Kaiser says it will miss interest payment on debt

John Stucke - Staff writer

Kaiser Aluminum Corp. will skip a $25.5 million interest payment this week in a move that puts the struggling firm in financial jeopardy.

Reeling from poor aluminum prices, Kaiser has been further pinched by maturing debts.

Spokesman Scott Lamb declined to say whether the missed payments were steering Kaiser toward bankruptcy. It was, however, Kaiser's first disclosure to bondholders that it did not intend to meet debt obligations.

The company announced earlier this month that it was talking with bondholders about restructuring $799 million of debt.

"While we have not yet reached a definitive solution for our debt maturities," said Kaiser president and chief executive officer Jack Hockema, "we have determined that it is in the company's best interest not to make this interest payment and to focus our financial resources on our operation priorities."

With Kaiser's plan to miss Friday's interest payment deadline on its $400 million of 12.75 percent notes, the company warned it may miss payments on other debts.

On Feb. 15, the company is scheduled to retire principal and interest on $174 million of 9.875 percent notes. And on April 15, the company has an interest payment due on $225 million of 10.875 percent notes.

Lamb said the company is considering restructuring alternatives, but said he couldn't yet share the details of such a scenario.

Kaiser will be in default if it misses the Feb. 15 deadline to repay principal and interest on the $174 million debt. Should the company meet that debt obligation, it has until the beginning of March to avoid being in default on its missed $25.5 million interest payment on the $400 million debt.

.7Kaiser has retained Lazard as its financial adviser and Jones, Day as its legal adviser.

The developments, Lamb said, have postponed Kaiser's fourth-quarter conference call with analysts today to discuss earnings.

Maxxam Inc., the Houston-based holding company that owns about 62 percent of Kaiser stock, also postponed its fourth-quarter earnings release. Maxxam is controlled by Houston financier Charles Hurwitz.

Although Kaiser netted about $460 million during the past year by remarketing its allocation of Bonneville Power Administration electricity, the company continues to struggle. Some of that money was spent upgrading an alumina refinery in Gramercy, La., that had been destroyed by an explosion and rebuilt using insurance proceeds. And some of the money was spent meeting earlier interest payments, labor costs and corporate expenses.

As executives wrestle with debt woes, Lamb said Kaiser will continue making and shipping products. The company, he said, has about $132 million of unrestricted cash to run its plants.

Kaiser's smelters in Mead and Tacoma, along with the Trentwood rolling mill, are leveraged as debt collateral.

Shares of Kaiser climbed 6 cents on Wednesday to close at $1.25 on the New York Stock Exchange before the announcement.

• John Stucke can be reached at (509) 459-5419 or by e-mail at johnst@spokesman.com.

-- Anonymous, January 31, 2002

Answers

I'm familiar with that Kaiser plant in La. It's right next to the Battle of New Orleans site--huge thing, amazing. If it goes down, the whole of St. Bernard Parish will feel the impact--and it's a highly-populated parish.

-- Anonymous, January 31, 2002