Venator expects fast exit out of US bankruptcy under creditor deal

HOUSTON (ICIS)–UK-based pigment producer Venator Materials has reached a restructuring support agreement with the creditors that hold the majority of the company’s debt, which could allow the company to emerge from Chapter 11 bankruptcy protection in a couple of months.

Under a timeline proposed in the agreement, Venator would need the court to confirm its bankruptcy plan in the next 60 days from its 14 May bankruptcy filing. After the court confirms the plan, Venator could emerge from bankruptcy protection within the next five days.

Under the restructuring agreement, nearly all of the company’s funded debt will be equitised into stock owned by the creditors. The agreement will significantly reduce the company’s debt burden.

Venator expects its businesses will continue to operate normally while it is under bankruptcy protection. It will continue to pay wages and offer benefits to its employees and it will pay all of its trade partners. It will retain it plants and management.

Venator does not expect current shareholders will recover anything.

FACTORS BEHIND BANKRUPTCY
Earlier in the decade, demand for Venator’s titanium dioxide (TiO2) and other products surged as customers built up stockpiles to account for market and supply-chain issues, said Kurt Ogden, CFO. He made his comments in an affidavit filed with the bankruptcy court.

Demand fell after these issues passed, Ogden said. Inflation further reduced demand for Venator’s products.

At the same time, the war between Russia and Ukraine caused a sharp increase in the company’s costs for production, feedstock and shipping, Ogden said.

Venator was particularly exposed to these costs because most of its plants are in Europe, according to the company’s annual report.

To top things off, Venator had operational issues at some of its plants. Because of inflation, the company’s TiO2 production line in Duisburg, Germany, had produced significant quarterly losses when compared with the profitable operations of the site’s performance-additive plant. The company’s operations in Pori, Finland, have operated at a loss since a fire in 2017.

The combination of these challenges lowered the company’s profitability and squeezed its liquidity, Ogden said. The company was in danger of defaulting on its debts.

Starting in early 2023, Venator began talks with its lenders and noteholders about restructuring its debt.

The talks culminated in the restructuring support agreement and the pre-packaged bankruptcy filing.

SPEEDY BANKRUPTCIES
Venator is the latest example of a chemical company reaching a restructuring agreement with its creditors as part of a pre-packaged bankruptcy filing.

The process significantly shortens the formal bankruptcy process. Recently, chemical companies that filed under Chapter 11 have operated under bankruptcy protection for less than a year.

Prior to Venator, US-based butadiene (BD) producer TPC Group was the most recent company to pursue such a bankruptcy strategy. The whole process lasted less than seven months.

Hexion also reached a restructuring support agreement with its creditors right before it filed for bankruptcy protection in 2019.

It was in and out of bankruptcy in less than a year.

Venator filed for bankruptcy protection in the US Bankruptcy Court, Southern District of Texas. The case number is 23-90301.

Focus article by Al Greenwood

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