Talvivaara, unit apply for reorganization, hope to avoid bankruptcy

By Caroline Salls

Pittsburgh, Nov. 21 - Talvivaara Mining Co. plc and operating subsidiary Talvivaara Sotkamo Ltd. both applied for a corporate reorganization under the Finnish Corporate Reorganization Act by filing related applications with the district court of Espoo, Finland, according to a news release.

The company said the Talvivaara Group expected to require additional liquidity for the payment of costs of the reorganization proceedings and payment of new debt incurred after the filing for reorganization.

Toward this goal, Talvivaara made a financing proposal to a group of stakeholders for additional funding in the form of a €40 million restructuring facility, with Talvivaara as the guarantor and Talvivaara Sotkamo as the borrower.

However, the company said the stakeholders informed it on Wednesday that they were unable to offer any additional funding to support the reorganization process.

As a result, Talvivaara said it is assessing all options available to the group, including the adequacy of its own available cash.

According to the release, Talvivaara announced plans for the rationalization of its operations on Nov. 15.

These actions are expected to increase productivity and, together with a short-term shut-down of the group's metals recovery plant and discontinuation of its ore production for about six months, reduce the operating expenses during the period it expects to need to attract long-term capital and to right-size its capital structure as part of the corporate reorganization process.

Talvivaara estimates that, as a result of these measures and the corporate reorganization filing, the group's current combined cash position will be sufficient without additional external funding until the first quarter of 2014 and will facilitate the reorganization process.

The company said it continues to believe that bankruptcy proceedings would have a significant value destructing effect and, therefore, would not be in the best interests of the Talvivaara Group and its stakeholders.

Talvivaara said bankruptcy proceedings would jeopardize jobs and affect many of its suppliers and contractors.

In addition, the company said it continues to believe that the environmental impact of a bankruptcy would be difficult to manage and that corporate reorganization proceedings and continued production at its Sotkamo site would best facilitate water treatment and other environmental clean-up and provide the best possibility to preserve value for various stakeholders.

If Talvivaara and Talvivaara Sotkamo are not admitted to corporate reorganization proceedings or if the proceedings fail, the companies would expect to file bankruptcy proceedings.

Helsinki-based Talvivaara Mining is a base metals producer with its primary focus on nickel and zinc.

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