A mining company that is partly owned by West Chester-based AK Steel has filed for Chapter 11 bankruptcy protection.
AK Steel (NYSE: AKS) holds 49.9 percent of Minnesota mining company MagnetationLLC, which made the filing after reaching a restructuring deal with senior bondholders that are owed $425 million, the Wall Street Journal reports.
The privately held joint venture between AK Steel affiliate AK Iron Resources LLC and Magnetation Inc. was founded in 2006 and has fallen victim to the declining demand for steel along with a growing global oversupply. The company uses magnetic separators to recover iron ore concentrate from waste stockpiles from mining operations. The iron ore is then processed into pellets and sold to steelmakers.
Iron ore prices have dropped in the last 18 months, which contributed to Magnetation’s $16 million loss on revenue of about $96 million in 2014.
AK Steel recorded a $256.3 million impairment charge related to Magnetation in the quarter that ended March 31.
Before filing for bankruptcy, Magnetation reached a deal with more than 70 percent of its senior secured bondholders, who agreed to extend a $135 million bankruptcy financing package to fund operations during restructuring. Magnetation plans to continue to pay suppliers and provide benefits for its 486 employees during the restructuring period. Its financing package calls for a roll-up of existing debt and as much as $63.7 million in new loans. The company must also file a reorganization plan within 90 days.
Magnetation owns iron ore concentrate plants in Keewatin, Bovey and Grand Rapids, Minn. as well as an iron ore pellet plant in Reynolds, Ind.
Davis Polk & Wardwell LLP is handling the bankruptcy case, and Blackstone Advisory Partners LP is serving as Magentation’s financial adviser. U.S. Bankruptcy Court Judge Gregory Kishel will oversee the case.