Chemtura struggling to avoid default

16-Mar-09

Chemtura Corp. is struggling to stay out of default and needs to raise cash by July 15 to make payment on US$370 mln in notes. In Chemtura's annual report released last week, auditors KPMG warned that Chemtura's operating losses, debt and limited liquidity "raise substantial doubt about the company's ability to continue as a going concern." - indicating that the company is in dire straits. After 3 quarters of high raw material and energy prices in 2008, demand for its products dried up in the fourth quarter. In the three months that ended in December, Chemtura's sales declined 23% from the previous year to US$690 mln. The company recorded a loss of US$737 mln, which included a US$665 mln charge for goodwill impairment. After a sudden drop in sales due to global economic meltdown, Chemtura is having difficulty meeting its commitments to its lenders and noteholders. It is in violation of its financial maintenance covenants with its bankers. On Dec. 30, it received a 90-day waiver from compliance with the covenants, and it expects to require more waivers through the rest of the year. Chemtura is also concerned about the US$370 mln in notes that come due on July 15. It is trying to sell assets to be able to redeem the notes. The company said last month it is negotiating with potential buyers. Chemtura's Elmira plant was responsible for contaminating the local groundwater. In co-operation with, and under order from, the provincial Environment Ministry, the company has been cleaning up Elmira's water since 1991; the project is scheduled for completion in 2028. The company seems reluctant to discuss what would happen if Chemtura files for bankruptcy protection.