Valuation has become a contentious issue in the chapter 11 case of Horsehead Holding as some shareholders are alleging that the company’s assets are actually worth more than the company contends, the New York Times reported on Saturday. The company listed $421 million in secured and unsecured debt obligations in its February bankruptcy filing. Like many companies in the commodities business, Horsehead has stumbled. Spot prices for zinc and nickel swooned in 2015, and a new zinc plant it built in Mooresboro, N.C., encountered production problems. Still, metals prices have rebounded significantly since the company filed for bankruptcy. And some Horsehead shareholders contend the company is lowballing the value of its assets to let leading creditors gain control of it at a bargain price. The decline in Horsehead’s assets has certainly been precipitous. Just before the February filing, its assets were valued at $1 billion. Six months later, Horsehead’s financial adviser estimated that the company’s assets were worth about one-third of that. Diane Lourdes Dick, an associate professor of law at Seattle University Law School, said the Horsehead case highlighted a flaw in the bankruptcy process. “What we have here are equity owners that are functionally shut out of the process, and that provides the opportunity for exploitation by other stakeholders,” she said. “It is yet another example of the unique challenges that equity holders face when the company they’ve invested in is in chapter 11.” Read more.
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