Attached files
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8-K - LANXESS Solutions US Inc. | v177485_8k.htm |
UNITED
STATES BANKRUPTCY COURT
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Ex.
99.1
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SOUTHERN
DISTRICT OF NEW YORK
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)
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In
re:
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)
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Chapter
11
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)
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Chemtura Corporation,
et
al.,
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)
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Case
No. 09-11233 (REG)
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)
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Debtors.
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)
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Jointly
Administered
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)
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MONTHLY
OPERATING REPORT FOR THE PERIOD FROM
FEBRUARY
1, 2010 TO FEBRUARY 28, 2010
DEBTORS
ADDRESS:
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199
Benson Road, Middlebury,
Connecticut 06749
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DEBTORS
ATTORNEYS:
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Richard
M. Cieri, Esq.
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M. Natasha Labovitz, Esq.
Craig A. Bruens, Esq.
KIRKLAND & ELLIS LLP
601 Lexington Avenue
New York, New York 10022
Telephone: (212)
446-4800
Facsimile: (212)
446-4900
The
undersigned, having reviewed the attached report and being familiar with the
Debtors' financial affairs, verifies under penalty of perjury, that the
information contained therein is complete, accurate and truthful to the best of
my knowledge.
/s/ Stephen C. Forsyth
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Stephen
C. Forsyth
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Executive
Vice President &
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Chief
Financial Officer
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DATE:
March 15, 2010
1
CHEMTURA
CORPORATION AND RELATED DEBTORS
INDEX
TO CONDENSED COMBINED FINANCIAL STATEMENTS AND SCHEDULES
(UNAUDITED)
Page
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||
Condensed
Combined Financial Statements (Unaudited):
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||
Condensed
Combined Statement of Operations
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3
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Condensed
Combined Balance Sheet
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4
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|
Condensed
Combined Statement of Cash Flows
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5
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Notes
to Unaudited Condensed Combined Financial Statements
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|
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1. Basis
of Presentation and Accounting Policies
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6
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2. Chapter
11 Proceedings
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7
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3. Debt
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10
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4. Reorganization
Items, Net
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14
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5. Restructuring
Initiatives and Other Items
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14
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Schedules:
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||
Schedule
1. Schedule of Disbursements
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||
February
28, 2010
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15
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Schedule
2. Debtor Questionnaire
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February
28, 2010
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16
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2
CHEMTURA
CORPORATION AND RELATED DEBTORS
CONDENSED
COMBINED STATEMENT OF OPERATIONS
(UNAUDITED)
For
the Period
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||||
February
1, 2010 to
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||||
($
in millions)
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February 28, 2010
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|||
Net
sales
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$ | 152 | ||
Cost
of goods sold
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131 | |||
Selling,
general and administrative
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15 | |||
Depreciation
and amortization
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16 | |||
Research
and development
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1 | |||
Operating
loss
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(11 | ) | ||
Interest
expense
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(5 | ) | ||
Other
income, net
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4 | |||
Reorganization
items, net
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(7 | ) | ||
Equity
in net earnings (loss) of subsidiaries
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- | |||
Net
loss before income taxes
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(19 | ) | ||
Income
tax (provision) benefit
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- | |||
Net
loss
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$ | (19 | ) |
See Notes
to the Condensed Combined Financial Statements
3
CHEMTURA
CORPORATION AND RELATED DEBTORS
CONDENSED
COMBINED BALANCE SHEET
(UNAUDITED)
($
in millions)
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February 28, 2010
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|||
ASSETS
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||||
Current
assets
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$ | 736 | ||
Intercompany
receivables
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517 | |||
Investment
in subsidiaries
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1,895 | |||
Property,
plant and equipment
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403 | |||
Goodwill
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149 | |||
Other
assets
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392 | |||
Total
assets
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$ | 4,092 | ||
LIABILITIES
AND STOCKHOLDERS' EQUITY
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||||
Current
liabilities
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$ | 456 | ||
Intercompany
payables
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40 | |||
Other
long-term liabilities
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75 | |||
Total
liabilities not subject to compromise
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571 | |||
Liabilities
subject to compromise
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3,420 | |||
Total
stockholders' equity
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101 | |||
Total
liabilities and stockholders' equity
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$ | 4,092 |
See Notes
to the Condensed Combined Financial Statements
4
CHEMTURA
CORPORATION AND RELATED DEBTORS
CONDENSED
COMBINED STATEMENT OF CASH FLOWS
(UNAUDITED)
For
the Period
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||||
February
1, 2010 to
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||||
($
in millions)
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February 28, 2010
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|||
Increase (decrease) to cash and cash
equivalents
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||||
CASH
FLOWS FROM OPERATING ACTIVITIES
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||||
Net
loss
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$ | (19 | ) | |
Adjustments
to reconcile net loss
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||||
to
net cash used in operating activities:
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||||
Depreciation
and amortization
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16 | |||
Changes
in assets and liabilities, net
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(23 | ) | ||
Net
cash used in operating activities
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(26 | ) | ||
CASH
FLOWS FROM INVESTING ACTIVITIES
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||||
Capital
expenditures
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(2 | ) | ||
CASH
FLOWS FROM FINANCING ACTIVITIES
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||||
Proceeds
from amended and restated DIP credit agreement, net
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299 | |||
Payment
on DIP credit facility, net
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(250 | ) | ||
Deferred
debt issuance costs
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(16 | ) | ||
Net
cash provided by financing activities
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33 | |||
CASH
AND CASH EQUIVALENTS
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||||
Change
in cash and cash equivalents
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5 | |||
Cash
and cash equivalents at beginning of period
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52 | |||
Cash
and cash equivalents at end of period
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$ | 57 |
See Notes
to the Condensed Combined Financial Statements
5
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1.
