Debtors' Second Amended Disclosure Statement for the Debtors' Second Amended Joint Plan of ...

535 Pages·2016·4.75 MB·English

Case 16-10287-CSS Doc 1310 Filed 07/15/16 Page 1 of 535
Solicitation Version
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
)
In re: ) Chapter 11
)
HORSEHEAD HOLDING CORP., et al.,1 ) Case No. 16-10287 (CSS)
)
Debtors. ) Jointly Administered
)

DEBTORS’ SECOND AMENDED DISCLOSURE STATEMENT FOR THE DEBTORS’ SECOND
AMENDED JOINT PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF
THE BANKRUPTCY CODE

James H.M. Sprayregen, P.C. Laura Davis Jones (DE Bar No. 2436)
Patrick J. Nash Jr., P.C. (admitted pro hac vice) James E. O’Neill (DE Bar No. 4042)
Ryan Preston Dahl (admitted pro hac vice) Joseph M. Mulvihill (DE Bar No. 6061)
KIRKLAND & ELLIS LLP PACHULSKI STANG ZIEHL & JONES LLP
300 North LaSalle Street 919 North Market Street, 17th Floor
Chicago, Illinois 60654 P.O. Box 8705
Telephone: [phone] Wilmington, Delaware 19899-8705
Facsimile: [phone] Telephone: [phone]
Facsimile: [phone]

Co-Counsel to the Debtors and Debtors in Possession
Dated as of: July 12, 2016

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number,
are: Horsehead Holding Corp. (7377); Horsehead Corporation (7346); Horsehead Metal Products, LLC (6504); The
International Metals Reclamation Company, LLC (8892); and Zochem Inc. (4475). The Debtors’ principal offices are
located at 4955 Steubenville Pike, Suite 405, Pittsburgh, Pennsylvania 15205.

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PREAMBLE2
THE DEBTORS3 ARE PROVIDING THE INFORMATION IN THIS DISCLOSURE STATEMENT TO
HOLDERS OF CLAIMS AND INTERESTS FOR PURPOSES OF SOLICITING VOTES TO ACCEPT OR
REJECT THE DEBTORS’ SECOND AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11
OF THE BANKRUPTCY CODE. NOTHING IN THIS DISCLOSURE STATEMENT MAY BE RELIED UPON
OR USED BY ANY ENTITY FOR ANY OTHER PURPOSE. PRIOR TO DECIDING WHETHER AND HOW
TO VOTE ON THE PLAN, EACH HOLDER ENTITLED TO VOTE SHOULD CAREFULLY CONSIDER ALL
OF THE INFORMATION IN THIS DISCLOSURE STATEMENT, INCLUDING THE RISK FACTORS
DESCRIBED IN ARTICLE VIII HEREOF. EACH DEBTOR MUST SATISFY THE CONFIRMATION
REQUIREMENTS SUMMARIZED IN ARTICLE VII HEREOF WITH RESPECT TO THE PLAN.
ACCORDINGLY, IT IS POSSIBLE THAT THE BANKRUPTCY COURT CONFIRMS THE PLAN WITH
RESPECT TO SOME, BUT NOT ALL, OF THE DEBTORS.
HOLDERS OF CLAIMS OR INTERESTS SHOULD NOT CONSTRUE THE CONTENTS OF THIS
