Magnetation LLC Reaches Agreement with Noteholders to Restructure Balance Sheet and Provide New Financing

GRAND RAPIDS, Minn., May 5, 2015 /PRNewswire/ -- Magnetation LLC, an innovative iron ore concentrate and pellet producer, announced today that it has reached an agreement with holders of more than 70% of its 11.0% senior secured notes due 2018 (Senior Secured Notes) to restructure the Company's balance sheet and provide liquidity to support long-term operations.  To implement this restructuring, Magnetation LLC and its direct subsidiaries have filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the District of Minnesota.  The Company and the noteholders have agreed to the principal terms of a chapter 11 plan of reorganization, which will be subject to approval by the Bankruptcy Court. 

In conjunction with its reorganization, Magnetation has obtained a commitment for $135 million in debtor-in-possession financing (DIP Financing) from certain holders of Senior Secured Notes.  All holders of Senior Secured Notes are eligible to participate pro rata in the DIP Financing pursuant to procedures filed with the Bankruptcy Court, which will provide Magnetation with $63.7 million of incremental liquidity.  Upon approval by the Bankruptcy Court, the DIP Financing and cash generated from Magnetation's ongoing operations will be used to support the business during the reorganization process. 

Magnetation has filed various motions with the Bankruptcy Court in support of its reorganization.  The Company intends to continue to pay employee wages and provide healthcare and other benefits without interruption in the ordinary course of business and to pay suppliers and vendors in full under normal terms for goods and services provided after the filing date of May 5, 2015.  The Company expects its mining and pelletizing operations and customer shipments to continue in the ordinary course throughout the reorganization.  

"We are pleased to have reached an agreement with our noteholders on the terms of a balance sheet restructuring through a chapter 11 reorganization," said Magnetation Chief Executive Officer Larry Lehtinen.  "The significant decrease in global iron ore prices along with our existing capital structure has created a challenging business environment in the short term.  The reorganization process will create a more competitive and successful Company.  We remain firmly committed to serving our customers and to being a good employer by maintaining safe, productive operations as we undertake this process.  We appreciate the ongoing dedication of our employees, whose hard work is critical to the success and future of our Company."

Magnetation's business outlook has been impacted by the challenging iron ore industry, which has experienced global supply increases and a reduction in the global demand.  The Company has reacted to the decline in pricing by, among other things, taking cost reduction measures, including the recently-announced decision to indefinitely idle its Plant 1 iron ore concentrate operation in Keewatin, MN. 

Davis Polk & Wardwell LLP is serving as legal advisor and Blackstone Advisory Partners LP is serving as financial advisor in connection with the reorganization.  Additional information about the reorganization can be found at www.donlinrecano.com/mag.

Magnetation LLC:
Magnetation LLC is a joint venture between Magnetation, Inc. (50.1% owner) and AK Iron Resources, LLC, an affiliate of AK Steel Corporation (49.9% owner).  Magnetation LLC recovers high-quality iron ore concentrate from previously abandoned iron ore waste stockpiles and tailings basins.  Magnetation LLC owns iron ore concentrate plants located in Keewatin, MN, Bovey, MN and Grand Rapids, MN, and an iron ore pellet plant in Reynolds, IN.  Additional information about the Company is available at www.magnetation.com.

Forward Looking Statements:  Certain statements in this press release are forward-looking as defined in the Private Securities Litigation Reform Act of 1995.  These statements involve certain risks and uncertainties that may be beyond our control and may cause our actual future results to differ materially from our current expectations both in connection with the Chapter 11 filings Magnetation is announcing today and our business and financial prospects.  Statements of management's expectations, including its desire to successfully restructure in order to position Magnetation for long term viability and success, to address its financial challenges, to address important issues in an orderly way and to make Magnetation stronger and more competitive are based on current assumptions and expectations.  No assurance can be made that these events will come to fruition.  We do not undertake to update our forward-looking statements.  Factors that could affect our results include, but are not limited to: (i) the ability of Magnetation and its subsidiaries to continue as a going concern, (ii) the ability of Magnetation and its subsidiaries to obtain Bankruptcy Court approval with respect to motions in the Chapter 11 cases, (iii) the ability of Magnetation and its subsidiaries to prosecute, develop and consummate one or more plans of reorganization with respect to the Chapter 11 cases, (iv) the effects of the bankruptcy filing on Magnetation and its subsidiaries and the interests of various creditors, equity holders and other constituents, (v) Bankruptcy Court rulings in the Chapter 11 cases and the outcome of the cases in general, (vi) the length of time Magnetation and its subsidiaries will operate under the Chapter 11 cases, (vii) risks associated with third-party motions in the Chapter 11 cases, which may interfere with the ability of Magnetation and its subsidiaries to develop one or more plans of reorganization and consummate such plans once they are developed, (viii) the potential adverse effects of the Chapter 11 proceedings on Magnetation's liquidity or results of operations, (ix) the ability to execute Magnetation's business and restructuring plans, (x) increased legal costs related to Magnetation's bankruptcy filing and other litigation, and (xi) the ability of Magnetation and its subsidiaries to maintain contracts that are critical to their operation, including to obtain and maintain normal terms with their vendors, customers, lessors and service providers and to retain key executives, managers and employees.  In the event that the risks disclosed in Magnetation's public filings and those discussed above cause results to differ materially from those expressed in Magnetation's forward-looking statements, Magnetation's business, financial condition, results of operations or liquidity, and the interests of creditors, equity holders and other constituents, could be materially adversely affected.  Magnetation undertakes no obligation (and expressly disclaims any such obligation) to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact:
Griffin Moe
1-218-966-9519
[email protected]

SOURCE Magnetation LLC

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