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Basis
of Presentation and Accounting
Policies
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BASIS OF
PRESENTATION
Chemtura
Corporation, together with its consolidated subsidiaries, (the “Company” or
“Chemtura”) is dedicated to delivering innovative, application-focused specialty
chemical and consumer product offerings. Chemtura Corporation’s
principal executive offices are located in Philadelphia, Pennsylvania and
Middlebury, Connecticut. We operate in a wide variety of end-use
markets, including automotive, transportation, construction, packaging,
agriculture, lubricants, plastics for durable and non-durable goods,
electronics, and pool and spa chemicals.
On March
18, 2009, Chemtura and 26 of its U.S. affiliates (collectively the “Debtors”)
filed voluntary petitions for relief under Chapter 11 of Title 11 of the United
States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy
Court for the Southern District of New York (the “Bankruptcy Court”) (see Note
2).
The
accompanying combined financial statements of the Debtors have been prepared
solely for the purpose of complying with the monthly reporting requirements of
the Bankruptcy Court (referred to herein as the “Monthly Operating
Report”).
The
monthly information presented herein is unaudited and has been prepared from the
books and records of Chemtura and the Debtors on a going concern basis, which
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As discussed in Note 2, the Chapter 11
cases and related matters raise substantial doubt about the ability of the
Debtors to continue as a going concern. The accompanying Condensed Combined
Financial Statements of the Debtors do not reflect any adjustments relating to
the recoverability of assets and classification of liabilities that might result
from the outcome of these uncertainties.
The
Condensed Combined Financial Statements have been prepared in accordance with
Accounting Standards Codification (“ASC”) Section 852-10-45, Reorganizations - Other Presentation
Matters (“ASC 852-10-45”). ASC 852-10-45 does not ordinarily
affect or change the application of U.S. generally accepted accounting
principles (“GAAP”). However, it does require the Company to
distinguish transactions and events that are directly associated with the
reorganization in connection with the Chapter 11 cases from the ongoing
operations of the business. The pre-petition liabilities subject to
compromise are disclosed separately on the February 28, 2010 Condensed Combined
Balance Sheet. Expenses incurred and settlement impacts due to the
Chapter 11 cases are reported separately as reorganization items, net on the
Condensed Combined Statement of Operations for the month ended February 28,
2010. Interest expense related to pre-petition indebtedness has been
reported only to the extent that it will be paid during the pendency of the
Chapter 11 cases or is permitted by Bankruptcy Court approval or is expected to
be an allowed claim.
These
Condensed Combined Financial Statements are based on the Debtors' combined
financial statements as of and for the month ended February 28,
2010. The Condensed Combined Financial Statements may not contain all
necessary adjustments which may be reported in Chemtura’s filings pursuant to
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Accordingly, the financial information herein is subject to
change and any such change could be material. The Condensed Combined
Balance Sheet as of February 28, 2010 reflects all final adjustments as of
December 31, 2009 that have been included in the Company’s Annual Report on Form
10-K which was filed on March 12, 2010. These adjustments include
changes in retained earnings and equity as of December 31, 2009, as well as
changes in estimates for liabilities subject to compromise primarily relating to
environmental, litigation, income taxes, pension and post-retirement
obligations. Chemtura cautions investors and potential investors not
to place undue reliance upon the information contained in the Monthly Operating
Report, as it was not prepared for the purpose of providing the basis for an
investment decision relating to any of the securities of any of Chemtura or its
subsidiaries, or any other affiliate of Chemtura. The Monthly
Operating Report was not audited or reviewed by independent accountants, is as
prescribed by applicable bankruptcy laws, and is subject to future adjustment
and reconciliation. The Monthly Operating Report does not contain all
disclosures that would be required for presentation in accordance with U.S.
GAAP. There can be no assurance that, from the perspective of an
investor or potential investor in Chemtura’s securities, the Monthly Operating
Report is complete. The Monthly Operating Report also contains
information for periods which are shorter or otherwise different from those
required in Chemtura’s reports pursuant to the Exchange Act, and such
information might not be indicative of Chemtura’s financial condition or
operating results for the period that would be reflected in Chemtura’s financial
statements or in its reports pursuant to the Exchange Act. Results
set forth in the Monthly Operating Report should not be viewed as indicative of
future results.
6
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
ACCOUNTING
POLICIES
Carrying Value of Goodwill
and Long-lived Assets
The
Company has elected to perform its annual goodwill impairment procedures for all
of its reporting units in accordance with ASC Subtopic 350-20, Intangibles – Goodwill and Other -
Goodwill as of July 31, or sooner, if events occur or circumstances
change that would more likely than not reduce the fair value of a reporting unit
below its carrying value. Interim tests, if necessary, are performed
during the last month of a respective quarter and an impairment, if any, is
recorded in the financial statements for that quarter.