DISCLOSURE STATEMENT AS PROVIDING ANY LEGAL, FINANCIAL, SECURITIES, TAX, OR
BUSINESS ADVICE. THE DEBTORS URGE EACH HOLDER OF A CLAIM OR AN INTEREST TO
CONSULT WITH ITS OWN LEGAL, FINANCIAL, SECURITIES, TAX, OR BUSINESS ADVISORS WITH
RESPECT TO ANY SUCH MATTERS CONCERNING AND IN REVIEWING THIS DISCLOSURE
STATEMENT, THE SOLICITATION OF VOTES TO ACCEPT THE PLAN, THE RESTRUCTURING
DOCUMENTS, AND EACH OF THE PROPOSED TRANSACTIONS CONTEMPLATED THEREBY.
FURTHERMORE, THE BANKRUPTCY COURT’S OR THE CANADIAN COURT’S APPROVAL OF THE
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE THE
BANKRUPTCY COURT’S OR THE CANADIAN COURT’S APPROVAL OF THE PLAN.
THE DEADLINE TO VOTE ON THE PLAN IS AUGUST 19, 2016, AT 5:00 P.M., PREVAILING
EASTERN TIME (THE “VOTING DEADLINE”). TO BE COUNTED, VOTES TO ACCEPT OR REJECT THE
PLAN MUST BE RECEIVED BY THE NOTICE AND CLAIMS AGENT BY THE VOTING DEADLINE.
THIS DISCLOSURE STATEMENT CONTAINS, AMONG OTHER THINGS, SUMMARIES OF THE
PLAN, CERTAIN STATUTORY PROVISIONS, CERTAIN EVENTS IN THE DEBTORS’ CHAPTER 11 CASES
AND CANADIAN PROCEEDINGS, AND CERTAIN DOCUMENTS RELATED TO THE PLAN THAT ARE
ATTACHED HERETO AND INCORPORATED BY REFERENCE HEREIN. ALTHOUGH THE DEBTORS
BELIEVE THAT THESE SUMMARIES ARE FAIR AND ACCURATE, THESE SUMMARIES ARE
QUALIFIED IN THEIR ENTIRETY TO THE EXTENT THAT THEY DO NOT SET FORTH THE ENTIRE
TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS OR EVERY DETAIL OF SUCH EVENTS.
IN THE EVENT OF ANY INCONSISTENCY OR DISCREPANCY BETWEEN A DESCRIPTION IN THIS
DISCLOSURE STATEMENT AND THE TERMS AND PROVISIONS OF THE PLAN OR ANY OTHER
DOCUMENTS INCORPORATED HEREIN BY REFERENCE, THE PLAN OR SUCH OTHER DOCUMENTS
WILL GOVERN FOR ALL PURPOSES. FACTUAL INFORMATION CONTAINED IN THIS DISCLOSURE
STATEMENT HAS BEEN PROVIDED BY THE DEBTORS’ MANAGEMENT EXCEPT WHERE OTHERWISE
SPECIFICALLY NOTED. THE DEBTORS DO NOT REPRESENT OR WARRANT THAT THE
INFORMATION CONTAINED HEREIN OR ATTACHED HERETO IS WITHOUT ANY MATERIAL
INACCURACY OR OMISSION.
THE FINANCIAL PROJECTIONS PROVIDED IN THIS DISCLOSURE STATEMENT HAVE BEEN
PREPARED BY THE DEBTORS’ MANAGEMENT. WHILE PRESENTED WITH NUMERICAL
SPECIFICITY, THE FINANCIAL PROJECTIONS ARE NECESSARILY BASED ON A VARIETY OF
ESTIMATES AND ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY THE DEBTORS,
MAY NOT BE REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC,

