Judge expected to approve terms of Ormet asset bidding process

US Bankruptcy Judge Mary Walrath was expected to approve on Thursday an agreement that sets the stage for a possible May 13 auction for the assets of US aluminum producer Ormet, which filed for Chapter 11 bankruptcy reorganization in Delaware on February 25.

Patrick Burns, a Cincinnati-based attorney who represents Hannibal, Ohio-based Ormet, said in an interview that a deal was reached on Wednesday among parties in the case on terms of the court-sanctioned bidding process. Burns said the proposed accord was submitted to the judge and approval was anticipated before the end of Thursday.

The agreement resolves objections of Ormet's unsecured creditors, who had complained the proposed bidding procedures were tilted unfairly in favor of Wayzata Investment Partners LLC, which has agreed to buy Ormet and serve as a stalking-horse bidder in an auction.

In the event Ormet -- the owner of the 260,000 metric ton/year Hannibal aluminum smelter and a 540,000 mt alumina refinery in Burnside, Louisiana -- receives more than one qualifying bid by the May 8 deadline, an auction will be held May 13 in Cincinnati at the offices of Dinsmore & Shoal, the company's legal counsel.

A court hearing to approve the sale would be held on May 15 in Wilmington, Delaware.

If Wayzata submits the only qualifying offer, "the debtors shall not hold an auction and, instead, shall seek approval of the stalking-horse agreement at the sale-approval hearing," according to the agreement.

Wayzata is offering $221 million in debt forgiveness and cash for Ormet. That includes $30 million in debtor-in-possession financing that Wayzata is making available to Ormet while the company is in Chapter 11.

Ormet has agreed that if the court approves the purchase of its assets by anyone other than Wayzata "the debtors shall reimburse the stalking horse bidder for its reasonable out-of-pocket expenses up to an aggregate amount not to exceed $1 million."

Ormet CEO Michael Tanchuk said late February in an interview that his company hoped to complete the reorganization, and emerge financially stronger from bankruptcy, in three to four months.