The
Company’s cash flow projections, used to estimate the fair value of its
reporting units, are based on subjective estimates. Although the
Company believes that its projections reflect its best estimates of the future
performance of its reporting units, changes in estimated revenues or operating
margins could have an impact on the estimated fair values. Any
increases in estimated reporting unit cash flows would have had no impact on the
carrying value of that reporting unit. However, a decrease in future
estimated reporting unit cash flows could require the Company to determine
whether recognition of a goodwill impairment charge was required. The
assessment is required to be performed in two steps, step one to test for a
potential impairment of goodwill and, if potential losses are identified, step
two to measure the impairment loss through a full fair valuing of the assets and
liabilities of the reporting unit utilizing the acquisition method of
accounting.
The
Company continually monitors and evaluates business and competitive conditions
that affect its operations and reflects the impact of these factors in its
financial projections. If permanent or sustained changes in business,
competitive conditions or stock price occur, they can lead to revised
projections that could potentially give rise to impairment charges.
During
the last month of a respective quarter, the Company evaluates the recoverability
of the carrying value of its long-lived assets, excluding goodwill, whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable and an impairment, if any, is recorded in the financial statements
for that quarter. The Company realizes that events and changes in circumstances
can be more frequent in the course of a U.S. bankruptcy
process. Under such circumstances, the Company assesses whether the
projected undiscounted cash flows of its businesses are sufficient to recover
the existing unamortized carrying value of its long-lived assets. If the
undiscounted projected cash flows are not sufficient, the Company calculates the
impairment amount by several methodologies, including discounting the projected
cash flows using its weighted average cost of capital and valuation estimates
from third parties. The amount of the impairment is written-off
against earnings in the period in which the impairment has been
determined.
2.
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Chapter
11 Proceedings
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The
Chapter 11 cases are being jointly administered under the caption "In re
Chemtura Corporation, et a1." and the Debtors are operating their U.S.
businesses as a debtor-in-possession (“DIP”) under the jurisdiction of the
Bankruptcy Court and in accordance with the applicable provisions of the
Bankruptcy Code and orders of the Bankruptcy Court.
7
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
The
Debtors own substantially all of the Company’s U.S. assets. The
Debtors consist of Chemtura and the following subsidiaries:
·
A&M Cleaning Products LLC
|
·
Crompton Colors Incorporated
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·
Kem Manufacturing Corporation
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·
Aqua Clear Industries, LLC
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·
Crompton Holding Corporation
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·
Laurel Industries Holdings, Inc.
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·
ASEPSIS, Inc.
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·
Crompton Monochem, Inc.
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·
Monochem, Inc.
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·
ASCK, Inc.
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·
GLCC Laurel, LLC
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·
Naugatuck Treatment Company
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·
BioLab, Inc.
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·
Great Lakes Chemical Corporation
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·
Recreational Water Products, Inc.
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·
BioLab Company Store, LLC
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·
Great Lakes Chemical Global, Inc.
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·
Uniroyal Chemical Company Limited
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·
Biolab Franchise Company, LLC
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·
GT Seed Treatment, Inc.
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·
Weber City Road LLC
|
·
BioLab Textile Additives, LLC
|
·
HomeCare Labs, Inc
|
·
WRL of Indiana, Inc.
|
·
CNK Chemical Realty Corporation
|
·
ISCI, Inc.
|
Since the
filing, all orders of the Bankruptcy Court sufficient to enable the Debtors to
conduct normal business activities, including “first day” motions and the
interim and final approval of the DIP Credit Facility, have been entered by the
Bankruptcy Court. While the Debtors are subject to Chapter 11, all
transactions outside the ordinary course of business will require the prior
approval of the Bankruptcy Court.
As a
consequence of the Chapter 11 cases, substantially all pre-petition litigation
and claims against the Debtors have been stayed. Accordingly, no
party may take any action to collect pre-petition claims or to pursue litigation
arising as a result of pre-petition acts or omissions except pursuant to an
order of the Bankruptcy Court.
On August
21, 2009, the Bankruptcy Court established October 30, 2009 as the deadline for
the filing of proofs of claim against the Debtors (the “Bar
Date”). Under certain limited circumstances, some creditors may be
permitted to file proofs of claim after the Bar Date. Accordingly, it
is possible that not all potential proofs of claim were filed as of the filing
of this Monthly Operating Report.
The
Debtors have received approximately 15,300 proofs of claim covering a broad
array of asserted liabilities. Approximately 8,000 proofs of claim have been
asserted in “unliquidated” amounts or contain an “unliquidated” component such
that they are treated as being asserted in “unliquidated” amounts. Excluding
proofs of claim in “unliquidated” amounts, the aggregate amount of proofs of
claim filed totaled approximately $23.6 billion.
The
Company is in the process of evaluating the amounts asserted in and the factual
and legal basis of the proofs of claim filed against the Debtors. Based upon the
Company’s initial review and evaluation, which is continuing, a significant
number of proofs of claim are duplicative and/or legally or factually without
merit. As to those claims, the Company has filed and intends to file objections
with the Bankruptcy Court. However, there can be no assurance that these claims
will not be allowed in full.
Further,
while the Debtors believe they have insurance to cover certain asserted claims,
there can be no assurance that material uninsured obligations will not be
allowed as claims in the Chapter 11 cases. Because of the substantial number of
asserted contested claims, as to which review and analysis is ongoing, there is
no assurance as to the ultimate value of claims that will be allowed in these
Chapter 11 cases, nor is there any assurance as to the ultimate recoveries for
the Debtors’ stakeholders, including the Debtors’ bondholders and the Company’s
shareholders. The differences between amounts recorded by the Debtors
and proofs of claim filed by the creditors will continue to be investigated and
resolved through the claims reconciliation process.
