KAISER Aluminum Corporation yesterday filed for protection from its creditors under Chapter 11 of the US federal bankruptcy laws, but said that the proceedings did not extend to its Jamaica operations, which would continue to operate normally.

Others parts of the company would also function without interruption, the company said.

Kaiser owns 65 per cent of the million tonne Alumina Partners (Alpart) alumina refinery in Nain, St Elizabeth as well as 49 per cent of the Kaiser Jamaica Bauxite Company, which mines and exports up to four million tonnes of bauxite a year. Its partner in Alpart is the Norwegian mining and energy company, Norsk Hydro, while the Jamaica government is the major partner in the bauxite mining operation. Both operations employ, combined, nearly 2,000 workers.

In Parliament yesterday, the mining and energy minister, Anthony Hylton, repeated the Kaiser assurance about the Jamaica facilities.

“It should be noted that the Jamaican subsidiaries and the non-US operations have been excluded from the filing and the company has indicated that it has taken appropriate steps to ensure that certain costs and expenses will not be affected by the filing,” Hylton told legislators.

“The company has also informed the Jamaican government that its local subsidiaries will, in the normal course of their business activities, meet and satisfy their continuing obligations required by Jamaican law,” he added.

The Jamaican facilities apart, the other foreign subsidiaries outside the range of the Chapter 11 motion are:

* a 20 per cent stake in the QAL alumina refinery in Australia;

* the Valco aluminium smelter in Ghana, which Kaiser owns 90 per cent;

* a 49 per cent ownership in the Anglesey smelter in Wales; and

* a wholly-owned extrusion plant in Ontario, Canada.

“…Kaiser has taken appropriate steps designed to ensure that its participation in each of these entries, including the funding of certain costs and expenses, will not be impacted by the filings,” Kaiser said in a statement from its headquarters in Houston, Texas yesterday.

Kaiser has been having cash problems for several months, which the company blamed on a weakened economy, depressed prices and asbestos litigation.

“The confluence of factors has created the prospects for continued operating losses and negative cash flow, resulting in lower credit ratings and an inability to access the capital markets,” the company said.

Chapter 11 bankruptcy frees a company from the threat of creditors’ lawsuits while it reorganises its finances. The debtor usually retains control of the business and its assets.

In conjunction with its Chapter 11 filing, Kaiser won a US$300-million loan from Bank of America, which, along with invested cash, should provide it with sufficient liquidity to meet operating needs while it reorganised, it said.

“The decision to seek protection under Chapter 11 will provide Kaiser with the opportunity to reorganise its financial structure and implement a strategic plan to return to sustained profitability,” said Jack A Hockema, Kaiser’s president and chief executive. “The reorganisation process will also allow the company to expand on and quicken the pace of its operational improvements.”

In Jamaica, Kaiser managers have been driving for improved efficiency at the facilities to reduce costs and bring the Alpart refinery and its mines closer to the world’s most competitive producers. Jamaica is in the mid tier of the rankings.

This process has meant the slashing of hundreds of jobs at these and other facilities and more investor-friendly contracts, which the Jamaican government hoped would translate into plant expansion, including at Alpart.

Last night, industry analysts stressed that yesterday’s developments would add pressure on Jamaican managers to improve performance and were likely to accelerate strategy talks between the government and Kaiser.

“Alpart is already a viable operation,” said one analyst. “It, however, needs to generate more profits.”

This could mean a further shaving of the plant’s workforce of about 1,200, but more critically, new investment to enhance energy efficiency.

“From the government side, the recently announced negotiating regime for a tax on profits in place of the existing bauxite production levy, would be an important development for Kaiser,” the analyst added.

In yesterday’s parliamentary remarks, Hylton stressed the critical importance of the Kaiser operations to the Jamaican economy, and said the government has discussed with the company “how they can enhance the viability of their operations and, importantly, to mitigate the impact to the local industry”.

“The matter of the company’s success in Jamaica is not for the government alone, but also for each stakeholder, including, of course, the company, the workforce and the communities where their operations are located,” Hylton said.