Castle Debt Holders Agree to Restructuring
By Metal Center News Staff
on Apr 12, 2017
A.M. Castle & Co., Oak Brook, Ill., has reached an agreement with its primary debt holders on a comprehensive financial restructuring that will allow the specialty metals distributor to execute its long-term strategy to return to profitability. More than 92 percent of Castle’s debt holders have agreed to the plan, which will convert some of the debt to equity and provide additional cash investments. The company has not ruled out filing for bankruptcy protection during the restructuring, which is expected to be complete in the third quarter.
In recent years, Castle has made significant cost-saving changes, including selling off non-core assets, shuttering various facilities, reducing inventory and creating a branch management system. “While the changes we made have brought us closer to profitability, better operational execution by itself will not be sufficient. Our interest burden is too great and must be reduced for our organization to succeed and thrive in the future,” said President and CEO Steve Scheinkman.
The company may determine within the next six weeks that it is best to complete the restructuring process under the protection of the bankruptcy court through a pre-packaged proceeding, which could be completed within 60 days after the filing. Regardless of what steps are taken, Castle expects to continue to receive product, deliver all shipments and make payments on time during the restructuring, Scheinkman said.
For its 2016 fiscal year, Castle reported a loss of $114.1 million, a significant improvement from the $212.8 million loss in 2015. Last year’s sales totaled $533.1 million, a 16.4 percent decline from the prior year.
“In line with the industry, we experienced expected seasonal declines in fourth-quarter volumes. In addition, as part of our ongoing plan to improve our inventory management, we chose to sell a significant amount of aged and excess material at an overall negative gross margin to improve the quality of our go-forward inventory,” Scheinkman said.