The
Company has recognized certain charges related to expected allowed
claims. As the Company completes the process of evaluating and
resolving the proofs of claim, appropriate adjustments to the Company’s
Condensed Combined Consolidated Financial Statements will be
made. Adjustments may also result from actions of the Bankruptcy
Court, settlement negotiations, rejection of executory contracts and real
property leases, determination as to the value of any collateral securing claims
and other events. Any such adjustments could be material to the
Company’s results of operations and financial position in any given
period.
8
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
As
provided by the Bankruptcy Code, the Debtors have the exclusive right to file a
plan of reorganization (the “Plan”) for 120 days after the petition date with
the possibility of extensions thereafter. On February 23, 2010, the
Bankruptcy Court granted the Company’s application for an extension of the
period during which it has the exclusive right to file a Plan from February 11,
2010 to June 11, 2010. The Bankruptcy Court had previously granted
the Company’s applications for extensions of the exclusivity period on July 28,
2009 and October 27, 2009. There can be no assurance that a Plan will
be filed by the Debtors or confirmed by the Bankruptcy Court, or that any such
Plan will be consummated. After a Plan has been filed with the
Bankruptcy Court, the Plan, along with a disclosure statement approved by the
Bankruptcy Court, will be sent to all creditors and other parties entitled to
vote to accept or reject the Plan. Following the solicitation period,
the Bankruptcy Court will consider whether to confirm the Plan. In
order to confirm a Plan, the Bankruptcy Court must make certain findings as
required by the Bankruptcy Code. The Bankruptcy Court may confirm a
Plan notwithstanding the non-acceptance of the Plan by an impaired class of
creditors or equity security holders if certain requirements of the Bankruptcy
Code are met.
On
February 9, 2010, the Court gave interim approval of an Amended and Restated
Senior Secured Super-Priority Debtor-in-Possession Credit Agreement (the
“Amended and Restated DIP Credit Agreement”) by and among the Debtors, Citibank
N.A. and the other lenders party thereto. The Amended and Restated
DIP Credit Agreement provides for a first priority and priming secured revolving
and term loan credit commitment of up to an aggregate of $450
million. The proceeds of the loans and other financial accommodations
incurred under the Amended and Restated DIP Credit Agreement were used to, among
other things, refinance the obligations outstanding under the DIP Credit
Facility and will provide working capital for general corporate
purposes. The Amended and Restated DIP Credit Agreement provided a
substantial reduction in the Company’s financing costs through interest rate
reductions and the avoidance of the extension fees that would have been payable
under the DIP Credit Facility in February and May 2010. It also
provided the Company with greater flexibility to operate its
business. The Amended and Restated DIP Credit Agreement closed on
February 12, 2010 with the drawing of the $300 million term loan. On
February 18, 2010, the Bankruptcy Court entered a final order providing full
access to the Amended and Restated DIP Credit Agreement. The Amended
and Restated DIP Credit Agreement matures on the earlier of 364 days after the
closing, the effective date of a Plan or the date of termination in whole of the
Commitments (as defined in the Amended and Restated DIP Credit
Agreement).
The
ultimate recovery by the Debtors’ creditors and the Company’s shareholders, if
any, will not be determined until confirmation and implementation of a
Plan. A Plan could result in the Company’s shareholders receiving
little or no value for their interests and holders of the Debtors’ unsecured
debt, including trade debt and other general unsecured creditors, receiving
less, and potentially substantially less, than payment in full for their
claims. Because of such possibilities, the value of the Company’s
common stock and unsecured debt is highly speculative. Accordingly,
the Company urges that appropriate caution be exercised with respect to existing
and future investments in any of these securities. Although the
shares of the Company’s common stock continue to trade on the Pink Sheets
Electronic Quotation Service (“Pink Sheets”) under the symbol “CEMJQ,” the
trading prices may have little or no relationship to the actual recovery, if
any, by the holders under any eventual Bankruptcy Court-approved reorganization
Plan. The opportunity for any recovery by holders of the Company’s
common stock under such Plan is uncertain as all creditors’ claims must be met
in full, with interest where due, before value can be attributed to the common
stock and therefore the shares of the Company’s common stock may be cancelled
without any compensation pursuant to such Plan.
Continuation
of the Company as a going concern is contingent upon, among other things, the
Company’s and/or the Debtors’ ability (i) to comply with the terms and
conditions of the Amended and Restated DIP Credit Agreement; (ii) to obtain
confirmation of a Plan under the Bankruptcy Code; (iii) to return to
profitability; (iv) to generate sufficient cash flow from operations; and (v) to
obtain financing sources to meet the Company's future
obligations. These matters raise substantial doubt about the
Company's ability to continue as a going concern. The Consolidated
Financial Statements do not reflect any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might result from the outcome of these
uncertainties. Additionally, a Plan could materially change amounts
reported in the Consolidated Combined Financial Statements, which do not give
effect to all adjustments of the carrying value of assets and liabilities that
may be necessary as a consequence of completing reorganization under Chapter 11
of the Bankruptcy Code.
9
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
In
addition, as part of the Company’s emergence from bankruptcy protection, the
Company may be required to adopt fresh start accounting in a future
period. If fresh start accounting is applicable, our assets and
liabilities will be recorded at fair value as of the fresh start reporting
date. The fair value of our assets and liabilities as of such fresh
start reporting date may differ materially from the recorded values of assets
and liabilities on our Consolidated Balance Sheets. Further, if fresh
start accounting is required, the financial results of the Company after the
application of fresh start accounting may not be comparable to historical
trends.
