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January 27, 2003
Monthly Update to Customers, Employees, Suppliers, and Friends of Kaiser Aluminum:
In Today’s Bankruptcy Court Hearing, Further Progress . . .
We obtained approval on an agreement to sell the Tacoma, Washington, smelter to the Port of Tacoma for cash proceeds of approximately $12 million. We expect the sale to close in February. Also, prior to the hearing, the Court approved Kaiser’s request for a routine extension of the period of exclusivity through April 2003. The next regularly scheduled Court hearing is February 24, 2003.
Subsidiary Chapter 11 Filings a Non-Event
As most of you know, nine of the company’s wholly owned subsidiaries filed for Chapter 11 on January 14, primarily to protect those assets from statutory liens that may arise in favor of the Pension Benefit Guaranty Corporation (PBGC) as a result of failure to make certain pension plan contributions. The filings included the legal entities through which Kaiser owns interests in operations in Jamaica and Canada. The filings have had no impact on our day-to-day operations. Specifically, in relation to these subsidiaries: all cash accounts have remained open and active; we obtained approval from U.S. and Canadian Courts to pay all creditors (other than the PBGC), and to meet our obligations to employees, customers, and others; and we obtained a waiver from our Debtor-in-Possession lenders to ensure that none of this would impact our credit agreement. In short: business as usual.
Valco Curtailment Does Not Change Our Long-Term View of Asset Value
On December 31, the Valco smelter reduced its operating level from three lines to two after the Volta River Authority (VRA) cut the plant’s power allocation. On January 9, after an unsuccessful mediation with the VRA and the Government of Ghana – concerning a variety of power-related issues – Valco was forced to curtail from two lines to one. We’re committed to preserving Valco’s value, and I’m optimistic that we will eventually reach a mutually satisfactory solution to this issue, whether through arbitration or otherwise.
Financial Position Remains Strong
Over the course of the fourth quarter, the company’s cash and total liquidity remained relatively unchanged, in the range of $250 million. Looking ahead, we expect that the cash balance and liquidity will experience some fluctuation but will remain strong.
Encouraging Signs in a Challenging Market
Aluminum industry conditions are still challenging, but we’re seeing at least some encouraging signs: metal prices appear to have stabilized above their recent lows, alumina spot prices have moved up, FRP bookings have begun to firm and Trentwood continues to capture increasing aerospace and distribution share as a consequence of superior delivery and quality performance.
Thanks for your continued support.
Jack A. Hockema
President and Chief Executive Officer
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