Aleris gets $1bn bankruptcy loan

The insolvent maker of aluminium products received court approval for a $1.075bn bankruptcy financing package despite objections from various lenders, including its owner TPG, and lenders Babson Capital and GSC Group.

Aleris International, a TPG portfolio company that stumbled into bankruptcy in February, received final approval from bankruptcy court for a $1.075 billion financing package that will allow it to operate through reorganisation.

The $1.075 billion facility, which includes a $500 million term loan from Oaktree Capital Management and Apollo Global Management and a $575 million revolving credit facility from a lending group led by Deutsche Bank and Bank of America, has been a source of contention among the company’s lenders, including its owner TPG.

TPG, Babson Capital and GSC Group all objected to the financing in the past few months, arguing that the structure of the loan gives lenders who participate in the financing more seniority than lenders who hold pre-bankruptcy loans.

The firms said in filings they were not opposed to Aleris’ reorganisation itself, only to the structure of the debtor-in-possession financing.

“The … DIP credit facility … will be used for the company’s normal operating and working capital requirements during its reorganisation process,” Aleris said in a statement.

TPG is considering taking part in the DIP facility.

TPG, which lost $830 million in the bankruptcy, acquired Aleris, a producer of aluminium products, in 2006 in a $3.3 billion deal. The transaction involved a purchase price of $1.7 billion and the assumption of $1.6 billion of debt.

Aleris blamed its bankruptcy on the global financial meltdown, as well as declining industrial demand “and a swift drop in aluminium prices”.

The bankruptcy marks the second time in less than a year that a TPG-backed company has fallen into insolvency, wiping out the firm’s equity stake.

Federal regulators seized the US bank, Washington Mutual, in September, selling its deposits and loan portfolio assets to JPMorgan. TPG had invested $2 billion in Washington Mutual last April and lost its remaining $1.3 billion stake after the bank was seized.