For
additional information regarding the Chapter 11 cases, please refer to
Chemtura's website at www.chemtura.com or
www.kccllc.net/chemtura.
3.
|
Debt
|
Borrowings
of the Debtors consist of the following:
($
in millions)
|
February 28, 2010
|
|||
6.875%
Notes due 2016 1
|
$ | 500 | ||
7%
Notes due 2009 2
|
370 | |||
Amended
and Restated DIP Credit Agreement
|
299 | |||
6.875%
Debentures due 2026 3
|
150 | |||
2007
Credit Facility
|
154 | |||
Other
borrowings
|
3 | |||
Total
Debt
|
1,476 | |||
Less:
Amended and Restated DIP Credit Agreement
|
(299 | ) | ||
Total
Debt Included in Liabilities Subject to Compromise
|
$ | 1,177 |
1 Issued
by Chemtura and guaranteed by all other Debtors.
2 Issued
by Great Lakes Chemical Corporation and guaranteed by Chemtura
Corporation.
3 Issued
by Chemtura and not subject to any guarantee.
With the
exception of the Amended and Restated DIP Credit Agreement, all of the foregoing
debt is embedded in the liabilities subject to compromise line of the
accompanying February 28, 2010 Condensed Combined Balance Sheet.
DEBTOR-IN-POSSESSION (“DIP”)
CREDIT AGREEMENTS
On March
18, 2009, the Debtors entered into a $400 million senior secured DIP Credit
Facility arranged by Citigroup Global Markets Inc. with Citibank, N.A. as
Administrative Agent, subject to approval by the Bankruptcy Court. On
March 20, 2009, the Bankruptcy Court entered an interim order providing approval
for the Debtors to access $190 million of the DIP Credit Facility in the form of
a $165 million term loan and a $25 million revolving credit
facility. The DIP Credit Facility closed on March 23, 2009 with the
drawing of the $165 million term loan. The initial proceeds were used
to fund the termination of the U.S. accounts receivable financing facility
entered into on January 23, 2009 and pay fees and expenses associated with the
transaction and to fund business operations.
The DIP
Credit Facility was comprised of the following: (i) a $250 million
non-amortizing term loan; (ii) a $64 million revolving credit facility; and
(iii) an $86 million revolving credit facility representing the “roll-up” of
certain outstanding secured amounts owed to lenders under the existing
pre-petition credit agreement, dated as of July 31, 2007 (the “2007 Credit
Facility”), who have commitments under the DIP Credit Facility. In
addition, a sub-facility for letters of credit (“Letters of Credit”) in an
aggregate amount of $50 million was available under the unused commitments of
the revolving credit facilities.
10
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
The
Bankruptcy Court entered a final order providing full access to the $400 million
DIP Credit Facility on April 29, 2009. On May 4, 2009, the Company
drew the $85 million balance of the $250 million term loan and used the proceeds
together with cash on hand to fund the $86 million “roll up” of certain
outstanding secured amounts owed to certain lenders under the 2007 Credit
Facility as approved by the final order.
On
February 9, 2010, the Bankruptcy Court gave interim approval of an Amended and
Restated DIP Credit Agreement by and among the Debtors, Citibank N.A. and the
other lenders party thereto. The Amended and Restated DIP Credit
Agreement provides for a first priority and priming secured revolving and term
loan credit commitment of up to an aggregate of $450 million. The
Amended and Restated DIP Credit Agreement consists of a $300 million term loan
and a $150 million revolving credit facility. The proceeds of the
term loan and other financial accommodations incurred under the Amended and
Restated DIP Credit Agreement were used to, among other things, refinance the
obligations outstanding under the DIP Credit Facility and will provide working
capital for general corporate purposes. The Amended and Restated DIP
Credit Agreement provided a substantial reduction in our financing costs through
reductions in interest spread and avoidance of the extension fees payable under
the DIP Credit Facility in February and May 2010. The Amended and
Restated DIP Credit Agreement closed on February 12, 2010 with the drawing of
the $300 million term loan. On February 18, 2010, the Bankruptcy
Court entered a final order providing full access to the Amended and Restated
DIP Credit Agreement. The Amended and Restated DIP Credit Agreement
matures on the earlier of 364 days after the closing, the effective date of a
Plan or the date of termination in whole of the Commitments (as defined in the
Amended and Restated DIP Credit Agreement).
The
Amended and Restated DIP Credit Agreement is secured by a super-priority lien on
substantially all of the Company's U.S. assets, including (i) cash; (ii)
accounts receivable; (iii) inventory; (iv) machinery, plant and equipment; (v)
intellectual property; (vi) pledges of the equity of first tier subsidiaries;
and (vii) pledges of debt and other instruments.
Availability
of credit under the Amended and Restated DIP Credit Agreement is equal to (i)
the lesser of (a) the Borrowing Base (as defined below) and (b) the effective
commitments under the Amended and Restated DIP Credit Agreement minus (ii) the
aggregate amount of the DIP Loans and any undrawn or unreimbursed Letters of
Credit. The Borrowing Base is the sum of (i) 80% of the Debtors’
eligible accounts receivable, plus (ii) the lesser of (a) 85% of the net orderly
liquidation value percentage (as defined in the Amended and Restated DIP Credit
Agreement) of the Debtors’ eligible inventory and (b) 75% of the cost of the
Debtors’ eligible inventory, plus (iii) $275 million, less certain reserves
determined in the discretion of the Administrative Agent to preserve and protect
the value of the collateral. As of February 28, 2010, extensions of
credit outstanding under the Amended and Restated DIP Credit Agreement consisted
of the $299 million term loan (net of an original issue discount of $1 million)
and Letters of Credit of $19 million.
