VALCO Owners File For Bankruptcy

The company is expected to continue operating its aluminium smelter in Ghana
As expected, Kaiser Aluminum Corporation, the 90%-owned Valco aluminum smelter in Ghana and one of the US's largest producers of aluminium has filed for protection from its creditors. Kaiser Aluminium missed a debt payment of $25.5m (?17.8m) in January, and faces being unable to pay about $174m due to bondholders on Friday. The company is expected to continue operating its aluminium smelters in north Wales and Ghana, as well as its refineries in Australia.

The company filed for Chapter 11 bankruptcy, which will allow the management to stay in charge while negotiating with creditors. In conjunction with the filing, the company expects to enter into definitive documentation today for $300 million in Debtor-in-Possession (DIP) financing from Bank of America, subject to court approval. The DIP financing, in combination with the company's current invested cash, should provide sufficient liquidity to meet its ongoing operating needs. Kaiser's production and shipment of bauxite, alumina, primary aluminum products, and fabricated aluminum products will continue without interruption.

Kaiser said it had been hit by weak aluminium prices, the global economic slowdown and the costs of asbestos litigation and growing medical and pension costs for former employees.

Failed diversification

Although the filing includes certain U.S. subsidiaries through which the company holds an interest in foreign operations, it does not include the operations of the following entities: the 65%-owned Alpart alumina refinery and the 49%-owned Kaiser Jamaica Bauxite Company in Jamaica; the 20%-owned QAL alumina refinery in Australia; the 90%-owned Valco aluminum smelter in Ghana; the 49%-owned Anglesey aluminum smelter in Wales, or the 100%-owned extrusion plant in Ontario, Canada.

Kaiser had been struggling in recent years after selling off profitable assets in the late 1980s to finance debt accrued in failed diversification into chemicals in the 1970s.

Kaiser, the third largest aluminium producer in the US, is the latest in a recent run of bankruptcies among major American companies.

Telecoms company Global Crossing filed for chapter 11 bankruptcy late last month, as did Kmart, the second-biggest discount retailer in the US.

VALCO Ghana

Located at Tema on the coast of Ghana in West Africa, Volta Aluminium Company Limited (Valco) is owned by Kaiser Aluminum (holding a 90% interest) and Reynolds Metals Company (10%). The plant has a rated capacity of 200,000 tons per year, with Kaiser's share totaling 180,000 tons. Electric power is provided by the Volta River Authority's Akosombo hydroelectric dam, while alumina is supplied by Alpart and third parties. Most of Valco's metal production is shipped to Europe; roughly 10% is supplied to Ghanaian customers. About 99.3% of Valco's workforce is Ghanaian. Valco's metal products operation is ISO 9002-certified.