Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Horsehead Shareholders Still Frisky in Face of Setbacks

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Horsehead Shareholders Still Frisky in Face of Setbacks

Article excerpt

When we last left Horsehead Holding, the bankrupt Robinson zinc producer and recycler was being rescued by a Purchase, N.Y., hedge fund, zinc prices were languishing, and shareholders were holding worthless paper.

That was September 2016. U.S. Bankruptcy Court Judge Christopher Sontchi had just approved the reorganization plan fronted by Greywolf Capital Management over the objections of shareholders who claimed the hedge fund was absconding with the company at a steep discount. The reorganization wiped out the value of Horsehead's publicly traded shares.

Since then, Horsehead has become a privately owned company and changed its name to American Zinc Recycling. Former CEO James Hensler has been replaced by Rodrigo Daud, the former chief operating officer of Votorantim, a Brazilian metals conglomerate.

With zinc prices rebounding sharply, the reorganized company sold Zochem, a subsidiary that produces zinc oxide used in sunscreens and other products. Terms of the September 2017 transaction were not disclosed.

Horsehead's post-bankruptcy history sounds painfully familiar to former shareholders.

They said bidders had been interested in buying parts of the company prior to the February 2016 bankruptcy filing and had argued for using asset sales to fund the reorganization, preserving some value for their shares.

"[New management] followed the precise playbook that we had advocated the entire time," former shareholder and El Segunda, Calif., investment manager Matthew Peterson told about 220 former Horsehead shareholders during a Nov. 16 webcast.

Mr. Peterson and other Horsehead shareholders had initially intervened in the bankruptcy, arguing that Greywolf was lowballing the value of the company's assets. They convinced Judge Sontchi to appoint a committee to represent shareholders. After the committee failed to find buyers for pieces of Horsehead, the judge approved Greywolf's plan despite his initial observation that "something doesn't smell right to the court."

Horsehead's shareholders refused to go quietly into that dark night.

They filed a class-action lawsuit against Mr. Hensler and former CFO Robert Scherich last year. …

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