Borrowings
under the DIP Credit Facility term loans and the $64 million revolving credit
facility bear interest at a rate per annum equal to, at the Company’s election,
(i) 6.5% plus the Base Rate (defined as the higher of (a) 4%; (b) Citibank
N.A.’s published prime rate; or (c) the Federal Funds rate plus 0.5%) or (ii)
7.5% plus the Eurodollar Rate (defined as the higher of (a) 3% or (b) the
current LIBOR rate adjusted for reserve requirements). Borrowings
under the $86 million revolving credit facility bear interest at a rate per
annum equal to, at the Company’s election, (i) 2.5% plus the Base Rate or (ii)
3.5% plus the Eurodollar Rate. Additionally, the Company will pay an
unused commitment fee of 1.5% per annum on the average daily unused portion of
the revolving credit facilities and a letter of credit fee on the average daily
balance of the maximum daily amount available to be drawn under Letters of
Credit equal to the applicable margin above the Eurodollar Rate applicable for
borrowings under the applicable revolving credit facility. Certain
fees are payable to the lenders upon the reduction or termination of the
commitment and upon the substantial consummation of a Plan as described more
fully in the DIP Credit Facility including an exit fee payable to the Lenders of
2% of “roll-up” commitments and 3% of all other commitments. These fees were
paid upon the funding of the term loan under the Amended and Restated DIP Credit
Agreement.
11
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
Borrowings
under the Amended and Restated DIP Credit Agreement term loan bear interest at a
rate per annum equal to, at our election, (i) 3.0% plus the Base Rate (defined
as the higher of (a) 3%; (b) Citibank N.A.’s published rate; or (c) the Federal
Funds rate plus 0.5%) or (ii) 4.0% plus the Eurodollar Rate (defined as the
higher of (a) 2% or (b) the current LIBOR rate adjusted for reserve
requirements). Borrowings under the $150 million revolving facility
bear interest at a rate per annum equal to, at our election, (i) 3.25% plus the
Base Rate or (ii) 4.25% plus the Eurodollar Rate. Additionally, we
pay an unused commitment fee of 1.0% per annum on the average daily unused
portion of the revolving facilities and a letter of credit fee on the average
daily balance of the maximum daily amount available to be drawn under Letters of
Credit equal to the applicable margin above the Eurodollar Rate applicable for
borrowings under the applicable revolving 2007 Credit Facility.
The
obligations of the Company as borrower under the Amended and Restated DIP Credit
Agreement are guaranteed by the Company’s U.S. subsidiaries who are Debtors in
the Chapter 11 cases, which, together with the Company own substantially all of
the Company’s U.S. assets. The obligations must also be guaranteed by
each of the Company’s subsidiaries that become party to the Chapter 11 cases,
subject to specified exceptions.
As under
the DIP Credit Facility, all amounts owing by the Company and the guarantors
under the Amended and Restated DIP Credit Agreement and certain hedging
arrangements and cash management services are secured, subject to a carve-out as
set forth in the Amended and Restated DIP Credit Agreement (the “Carve-Out”),
for professional fees and expenses (as well as other fees and expenses
customarily subject to such Carve-Out), by (i) a first priority perfected pledge
of (a) all notes owned by the Company and the guarantors and (b) all capital
stock owned by the Company and the guarantors (subject to certain exceptions
relating to their respective foreign subsidiaries) and (ii) a first priority
perfected security interest in all other assets owned by the Company and the
guarantors, in each case, junior only to liens as set forth in the Amended and
Restated DIP Credit Agreement and the Carve-Out.
The
Amended and Restated DIP Credit Agreement requires the Company to meet certain
financial covenants including the following: (a) minimum cumulative monthly
earnings before interest, taxes, and depreciation (“EBITDA”), after certain
adjustments, on a consolidated basis; (b) a maximum variance of the weekly
cumulative cash flows of the Debtors, compared to an agreed upon forecast; (c)
minimum borrowing availability of $20 million; and (d) maximum quarterly capital
expenditures. In addition, the Amended and Restated DIP Credit
Agreement, as did the DIP Credit Facility contains covenants which, among other
things, limit the incurrence of additional debt, operating leases, issuance of
capital stock, issuance of guarantees, liens, investments, disposition of
assets, dividends, certain payments, mergers, change of business, transactions
with affiliates, prepayments of debt, repurchases of stock and redemptions of
certain other indebtedness and other matters customarily restricted in such
agreements. As of February 28, 2010, the Company believes that it was
in compliance with the covenant requirements of the Amended and Restated DIP
Credit Agreement.
The
Amended and Restated DIP Credit Agreement contains events of default, including,
among others, payment defaults and breaches of representations and warranties
(such as non-compliance with covenants and the existence of a material adverse
effect (as defined in the agreement)).
