Vertellus Specialties yesterday filed for voluntary Chapter 11 bankruptcy protection in a bid to restructure debt and solicit bids for the company.
Vertellus received downgrades from credit rating agencies in recent months, and missed interest payment in April. Vertellus’ term loan lenders, including Black Diamond Capital Management and BlackRock, have agreed to purchase the company for $453.8 million in a “stalking horse” bid. The bid is meant to provide a floor for an auction for the company in sale process under US bankruptcy law.
“Vertellus…[has] initiated a voluntary financial restructuring under chapter 11 of the US Bankruptcy Code, which will help us reduce our debt and thus prepare for a sale,” says Rich Preziotti, president and CEO of Vertellus. The company, owned by private equity firm Wind Point Partners (Chicago), had about $596 million in revenues during 2015.
“Competitive and macroeconomic challenges facing our agriculture and nutrition business” have impacted the company’s earnings performance, leading to the bankruptcy filing, Preziotti says. The ag market, a key end market for Vertellus, has been challenged over the past 12 to 18 months as prices for many agricultural products have collapsed.
Prices for pyridines, along with picolines one of Vertellus’ two key products, have declined significantly due to competitive pressures in China and lower demand from the ag end market, Moody’s Investors Service (New York) said in April. Moody’s downgraded Vertellus’ credit rating at the time after the company missed a quarterly interest payment. Moody’s also noted that Vertellus’ 9.1 times (x) debt-to-Ebitda ratio was “high” and that the company had limited flexibility in its debt covenants.
The bankruptcy filing does not include Vertellus’ sodium borohydride (SBH) business, or its international subsidiaries. The international subsidiaries are included in the auction process, but the SBH business is not, Vertellus says.
Vertellus has secured $110 million in debtor-in-possession financing from existing lenders to fund its operations during the bankruptcy proceedings and auction process. As of 31 December 2015, Vertellus had a cash balance of $5.7 million, according to Moody’s.
By Vincent Valk
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