2 Defined terms used in this Preamble shall have the meaning ascribed to them herein.
3 Underlined, all-capitalized terms indicate that such term is a defined term.

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COMPETITIVE, INDUSTRY, REGULATORY, MARKET, AND FINANCIAL UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE DEBTORS’ CONTROL. THE DEBTORS
CAUTION THAT NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THE FINANCIAL
PROJECTIONS OR THE LIKELIHOOD THAT THE DEBTORS WILL ACHIEVE THE PROJECTED
RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER, EVENTS AND
CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THE FINANCIAL
PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR,
ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED, AND, THUS, THE OCCURRENCE OF THESE
EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIALLY ADVERSE OR MATERIALLY
BENEFICIAL MANNER. THEREFORE, THE FINANCIAL PROJECTIONS MAY NOT BE RELIED UPON AS
A GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR.
EXCEPT WHERE SPECIFICALLY NOTED, THE FINANCIAL INFORMATION CONTAINED
HEREIN HAS NOT BEEN AUDITED BY A CERTIFIED PUBLIC ACCOUNTANT AND HAS NOT BEEN
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH
SECTION 1125 OF THE BANKRUPTCY CODE AND BANKRUPTCY RULE 3016(b) AND IS NOT
NECESSARILY IN ACCORDANCE WITH FEDERAL, STATE, OR PROVINCIAL SECURITIES LAWS OR
OTHER SIMILAR LAWS. THE SECURITIES DESCRIBED HEREIN WILL BE ISSUED TO CREDITORS
WITHOUT REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933 (AS AMENDED,
THE “SECURITIES ACT”), OR ANY SIMILAR FEDERAL, STATE, PROVINCIAL, OR LOCAL LAW. THE
DEBTORS WILL INSTEAD RELY UPON (A) THE EXEMPTIONS SET FORTH IN SECTION 1145 OF THE
BANKRUPTCY CODE TO THE MAXIMUM EXTENT PERMITTED AND APPLICABLE, OR (B) TO THE
EXTENT THAT THE EXEMPTION PROVIDED BY SECTION 1145 IS EITHER NOT PERMITTED OR NOT
APPLICABLE, THE EXEMPTION SET FORTH IN SECTION 4(A)(2) OF THE SECURITIES ACT OR
REGULATION D PROMULGATED THEREUNDER. THIS DISCLOSURE STATEMENT DOES NOT
PROVIDE ANY LEGAL OR TAX ADVICE.
THIS DISCLOSURE STATEMENT WAS NOT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE OR CANADIAN PROVINCIAL SECURITIES ADMINISTRATOR, AND
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE OR CANADIAN
PROVINCIAL SECURITIES ADMINISTRATOR HAS CONFIRMED THE ACCURACY OR ADEQUACY OF
THIS DISCLOSURE STATEMENT OR PASSED UPON THE MERITS OF THE PLAN.
THIS DISCLOSURE STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SUCH STATEMENTS ARE BASED PRIMARILY ON THE
CURRENT EXPECTATIONS OF THE DEBTORS AND PROJECTIONS ABOUT FUTURE EVENTS AND
FINANCIAL TRENDS AFFECTING THE FINANCIAL CONDITION OF THE DEBTORS’ AND THE
REORGANIZED DEBTORS’ BUSINESSES AND MAY CONTAIN WORDS SUCH AS “MAY,” “WILL,”
“MIGHT,” “EXPECT,” “BELIEVE,” “ANTICIPATE,” “COULD,” “WOULD,” “ESTIMATE,” “CONTINUE,”
“PURSUE,” OR THE NEGATIVE THEREOF OR SIMILAR EXPRESSIONS THAT IDENTIFY THESE
FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE INHERENTLY
UNCERTAIN AND ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER FROM THOSE EXPRESSED OR IMPLIED IN THIS DISCLOSURE
STATEMENT AND THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. MAKING
INVESTMENT DECISIONS BASED ON THE FORWARD-LOOKING STATEMENTS CONTAINED IN
THIS DISCLOSURE STATEMENT AND/OR THE PLAN IS, THEREFORE, SPECULATIVE.
IN PREPARING THIS DISCLOSURE STATEMENT, THE DEBTORS RELIED ON FINANCIAL
DATA DERIVED FROM THEIR BOOKS AND RECORDS OR THAT WAS OTHERWISE MADE
AVAILABLE TO THEM AT THE TIME OF SUCH PREPARATION AND ON VARIOUS ASSUMPTIONS
REGARDING THE DEBTORS’ BUSINESSES AND THEIR EXPECTED FUTURE RESULTS AND
OPERATIONS. ALTHOUGH THE DEBTORS BELIEVE THAT SUCH FINANCIAL INFORMATION FAIRLY
REFLECTS THEIR FINANCIAL CONDITION SET FORTH HEREIN AND THAT THE ASSUMPTIONS
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REGARDING FUTURE EVENTS REFLECT REASONABLE BUSINESS JUDGMENTS, NO
REPRESENTATIONS OR WARRANTIES ARE MADE AS TO THE ACCURACY OF THE FINANCIAL
INFORMATION CONTAINED HEREIN OR MANAGEMENT’S ASSUMPTIONS REGARDING THE
DEBTORS’ BUSINESSES AND THEIR FUTURE RESULTS AND OPERATIONS. THE DEBTORS
EXPRESSLY CAUTION READERS NOT TO PLACE UNDUE RELIANCE ON ANY FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN.
THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE, AND MAY NOT BE CONSTRUED
AS, AN ADMISSION OF FACT, LIABILITY, STIPULATION, OR WAIVER. THE DEBTORS OR THE
REORGANIZED DEBTORS, AS APPLICABLE, MAY SEEK TO INVESTIGATE, FILE, AND/OR
PROSECUTE CLAIMS AND MAY OBJECT TO CLAIMS AFTER THE CONFIRMATION OR EFFECTIVE
DATE OF THE PLAN IRRESPECTIVE OF WHETHER THIS DISCLOSURE STATEMENT IDENTIFIES ANY
SUCH CLAIMS OR OBJECTIONS TO CLAIMS.
THE DEBTORS ARE MAKING THE STATEMENTS AND PROVIDING THE FINANCIAL
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT AS OF THE DATE HEREOF, UNLESS
OTHERWISE SPECIFICALLY NOTED. ALTHOUGH THE DEBTORS MAY SUBSEQUENTLY UPDATE
THE INFORMATION IN THIS DISCLOSURE STATEMENT, NEITHER THE DEBTORS NOR THE
REORGANIZED DEBTORS HAVE ANY AFFIRMATIVE DUTY TO DO SO, AND EXPRESSLY DISCLAIM
ANY DUTY TO PUBLICLY UPDATE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A
RESULT OF NEW INFORMATION, FUTURE EVENTS, OR OTHERWISE, UNLESS OTHERWISE
REQUIRED BY LAW. HOLDERS OF CLAIMS AND INTERESTS REVIEWING THIS DISCLOSURE