12
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
PRE-PETITION
DEBT
The
Chapter 11 filing constituted an event of default under, or otherwise triggered
repayment obligations with respect to, a number of debt instruments and
agreements relating to direct and indirect financial obligations of the Debtors
(collectively “Pre-petition Debt”). All obligations under the
Pre-petition Debt have become automatically and immediately due and
payable. The Debtors believe that any efforts to enforce the payment
obligations under the Pre-petition Debt have been stayed as a result of the
Company’s filing for relief under Chapter 11 of the U.S. Bankruptcy
Code. As a result, interest accruals and payments for the unsecured
Pre-petition Debt have ceased as of the petition date. The amount of
contractual interest expense not recorded in the month ended February 28, 2010
was approximately $6 million. The Pre-petition Debt as of February
28, 2010 consists of $500 million of 6.875% Notes due 2016 (“2016 Notes”)1, $370 million of 7% Notes
due July 15, 2009 (“2009 Notes”)2, $150 million 6.875%
Debentures due 2026 (“2026 Debentures”3 and, together with the
2016 Notes, the 2009 Notes and the 2026 Debentures, the “Notes”) and $154
million due 2009 under the 2007 Credit Facility and $3 million of other
borrowings. Pursuant to the final order of the Bankruptcy Court
approving the DIP Credit Facility, the Debtors have acknowledged the
pre-petition secured indebtedness associated with the 2007 Credit Facility to be
no less than $139 million (now $53 million after the “roll-up” in connection
with the Company’s entry into the DIP Credit Facility).
The 2007
Credit Facility was guaranteed by certain U.S. subsidiaries of the Company (the
“Domestic Subsidiary Guarantors”). Pursuant to a 2007 Credit Facility
covenant, the Company and the Domestic Subsidiary Guarantors were, in June of
2007, required to provide a security interest in the equity of their first tier
subsidiaries (limited to 66% of the voting stock of first-tier foreign
subsidiaries). Under the terms of the indentures for the Notes, the
Company was required to provide security for the Notes on an equal and ratable
basis if (and for so long as) the principal amount of secured debt exceeded
certain thresholds related to the Company’s assets. The thresholds
vary under each of the indentures. In order to avoid having the Notes
become equally and ratably secured with the 2007 Credit Facility obligations,
the lenders agreed to limit the amount secured by the pledged equity to the
maximum amount that would not require the Notes to become equally and ratably
secured (the “Maximum Amount”). In connection with the amendment and
waiver agreement dated December 30, 2008, the Company and the Domestic
Subsidiary Guarantors entered into a Second Amended and Restated Pledge and
Security Agreement. In addition to the prior pledge of equity granted
to secure the 2007 Credit Facility obligations, the Company and the Domestic
Subsidiary Guarantors granted a security interest in their
inventory. The value of this security interest continues to be
limited to the Maximum Amount.
The
Company has standby letters of credit and guarantees with various financial
institutions the majority of which were issued under the 2007 Credit
Facility. Any additional drawings of letters of credit issued under
the 2007 Credit Facility will be classified as liabilities subject to compromise
in the Condensed Combined Balance Sheet.
3 Issued
by Chemtura and not subject to any guarantee.
13
CHEMTURA
CORPORATION AND RELATED DEBTORS
NOTES
TO THE CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
4.
|
Reorganization
Items, Net
|
Reorganization
items, net in February 2010 primarily consist of professional fees associated
with the Chapter 11 cases for which Bankruptcy Court approval has been obtained
or requested.
5.
|
Restructuring
Initiatives
|
On
January 25, 2010, the Company’s Board of Directors approved a restructuring plan
involving the consolidation and idling of certain assets within the flame
retardants business operations in El Dorado, Arkansas. The
restructuring plan was approved by the Bankruptcy Court on February 23, 2010 and
is expected to be completed by the fourth quarter of 2010. As a
result of the restructuring plan, the Company expects to record costs of
approximately $40 million, primarily in the first half of 2010, consisting of
approximately $35 million in accelerated depreciation of property, plant and
equipment and approximately $5 million in other facility-related shutdown costs,
which include accelerated recognition of asset retirement obligations,
decommissioning of wells and pipelines and severance. In the
aforementioned costs, the Company expects cash costs, including capital costs,
to be approximately $20 million primarily in 2010 in order to execute the
consolidation of operations into remaining facilities. For the month
ended February 2010, the Company recorded $8 million of accelerated depreciation
related to this initiative.
14
In
re
|
Chemtura Corporation, et al.,
|
Case
No. (Jointly
Administered)
|
09-11233 (REG)
|
Debtor
|
Reporting
Period:
|
February 28,
2010
|
SCHEDULE
OF DISBURSEMENTS
($
in Millions)
Time
Period:
|
||||||||
2/1/10
- 2/28/10
|
||||||||
Debtor
|
Case
Number
|
Disbursements
|
||||||
AQUA
CLEAR INDUSTRIES, LLC,
|
09-11231 | $ | - | |||||
CHEMTURA
CORPORATION
|
09-11233 | $ | 101 | |||||
A&M
CLEANING PRODUCTS, LLC
|
09-11234 | $ | - | |||||
ASCK,
INC.
|
09-11235 | $ | - | |||||
ASEPSIS,
INC.
|
09-11236 | $ | - | |||||
BIOLAB
COMPANY STORE, LLC
|
09-11237 | $ | - | |||||
BIOLAB
FRANCHISE COMPANY, LLC
|
09-11238 | $ | - | |||||
BIO-LAB,
INC.
|
09-11239 | $ | 18 | |||||
BIOLAB
TEXTILE ADDITIVES, LLC
|
09-11240 | $ | - | |||||
CNK
CHEMICAL REALTY CORPORATION
|
09-11241 | $ | - | |||||
CROMPTON
COLORS INCORPORATED
|
09-11242 | $ | - | |||||
CROMPTON
HOLDING CORPORATION
|
09-11244 | $ | - | |||||
CROMPTON
MONOCHEM, INC.
