Chemtura's US firms go bankrupt after sales attempt fails

19 March 2009 22:09  [Source: ICIS news]

HOUSTON (ICIS news)--Chemtura's US operations filed for bankruptcy protection after it ran out of time to sell off two businesses, said the company, whose shares were at 12 cents on Thursday.

Chemtura adopted the sales strategy after soaring feedstock costs and collapsed demand left it in danger of breaching its covenants, the company said in court filings.

On 30 December, Chemtura received a 90-day waiver on one of its credit agreements, buying it time to arrange a sale.

However, once the waiver expires, Chemtura would likely default on one of its loans, which would, in turn, trigger more defaults, the company said. 

Chemtura needed to either refinance its debt or sell off some of its businesses before the waiver expired, the company said.

The global financial crisis ruled out the possibility of refinancing $374m (€277m) in debt maturing in July, Chemtura said.

Instead, Chemtura would try to sell its entire crop-protection segment and its petroleum-additives business, the company said. Chemtura would then use the proceeds to pay off the bonds.

As recently as February, CEO Craig Rogerson said that the company could arrange the sale in time. By the end of March, Chemtura could announce a sale worth at least $700m, he said. 

At the time, bankruptcy appeared unlikely, Rogerson said.

Indeed, Chemtura selected several unnamed buyers to perform due diligence on each of the businesses, the company said.

However, some buyers began lowering their bids in light of the recession, Chemtura said. Others were concerned that Chemtura could not satisfy its end of a sales agreement. Some even withdrew their offers.

As a result, any sale arranged before the 30 March expiration date would not solve the company's problems with maturing debt and liquidity.

Moreover, extending the 90-day waiver was unlikely, given the dwindling prospects of a sale and Chemtura's shrinking liquidity, the company said.

Shares of Chemtura rose 2 cents on Thursday on the New York Stock Exchange.

($1 = €0.74)