Sterling Chemicals files Chapter 11
Sterling Chemicals Holdings Inc. and Sterling Chemicals Inc., Houston, voluntarily filed for Chapter 11 protection for most of the holding company's US operations Monday in US Bankruptcy Court for the Southern District of Texas.
By the OGJ Online Staff
HOUSTON, July 17 -- Sterling Chemicals Holdings Inc. and Sterling Chemicals Inc., Houston, voluntarily filed for Chapter 11 protection for most of the holding company's US operations Monday in US Bankruptcy Court for the Southern District of Texas.
That move was necessary because the firm is unable to meet long-term debt obligations, officials said. They blamed recent higher costs for raw material and energy, coupled with weak demand for petrochemicals due to a general decline in world economic conditions.
The Sterling Chemicals subsidiaries included in the proposed reorganization own and operate a petrochemicals plant in Texas City, Tex., and other facilities in Pace, Fla.; and Valdosta, Ga. The company's foreign subsidiaries, including those in Canada, Australia, and Barbados, are neither included nor affected by the Chapter 11 filings, officials said.
The voluntary bankruptcy filings will give the company access to additional working capital and enable it to reduce its overall debt, while continuing to operate the ordinary course of its business, officials said.
"Our operations will continue without interruption and we will continue to meet our commitments to employees and customers. Moreover, our high standards for environmental, health and safety performance will not be compromised in any respect," said Frank P. Diassi, Sterling's chairman.
No plant closures or layoffs are expected, officials said.
David G. Elkins, Sterling's president of Sterling, said, "We expect to emerge from this reorganization with a much improved and viable capital structure that will allow us to maximize the value of our assets and position the Company for future profits and growth."
Sterling received commitments for up to $195 million in debtor-in-possession financing from a group of lenders led by CIT Group/Business Credit Inc.
Proceeds will be used to repay the company's existing revolvers and fund operating expenses throughout the reorganization process. Officials said $155 million would be immediately available, subject to customary funding conditions and bankruptcy court approval. The remaining $40 million is subject to certain other conditions.
In addition, Sterling Pulp Chemicals Ltd., its principal Canadian subsidiary, received commitments from a syndicate of lenders led by CIT Business Credit Canada Inc. for a $30 million credit facility. The initial $20 million advance from that loan is to be paid indirectly to the parent holding company to discharge a portion of the Canadian subsidiary's intercompany debt.
The $10 million remainder will be available to the Canadian subsidiary for its own corporate purposes, including providing capital for its previously announced new sodium chlorate plant to be built in Australia.
Officials said the reorganization process would have minimal impact on the company's day-to-day business operations. Employees will be paid their normal wages, and benefit programs will continue uninterrupted.
Company officials said they expect to commence discussions with representatives of holders of its various debt securities in pursuit of a consensus on an overall financial restructuring.
Sterling Chemicals Holdings manufactures petrochemicals, acrylic fibers, and pulp chemicals, and provides large-scale chlorine dioxide generators to the pulp and paper industry.