HOUSTON - Kaiser Aluminum Corp., a major aluminum maker, sought bankruptcy court protection yesterday, blaming asbestos-related lawsuits and falling profit in an industry dominated by rivals Alcoa Inc. and Alcan Inc.
Kaiser's spending on plant expansion and the expense of defending against asbestos complaints put the company behind on about $700 million in bond debt, analysts said. Kaiser said last week that it wouldn't make debt payments of about $200 million this month.
The company is facing costs of about $132 million and more than 122,000 lawsuits related to asbestos while it copes with declining aluminum demand from automakers and plane manufacturers.
Kaiser was forced to close two aluminum plants in Washington two years ago because it couldn't afford electricity prices in the Pacific Northwest.
"The casualties become the companies like Kaiser that are slower to react," said Georges Lequime, an analyst with HSBC Securities in Toronto. He has a "sell" rating on the company and said he doesn't own Kaiser shares.
The Houston company listed $3.3 billion in assets and $3.1 billion in liabilities in Chapter 11 papers filed in U.S. Bankruptcy Court in Wilmington, Del. Kaiser's wholly owned subsidiary Kaiser Aluminum & Chemical Corp. also sought Chapter 11 protection.
Kaiser won't pay $174 million in bonds due Friday and missed an interest payment last week of about $26 million. The company received a $300 million loan from Bank of America yesterday, the company said in a statement.
Kaiser is 62 percent owned by MAXXAM Inc., a timber and real estate company that is operated by financier Charles E. Hurwitz. MAXXAM bought Kaiser in 1988, took it private, then sold shares in the company again in 1991, said Josh Reis, a MAXXAM spokesman.
Hurwitz also acquired Pacific Lumber Co. through MAXXAM in a 1986 transaction engineered by Michael Milken and Ivan Boesky. Kaiser had about 7,800 employees at the end of 2000.
Kaiser shares lost 16 cents, or 31 percent, yesterday to close at 35 cents on the New York Stock Exchange. In 1995, they traded for $20. The $400 million in 12.75 percent bonds due Feb. 1 are trading at about 19.5 cents on the dollar, traders said.
MAXXAM shares lost $1.64, or nearly 15 percent, to close at $9.63 on the American stock exchange.
Kaiser's raw-aluminum shipments fell by more than half in the third quarter, the most recent results available, while the average price for aluminum fell 15 percent.
The drop in shipments stemmed from closing the two plants in Washington after power shortages raised prices, making the factories unprofitable.
Alcoa, the largest aluminum maker, has closed three plants.Alcoa had sales of $22.9 billion in 2001, and No. 2 Alcan, based in Montreal, had sales of $12.6 billion. Kaiser's fiscal 2000 sales were about $2.2 billion.