Kaiser to miss interest payments, study restructuring

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Posted 8:21AM on Friday, February 1, 2002

SPOKANE, Wash. - Kaiser Aluminum Corp. will miss a $25.5 million interest payment this week, and officials say they are talking with creditors about restructuring debt. Spokesman Scott Lamb in Houston said the developments postponed Kaiser's fourth-quarter conference call with analysts Thursday to discuss quarterly earnings. Lamb declined to say whether the missed payments were steering Kaiser, smarting from low aluminum prices and pressed by maturing debts, toward bankruptcy protection. It was Kaiser's first disclosure to bondholders that it did not intend to meet debt obligations. The company announced earlier this month that it was talking with bondholders about restructuring $799 million of debt. "While we have not yet reached a definitive solution for our debt maturities, we have determined that it is in the company's best interest not to make this interest payment and to focus our financial resources on our operation priorities," Kaiser President and Chief Executive Officer Jack Hockema said. Kaiser planned to miss Friday's interest payment deadline on its $400 million of 12.75 percent notes and warned it may miss payments on other debts. On Feb. 15, the company is scheduled to retire principal and interest on $174 million of 9.875 percent notes. And on April 15, the company has an interest payment due on $225 million of 10.875 percent notes. Lamb said the company is considering restructuring alternatives, but said he could not yet disclose the details. Kaiser will be in default if it misses the Feb. 15 deadline to repay principal and interest on the $174 million debt. Should the company meet that debt obligation, it has until the beginning of March to avoid being in default on its missed $25.5 million interest payment on the $400 million debt. Maxxam Inc., the Houston-based holding company that owns about 62 percent of Kaiser stock, also postponed its fourth-quarter earnings release. Maxxam is controlled by Houston financier Charles Hurwitz. Although Kaiser netted about $460 million last year by remarketing its allocation of Bonneville Power Administration electricity, the company continues to struggle. Some of that money was spent upgrading an alumina refinery in Gramercy, La., that had been destroyed by an explosion and rebuilt using insurance proceeds. And some of the money was spent meeting earlier interest payments, labor costs and corporate expenses. Lamb said Kaiser will continue making and shipping products. The company has about $132 million of unrestricted cash to run its plants, he said. In Washington state, Kaiser's closed smelters in Mead and Tacoma, along with the operating Trentwood rolling mill, are leveraged as debt collateral. Shares of Kaiser closed 53 cents lower on Thursday to 72 cents on the New York Stock Exchange.