Cases & Deals

Kaiser Aluminum and twenty of its subsidiaries emerge successfully from chapter 11 protection

Clients Kaiser Aluminum Corporation

Jones Day represented Kaiser Aluminum throughout its chapter 11 reorganization, which was commenced on February 12, 2002. On July 6, 2006, Kaiser and twenty of its subsidiaries successfully emerged from chapter 11 protection, having resolved a myriad of liabilities, many of which were unusually complex. Kaiser emerged virtually debt-free, with substantial liquidity and streamlined business operations that are considered first-in-class in the aluminum industry. The reorganization plan, which the U.S. Bankruptcy Court for the District of Delaware confirmed in February 2006 and the U.S. District Court for the District of Delaware affirmed in May 2006, received over 90% acceptance by every class of creditors entitled to vote.

Among other liabilities, the plan resolves more than 100,000 pending asbestos cases as well as silica, coal tar pitch volatiles and noise-induced hearing loss claims. The negotiated resolution involves (a) the creation of trusts funded by a cash payment of $13 million, 6.4% of the equity in the reorganized company (plus 100% of the stock of a subsidiary with limited assets) and rights to insurance proceeds and (b) the implementation of channeling injunctions permanently directing these tort claims and future claims from Kaiser to the trusts. Additionally, the plan resolves over $600 million in underfunded pension liabilities and $790 million in retiree medical liabilities by providing, among other things, for the issuance of stock to the PBGC and to two voluntary employees' beneficiary associations for the benefit of employees and retirees. In connection with the plan, existing retiree medical plans and the company's three largest defined benefit pension plans were terminated and certain replacement defined contribution pension plans were implemented. Billions of dollars of intercompany claims among various debtors were also resolved by a global settlement that involved certain intercompany cash payments, offsets of claims and releases. Environmental liabilities related to dozens of sites were likewise resolved during the chapter 11 proceeding.

The reorganization follows the successful implementation of a strategic plan that resulted in the sales of commodities businesses worldwide, including sales of mining and refinery interests in Jamaica, an interest in an alumina refinery in Australia, interests in a smelter in Ghana and a refinery in Louisiana. Proceeds from these asset sales approximated $700 million, much of which has already been distributed to creditors pursuant to separate liquidating plans that were also confirmed by the bankruptcy court. Kaiser and 25 affiliates were burdened by approximately $3.1 billion in debt at the time of the chapter 11 filings and had insufficient liquidity to meet their near-term obligations. Kaiser's common stock is now trading on the NASDAQ under the symbol KALU.

In re: Kaiser Aluminum Corp., Case No. 02-10429(JKF) (Bankr. D. Del.)

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