Real Alloy Holding, Inc. (“Real Alloy” or the “Company”) today announced several operational updates.
Real Alloy Receives Court Approval on Debtor-in-Possession (“DIP”) Financing
On January 17, 2018, Real Alloy received final approval from the U.S. Bankruptcy Court for the District of Delaware for its DIP financing, which is the existing $265 million Real Alloy DIP facility provided by Bank of America and certain bondholders of the Company approved in November. This DIP financing allows Real Alloy to continue uninterrupted operations throughout the reorganization process, giving Real Alloy the authority to make payments to suppliers and service providers as well as to continue to pay employees wages, salaries and benefits.
Real Alloy’s DIP financing is entirely separate from the DIP financing provided to Real Industry, Inc. (“Real Industry”).
Significant Progress Made from Real Alloy Since Filing
Since the filing of Chapter 11 in November 2017, Real Alloy has successfully negotiated contracts for 2018 production with several longstanding customers including major multinational automobile manufacturers and large-scale aluminum producers. The Company’s average tenure on its relationship with these customers is over 20 years.
Real Alloy has continued to work closely with its suppliers and critical vendors throughout this restructuring process, and has received strong support from customers and vendors alike.
Strategic Review of Existing Operations
As part of the Company’s continued focus on rationalizing costs and improving efficiency, Real Alloy announced that it will cease operations at its Mt Pleasant, WI facility, which was acquired from Beck Aluminum at the end of 2016. Real Alloy expects to utilize available production capacity in nearby Indiana and Michigan facilities, and feels that shutting down the facility allows the business to better utilize production capacity and reduce overall capital needs.
Real Alloy does not expect significant customer disruption as a result of the Mt. Pleasant closing and will handle customer needs from its other facilities.
Real Alloy Sales Process
Real Alloy continues to receive a significant amount of interest in its sales process and remains on track to receive multiple bids in line with the court approved bid deadline of January 31, 2018. Real Alloy does not expect any customer disruption as part of the sale.
Terry Hogan, President of Real Alloy, stated, “We have been very pleased with the progress made since our filing in November, and appreciate the support and patience of many of our customers, suppliers, and vendors throughout our restructuring. Given our strong liquidity position, the support from our customers and suppliers and the favorable spread prices, we believe we are well positioned for strong performance in the future. We look forward to completing our sale process with the right capital partner in the near future and continuing to grow our core operations in North America and Europe.”
Additional Information on the Chapter 11 Proceedings
Court filings and other information related to the court-supervised proceedings are available at a website administered by the Company’s claims agent, Prime Clerk, at https://cases.primeclerk.com/realindustry. Additional information on Real Alloy can be found at its website www.realalloy.com.
Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements, which are based on our current expectations, estimates, and projections about the businesses and prospects of Real Industry, Real Alloy and their subsidiaries (“we” or “us”), as well as management’s beliefs, and certain assumptions made by management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “should,” “will” and variations of these words are intended to identify forward-looking statements. Such statements speak only as of the date hereof and are subject to change. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Forward-looking statements discuss, among other matters: our financial and operational results, as well as our expectations for future financial trends and performance of our business in future periods; our strategy; risks and uncertainties associated with Chapter 11 proceedings; the negative impacts on our businesses as a result of filing for and operating under Chapter 11 protection; the time, terms and ability to confirm a Chapter 11 plan of reorganization for our businesses; the adequacy of the capital resources of our businesses and the difficulty in forecasting the liquidity requirements of the operations of our businesses; the unpredictability of our financial results while in Chapter 11 proceedings; our ability to discharge claims in Chapter 11 proceedings; negotiations with the holders of Real Alloy’s Senior Secured Notes, its asset-based facility lender, and its trade creditors; risks and uncertainties with performing under the terms of the Debtors’ debtor-in-possession (“DIP”) financing arrangements and any other arrangement with lenders or creditors while in Chapter 11 proceedings; our ability to operate our businesses within the terms of our respective DIP financing arrangements; the forecasted uses of funds in our DIP budgets; the impact of Real Alloy’s Chief Restructuring Officer on its restructuring efforts and negotiations with creditors and other stakeholders in the Chapter 11 proceedings; our ability to retain employees, suppliers and customers as a result of Chapter 11 proceedings; Real Alloy’s ability to conduct business as usual in the United States and worldwide; Real Alloy’s ability to continue to serve customers, suppliers and other business partners at the high level of service and performance they have come to expect from Real Alloy; our ability to continue to pay suppliers and vendors; our ability to fund ongoing business operations through the applicable DIP financing arrangements; the use of the funds anticipated to be received in the DIP financing arrangements; the ability to control costs during Chapter 11 proceedings; the risk that our Chapter 11 proceedings may be converted to cases under Chapter 7 of the Bankruptcy Code; the ability of Real Industry to preserve and utilize the NOLs following Chapter 11 proceedings; our ability to secure operating capital; Real Industry’s ability to take advantage of opportunities to acquire assets with upside potential; Real Industry’s ability to execute on its strategic plan to evaluate and close potential M&A opportunities; our long-term outlook; our preparation for future market conditions; and any statements or assumptions underlying any of the foregoing. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict. Accordingly, actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors.
Important factors that may cause such differences include, but are not limited to, the decisions of the bankruptcy court; negotiations with Real Alloy’s debtholders, our creditors and any committee approved by the bankruptcy court; negotiations with lenders on the definitive DIP financing, equity investment and post-emergence credit facility documents; Real Industry’s ability to meet the closing conditions of its DIP financing, equity investment or post-emergence credit facilities; our ability to meet the requirements, and compliance with the terms, including restrictive covenants, of our respective DIP financing arrangements and any other financial arrangement while in Chapter 11 proceedings; changes in our operational or cash needs from the assumptions underlying our DIP budgets and forecasts; changes in our cash needs as compared to our historical operations or our planned reductions in operating expense; adverse litigation; changes in domestic and international demand for recycled aluminum; the cyclical nature and general health of the aluminum industry and related industries; commodity and scrap price fluctuations and our ability to enter into effective commodity derivatives or arrangements to effectively manage our exposure to such commodity price fluctuations; inventory risks, commodity price risks, and energy risks associated with Real Alloy’s buy/sell business model; the impact of tariffs and trade regulations on our operations; the impact of the recently approved U.S. tax legislation and any other changes in U.S. or non-U.S. tax laws on our operations or the value of Real Industry’s NOLs; Real Industry’s ability to successfully identify, acquire and integrate additional companies and businesses that perform and meet expectations after completion of such acquisitions; our ability to achieve future profitability; our ability to control operating costs and other expenses; that general economic conditions may be worse than expected; that competition may increase significantly; changes in laws or government regulations or policies affecting our current business operations and/or our legacy businesses, as well as those risks and uncertainties disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Real Industry, Inc.’s Forms 10-Q filed with the Securities and Exchange Commission (“SEC”) on May 10, 2017, August 8, 2017 and November 9, 2017 and Form 10-K filed with the SEC on March 13, 2017, and similar disclosures in subsequent reports filed with the SEC.
Cautionary Note Regarding Real Industry Common Stock
Real Industry cautions that trading in its securities during the pendency of the Chapter 11 proceedings is highly speculative and poses substantial risks. Trading prices for Real Industry’s securities may bear little or no relationship to the actual recovery, if any, by holders of such securities in the Chapter 11 proceedings.