STATEMENT SHOULD NOT INFER THAT, AT THE TIME OF THEIR REVIEW, THE FACTS SET FORTH
HEREIN HAVE NOT CHANGED SINCE THIS DISCLOSURE STATEMENT WAS FILED. INFORMATION
CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THE DEBTORS RESERVE THE
RIGHT TO FILE AN AMENDED PLAN AND RELATED DISCLOSURE STATEMENT FROM TIME TO
TIME, SUBJECT TO THE TERMS OF THE PLAN.
CONFIRMATION AND CONSUMMATION OF THE PLAN ARE SUBJECT TO CERTAIN
MATERIAL CONDITIONS PRECEDENT DESCRIBED IN TITLE IX OF THE PLAN. THERE IS NO
ASSURANCE THAT THE PLAN WILL BE CONFIRMED OR, IF CONFIRMED, THAT SUCH MATERIAL
CONDITIONS PRECEDENT WILL BE SATISFIED OR WAIVED. YOU ARE ENCOURAGED TO READ
THIS DISCLOSURE STATEMENT IN ITS ENTIRETY, INCLUDING, BUT NOT LIMITED TO, THE PLAN
AND ARTICLE VIII OF THIS DISCLOSURE STATEMENT ENTITLED “RISK FACTORS” BEFORE
SUBMITTING YOUR BALLOT TO VOTE TO ACCEPT OR REJECT THE PLAN.
THE DEBTORS HAVE NOT AUTHORIZED ANY ENTITY TO GIVE ANY INFORMATION ABOUT
OR CONCERNING THE PLAN OTHER THAN THAT WHICH IS CONTAINED IN THIS DISCLOSURE
STATEMENT. THE DEBTORS HAVE NOT AUTHORIZED ANY REPRESENTATIONS CONCERNING THE
DEBTORS OR THE VALUE OF THEIR PROPERTY OTHER THAN AS SET FORTH IN THIS DISCLOSURE
STATEMENT.
IF THE PLAN IS CONFIRMED BY THE BANKRUPTCY COURT, SUCH CONFIRMATION IS
RECOGNIZED BY THE CANADIAN COURT, AND THE EFFECTIVE DATE OCCURS, ALL HOLDERS OF
CLAIMS AND/OR INTERESTS (INCLUDING THOSE HOLDERS OF CLAIMS OR INTERESTS WHO DO
NOT SUBMIT BALLOTS TO ACCEPT OR REJECT THE PLAN, OR WHO ARE NOT ENTITLED TO VOTE
ON THE PLAN) WILL BE BOUND BY THE TERMS OF THE PLAN AND THE RESTRUCTURING
TRANSACTIONS CONTEMPLATED THEREBY.
THE DEBTORS SUPPORT CONFIRMATION OF THE PLAN AND URGE ALL HOLDERS OF
CLAIMS WHOSE VOTES ARE BEING SOLICITED TO ACCEPT THE PLAN.
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TABLE OF CONTENTS
Page
ARTICLE I. INTRODUCTION ................................................................................................................................. 4 
ARTICLE II. TREATMENT OF CLAIMS AND INTERESTS ............................................................................. 5 
ARTICLE III. SOLICITATION, VOTING, ADDITIONAL CAPITAL COMMITMENT,
AND CONFIRMATION DEADLINES..................................................................................................... 10 
A.  Solicitation Packages. ..................................................................................................................... 10 
B.  Voting Deadline. ............................................................................................................................. 11 
C.  Voting Procedures. .......................................................................................................................... 11 
D.  Additional Capital Commitment. .................................................................................................... 13 
E.  Plan Objection Deadline. ................................................................................................................ 13 
F.  Confirmation Hearing. .................................................................................................................... 13 
ARTICLE IV. THE DEBTORS’ BACKGROUND ................................................................................................ 13 
A.  The Debtors’ Businesses. ................................................................................................................ 13 
B.  Summary of Prepetition Capital Structure. ..................................................................................... 17 
C.  The Debtors’ Board Members and Executives. ............................................................................... 20 
D.  Events Leading to the Chapter 11 Cases and the Canadian Proceedings. ....................................... 22 
ARTICLE V. EVENTS OF THE CHAPTER 11 CASES AND THE CANADIAN PROCEEDINGS .............. 27 
A.  First Day Pleadings and Administrative Matters. ........................................................................... 27 
B.  Statements and Schedules and Claims Bar Date. ............................................................................ 30 
C.  Pending Litigation Proceedings and Claims. .................................................................................. 31 
D.  The Creditors’ Committee’s Standing Motion. ............................................................................... 32 
E.  The Debtors’ DIP Financing and Cash Collateral Motion and the Interim DIP Relief. .................. 33 
F.  Traxys Settlement. .......................................................................................................................... 33 
G.  The Mooresboro Facility Repairs and Upgrades. ............................................................................ 34 
H.  Plan Exclusivity. ............................................................................................................................. 34 
I.  The Debtors’ Plan Process; Resolution with the Creditors’ Committee. ........................................ 34 
ARTICLE VI. SUMMARY OF THE PLAN ........................................................................................................... 35 
