Unsecured creditors of bankrupt US zinc recycler Horsehead Holding Corp are objecting to Horsehead's request to retain the exclusive right to submit a Chapter 11 reorganization plan and seek approvals of the plan until nearly the end of 2016.
Pittsburgh-based Horsehead, which filed for bankruptcy February 2 in the US Bankruptcy Court for the District of Delaware, is seeking court authorization to extend its exclusive right to file a Chapter 11 plan through October 29 and to solicit votes for the plan through December 28. Barring extensions, companies typically have four months to complete that process following a Chapter 11 filing.
But in an objection filed with the court Friday, Horsehead's official unsecured creditors committee urged rejection of the extension request.
The committee said Horsehead's lenders, led by Greywolf Capital Management, are behind the extension effort because they want to "run roughshod over the rights of unsecured creditors without any sale or marketing process of the debtors' valuable assets or by obtaining the majority of the equity interests in the reorganized debtor to extract the substantial interest value in the debtors' estates while unsecured creditors are left with de minimis or no recovery."
Under Horsehead's disclosure statement submitted recently to the court, the company is not proposing an auction to sell key assets, including its idled Mooresboro, North Carolina, facility.
The creditors committee argued that Horsehead is "woefully undervaluing" its assets. Horsehead has said it could take $100 million or more to bring Mooresboro to full capacity of approximately 155,000 tons/year of zinc. Horsehead has already invested about $550 million in the plant.
The plant produced only 2,200 tons of zinc in December and operated at about 25% during third-quarter 2015. Mooresboro was idled shortly before Horsehead filed for bankruptcy.
Allowing Horsehead to retain exclusivity for another 150 days would "allow the debtors to 'hedge their bets' and allow the debtors to continue to tie the committee's and other creditors' hands," the committee said. At most, it continued, the court should allow only a 45-day extension of the exclusivity period.
Horsehead officials could not be reached for comment Monday.
