US zinc recycler Horsehead Holding Corp and certain of its subsidiaries filed a voluntary Chapter 11 bankruptcy reorganization petition Tuesday with the US Bankruptcy Court for the District of Delaware, less than a month after the company defaulted on loan agreements with two banks.
In the filing, the Pittsburgh-based company listed total assets of slightly more than $1 billion and total liabilities of $544 million.
The filing also comes less than two weeks after Horsehead temporarily shut its Mooresboro, North Carolina, zinc production facility, in part because of low zinc prices.
"The actions we are announcing today represent an important step that we believe will allow us to restructure the company's balance sheet for the long-term," CEO Jim Hensler said in a statement.
"Filing for Chapter 11 protection is the best available option to preserve stakeholder value. We intend to emerge with increased financial flexibility and a capital structure that will enable us to invest in growing our business," he added.
Chapter 11 bankruptcy filings typically are used by US companies to erase overbearing debt obligations and/or restructure repayment terms. Often, some facilities are closed or realigned during the proceedings that can last for months or even years.
Neither Hensler nor other Horsehead officials could be reached for comment Tuesday.
But several factors, including low prices, most likely played an integral role in the bankruptcy filing, according to Stifel, a brokerage and investment banking firm.
In addition to a decline in zinc prices from more than $1/lb in the second quarter of 2015 to a low of 65 cents/lb in January, the company saw "numerous production setbacks during the ramp-up at Mooresboro," which began operations in May 2014, Stifel analysts Paul Forward and Vincent Anderson wrote in a report.
Moreover, Horsehead is facing a challenging environment for commodity-producing firms seeking access to capital, ahead of the company's 2017 maturities for the majority of its debt, they added.
Stifel suspended its rating and estimates on Horsehead on January 13.
Banks and other financial institutions top the list of Horsehead's 50 largest unsecured creditors, according to court filings.
Horsehead owes the most -- a total of $140 million -- to US Bank National Association in New York. Next comes Spain's Banco Bilbao Vizcaya, which is owed $17.4 million by Horsehead.
The largest trade creditor is Hudbay Marketing, part of Hudbay Minerals. It is owed $8.52 million by Horsehead.
Horsehead also owes up to $7.3 million to CCM Community Development of Portland, Maine, and up to $6.8 million to Bank of America of Charlotte, North Carolina.