A.  Administrative Claims and Professional Fee Claims. ..................................................................... 35 
B.  Classification and Treatment of Claims and Interests. .................................................................... 37 
C.  Means for Implementation of the Plan. ........................................................................................... 44 
D.  Treatment of Executory Contracts and Unexpired Leases. ............................................................. 51 
E.  Provisions Governing Distributions. ............................................................................................... 55 
F.  Procedures for Resolving Contingent, Unliquidated, and Disputed Claims. .................................. 59 
G.  Settlement, Release, Injunction, and Related Provisions. ............................................................... 61 
H.  Conditions Precedent to Confirmation and Consummation of the Plan. ......................................... 66 
I.  Modification, Revocation, or Withdrawal of the Plan. ................................................................... 68 
J.  Retention of Jurisdiction. ................................................................................................................ 69 
K.  Miscellaneous Provisions. ............................................................................................................... 71 
ARTICLE VII. STATUTORY REQUIREMENTS FOR CONFIRMATION OF THE PLAN ......................... 74 
A.  Confirmation Hearing. .................................................................................................................... 74 
B.  Confirmation Standards. ................................................................................................................. 75 
C.  Acceptance by Impaired Classes. .................................................................................................... 80 
D.  Confirmation without Acceptance by All Impaired Classes. .......................................................... 81 
ARTICLE VIII. CERTAIN RISK FACTORS TO BE CONSIDERED BEFORE VOTING ............................. 82 
(i)
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A.  Risk Factors that May Affect Recovery Available to Holders of Allowed Claims Under
the Plan. .......................................................................................................................................... 82 
B.  Risks Related to the UPA and the Additional Capital Commitment. .............................................. 83 
C.  Risk Factors that Could Negatively Affect the Debtors’ Businesses. ............................................. 85 
D.  Risks Related to the New Common Equity. .................................................................................... 94 
E.  Liquidity Risks. ............................................................................................................................... 96 
F.  Risks Associated with Forward Looking Statements. ..................................................................... 96 
G.  Disclosure Statement Disclaimer. ................................................................................................... 96 
H.  Liquidation Under Chapter 7. ......................................................................................................... 97 
ARTICLE IX. SECURITIES LAW MATTERS .................................................................................................... 98 
A.  Section 1145 of the Bankruptcy Code. ............................................................................................ 98 
B.  Section 4(a)(2) of the Securities Act. .............................................................................................. 99 
C.  Management Equity Incentive Plan. ............................................................................................... 99 
ARTICLE X. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES ......................... 99 
A.  Certain U.S. Federal Income Tax Consequences of the Plan to the Debtors and Canadian
Income Tax Consequences to Zochem. ......................................................................................... 100 
B.  Certain U.S. Federal Income Tax Consequences to the U.S. Holders of Allowed Claims
Entitled to Vote. ............................................................................................................................ 102 
C.  Limitation on Use of Capital Losses. ............................................................................................ 106 
D.  Ownership and Disposition of New Common Equity. .................................................................. 106 
E.  Certain U.S. Federal Income Tax Consequences to Certain Non-U.S. Holders of Claims. .......... 107 
F.  Information Reporting and Backup Withholding. ......................................................................... 109 
ARTICLE XI. RECOMMENDATION OF THE DEBTORS ............................................................................. 110 

