significant decrease in global iron ore prices along with our existing capital structure has created a challenging business environment in the short term. The reorganization process will create a more competitive and successful Company.
We remain firmly committed to serving our customers and to being a good employer by maintaining safe, productive operations as we undertake this process. We appreciate the ongoing dedication of our employees, whose hard work is critical to the success and future of our Company.”
Magnetation's business outlook has been impacted by the challenging iron ore industry,
which has experienced global supply increases and a reduction in the global demand. The Company has reacted to the decline in pricing by, among other things, taking cost reduction
measures, including the recently-announced decision to indefinitely idle its Plant 1 iron ore concentrate operation in Keewatin, MN.
Davis Polk & Wardwell LLP is serving as legal advisor and Blackstone Advisory Partners LP is serving as financial advisor in connection with the reorganization.
Additional information about the reorganization can be found at www.donlinrecano.com/mag.
Magnetation LLC
Magnetation LLC is a joint venture between Magnetation, Inc. (50.1 percent owner) and AK Iron Resources, LLC, an affiliate of AK Steel Corporation (49.9 percent owner). Magnetation LLC recovers high-quality iron ore concentrate from previously abandoned iron ore waste stockpiles and tailings basins. Magnetation LLC owns iron ore concentrate plants located in
Keewatin, MN, Bovey, MN and Grand Rapids, MN, and an iron ore pellet plant in Reynolds, IN. Additional information about the Company is available at www.magnetation.com.
Source: Magnetation LLC