|
09-11245 | $ | - | |||||
GLCC
LAUREL, LLC
|
09-11246 | $ | - | |||||
GREAT
LAKES CHEMICAL CORPORATION
|
09-11247 | $ | 20 | |||||
GREAT
LAKES CHEMICAL GLOBAL, INC.
|
09-11249 | $ | - | |||||
GT
SEED TREATMENT, INC.
|
09-11250 | $ | - | |||||
HOMECARE
LABS, INC.
|
09-11251 | $ | - | |||||
ISCI,
INC.
|
09-11252 | $ | - | |||||
KEM
MANUFACTURING CORPORATION
|
09-11253 | $ | - | |||||
LAUREL
INDUSTRIES HOLDINGS, INC.
|
09-11254 | $ | - | |||||
MONOCHEM,
INC.
|
09-11255 | $ | - | |||||
NAUGATUCK
TREATMENT COMPANY
|
09-11256 | $ | - | |||||
RECREATIONAL
WATER PRODUCTS, INC.
|
09-11257 | $ | - | |||||
UNIROYAL
CHEMICAL COMPANY LIMITED (DELAWARE)
|
09-11258 | $ | - | |||||
WEBER
CITY ROAD, LLC
|
09-11259 | $ | - | |||||
WRL
OF INDIANA, INC.
|
09-11260 | $ | - |
15
In
re
|
Chemtura Corporation, et al.,
|
Case
No. (Jointly
Administered)
|
09-11233 (REG)
|
Debtor
|
Reporting
Period:
|
February 28,
2010
|
DEBTOR
QUESTIONNAIRE
Must
be completed each month. If the answer to any of the questions
is “Yes”, provide a detailed explanation of each item. Attach additional
sheets if necessary.
|
Yes
|
No
|
||||||||
1
|
Have
any assets been sold or transferred outside the normal course of business
this reporting period?
|
X
|
||||||||
2
|
Have
any funds been disbursed from any account other than a debtor in
possession account this reporting period?
|
X
|
||||||||
3
|
Is
the Debtor delinquent in the timely filing of any post-petition tax
returns?
|
X
|
||||||||
4
|
Are
workers compensation, general liability or other necessary insurance
coverages expired or cancelled, or has the debtor received notice of
expiration or cancellation of such policies?
|
X *
|
||||||||
5
|
Is
the Debtor delinquent in paying any insurance premium
payment?
|
X
|
||||||||
6
|
Have
any payments been made on pre-petition liabilities this reporting
period?
|
X
|
||||||||
7
|
Are
any post petition receivables (accounts, notes or loans) due from related
parties?
|
X
|
||||||||
8
|
Are
any post petition payroll taxes past due?
|
X
|
||||||||
9
|
Are
any post petition State or Federal income taxes past due?
|
X
|
||||||||
10
|
Are
any post petition real estate taxes past due?
|
X *
|
||||||||
11
|
Are
any other post petition taxes past due?
|
X
|
||||||||
12
|
Have
any pre-petition taxes been paid during this reporting
period?
|
X
|
||||||||
13
|
Are
any amounts owed to post petition creditors delinquent?
|
X *
|
||||||||
14
|
Are
any wage payments past due?
|
X
*
|
||||||||
15
|
Have
any post petition loans been received by the Debtor from any
party?
|
X
|
||||||||
16
|
Is
the Debtor delinquent in paying any U.S. Trustee fees?
|
X
|
||||||||
17
|
Is
the Debtor delinquent with any court ordered payments to attorneys or
other professionals?
|
X
|
||||||||
18
|
Have
the owners or shareholders received any compensation outside of the normal
course of business?
|
X
|
Explanations
to Questions Answered “Yes”
6.
|
Pre-petition
payments have been made pursuant to certain Bankruptcy Court approved
court orders for taxes, wages, customer programs, critical vendors,
insurance and other employee
programs.
|
7.
|
The
Debtors have intercompany trade receivables due from non-filing
affiliates.
|
12.
|
Pre-petition
tax payments have been made pursuant to certain Bankruptcy Court approved
court orders.
|
15.
|
During
February 2010, the Debtors received Bankruptcy Court approval for the
Amended and Restated DIP Credit Agreement and drew down the $300 million
term loan. Proceeds were utilized to pay down the DIP Credit
Facility as well as to provide working capital for general corporate
purposes.
|
Explanations
to Questions Answered “No *”
4.
|
The
Debtors have received certain notices, as required by Connecticut
insurance regulations, with respect to possible changes in terms and
conditions for policies renewing effective June 1, 2010. The
Debtors are working to implement the renewal of such policies on
commercially acceptable terms and
conditions.
|
10.
|
The
Debtors are required under certain of their leases to pay a share of the
real estate taxes on the property. The payment is made by
reimbursing the landlord for such amounts paid by the landlord after
receiving an invoice. Debtors have reimbursed their
landlords for all post-petition amounts for which they have been
billed.
|
13.
|
Answer
does not include amounts that may be past due as a result of a continued
investigation regarding discrepancies on price or
quantity.
|
14.
|
No
post-petition wage payments are past due. Certain pre-petition
wage payments, subject to certain Bankruptcy Code and Bankruptcy Court
limitations, remain past due.
|
16