Chemtura Sees Exit from Bankruptcy in Early 2010

This article is from Chemweek and will be out next week

Chemtura Sees Exit from Bankruptcy in Early 2010

10:05 AM EDT | September 21, 2009 | Robert Westervelt

Chemtura expects to emerge from bankruptcy in early 2010 as progress on its reorganization advances. The company filed for bankruptcy in March as sharp demand declines cut down earnings and drained liquidity, and efforts to sell assets and restructure debt faltered in the frozen credit markets of earlier this year.

“We’re working to exit bankruptcy as fast as we can,” says Chemtura chairman and CEO Craig Rogerson says. “We’re on track right now to come out within a year of going in, by [the end of] first-quarter 2010.” The company issued a revised business plan to creditors last month, which included five-year forecasts for each of the company’s businesses. The document will form the basis for a plan of reorganization, which is expected to be filed by mid-December. Core strategies in the business plan revolves around three themes: growth around greener technologies in key businesses; strengthening the company’s global presence, particularly in emerging markets; and making Chemtura an easier company to do business with, Rogerson says.

“We should be a stronger company with a much improved balance sheet,” he says. “There are things you can do in Chapter 11 around legacy liabilities and rejection of contracts, where appropriate, that allow you to come out as a cleaner company and we expect to take full advantage. And we will have clear direction around what we’re trying to accomplish as a company. That will be the biggest benefit because we didn’t have that prior to going into bankruptcy.”

Stronger market conditions are also starting to provide some support. “We think we’re seeing the first indications of improvement,” Rogerson says. “The industrial businesses are showing some signs of improvement, but we are still a long way from where business was in September 2008. As this continues, I’m a little more confident that it is the start of recovery and not just people putting inventory back on the shelves.”

Results are clearer for the company’s seasonal product lines, crop protection and pool and spa chemicals, with the 2009 selling cycle in key markets in the Northern Hemisphere largely complete. Performance in the pool and spa segment will be stronger in 2009 than last year despite a wet and cool summer in parts of the U.S. market, Rogerson says. Crop protection remains strong but results are not likely to match 2008 results, due in part to the impact of credit restrictions in Eastern Europe and Brazil that caused some customers to defer purchases.

Rogerson would not address speculation around specific assets that the company could sell but adds that Chapter 11 makes the need for divestitures less urgent.

Documents filed as part of the bankruptcy proceedings indicate that the company is exploring the possible sale of some assets, including its polyvinyl chloride (PVC) additives business and polyurethane dispersions business. Chemtura has retained Lazard (New York) as investment banker to advise on restructuring and M&A. Chemtura was in discussions with bidders for its agricultural chemical and fuel additives businesses prior to its bankruptcy filing, but it is not clear whether those assets are still being considered for sale.

“In the middle of credit crunch, you’re faced with having to sell the best and most attractive assets to generate cash,” Rogerson says. “Now, however, if we can demonstrate that we can create more value by operating the business rather than selling, we can keep it.” Rogerson says forecasts issued to creditors are based on the presumption that Chemtura will keep all of its current businesses. “And we think that’s reasonable given the current market for M&A,” Rogerson says. “It is not a good time to sell assets. We will always consider any offers for the businesses, but right now our five-year plan includes running them all.”



A key part of the compnay’s post-bankruptcy strategy calls for the company to shift its manufacturing footprint east as sales shift to Asia and Eastern Europe, and to source product closer to where it is sold. Management responsibility will also be shifted into those regions and away from Chemtura’s corporate headquarters in Middlebury, CT. “Operations outside the U.S. will have step up,” Rogerson says. “And that means giving them the authority and responsibility to deliver results.”