(ii)
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EXHIBITS
EXHIBIT A Debtors’ Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy
Code
EXHIBIT B Financial Projections
EXHIBIT C Liquidation Analysis
EXHIBIT D Valuation Analysis
EXHIBIT E Debtors’ Corporate Structure as of the Petition Date
EXHIBIT F Unit Purchase Agreement

(iii)
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ARTICLE I.
INTRODUCTION
This disclosure statement (this “Disclosure Statement”) provides information regarding the Debtors’
Second Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code (the “Plan”), which
the Debtors are seeking to have confirmed by the Bankruptcy Court. A copy of the Plan is attached hereto as
Exhibit A. All capitalized terms used but not otherwise defined in this Disclosure Statement shall have the meaning
ascribed to them in the Plan. The rules of interpretation set forth in Article I.B of the Plan shall govern the
interpretation of this Disclosure Statement.
The Debtors operate in three distinct, but related, lines of business: (a) the recycling and processing of
electric arc furnace (“EAF”) dust and other zinc-bearing material to produce and sell zinc and other metals; (b) the
production and sale of zinc oxide; and (c) the recycling and processing of a variety of metal-bearing waste material,
and the production of nickel-based alloys. Due to events more fully described below, including, but not limited to,
stressed commodity pricing environment, operational issues at the Debtors’ primary zinc-processing facility, and a
deteriorating liquidity situation, the Debtors filed for bankruptcy protection under chapter 11 on February 2, 2016.
The Canadian Court recognized the Chapter 11 Cases as foreign main proceedings under Part IV of the CCAA on
February 5, 2016. The Debtors entered chapter 11 to protect their assets and to formulate a balance sheet
restructuring and deleveraging of the Debtors’ current capital structure.
If confirmed and consummated, the Plan will eliminate more than $400.0 million in debt from the Debtors’
balance sheet and will provide the Debtors with the capital necessary to fund distributions to the Debtors’ creditors
pursuant to the Plan and provide the Debtors with working capital necessary to fund ongoing operations. To
effectuate the Plan, the Debtors will, among other things, pursuant to the UPA, receive $160.0 million and permit
Eligible Holders to commit to purchase up to an additional $100.0 million on a post-Effective Date basis and
consequently participate in the Additional Capital Commitment.4 The proceeds received pursuant to the UPA,
together with cash on hand and cash from operations, will be used to pay administrative and priority claims in full.
The Plan eliminates substantially all of the Debtors’ current debt load, provides full recoveries for creditors of
Zochem, and provides meaningful recoveries for non-Zochem unsecured creditors. The Debtors respectfully submit
that the Plan maximizes recoveries for the Debtors’ stakeholders, right-sizes the Debtors’ balance sheet, and
preserves the Debtors’ ongoing operations, including the jobs for the Debtors’ approximately 700 employees.
The Debtors seek Bankruptcy Court approval of the Plan. Before soliciting acceptances of a proposed plan
of reorganization, section 1125 of the Bankruptcy Code requires a plan proponent to prepare a disclosure statement
containing information of a kind, and in sufficient detail, to enable a hypothetical reasonable investor to make an
informed judgment regarding acceptance of a chapter 11 plan. This Disclosure Statement is being submitted in
accordance with such requirements. This Disclosure Statement includes, without limitation, information about:
 the Debtors’ corporate history and corporate structure, business operations, and prepetition capital
structure and indebtedness (Article IV hereof);
 events leading to the Chapter 11 Cases, including the Debtors’ restructuring negotiations (Article
IV hereof);
 significant events in the Chapter 11 Cases and the Canadian Proceedings (Article V hereof);
 the classification and treatment of Claims and Interests under the Plan, including who is entitled to
vote and how to vote on the Plan (Article VI hereof);
 certain important effects of Confirmation of the Plan (Article VI hereof);
 releases contemplated by the Plan that are integral to the overall settlement of Claims and Interests
pursuant to the Plan (Article VI hereof);

4 The UPA is attached hereto as Exhibit F.
4

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 the statutory requirements for confirming the Plan (Article VII hereof);
 certain risk factors Holders of Claims should consider before voting to accept or reject the Plan
and information regarding alternatives to Confirmation of the Plan (Article VIII hereof); and
 certain United States federal income tax consequences of the Plan (Article X hereof).
In light of the foregoing, the Debtors believe this Disclosure Statement contains “adequate information” to enable a
hypothetical reasonable investor to make an informed judgment about the Plan and complies with all aspects of
section 1125 of the Bankruptcy Code.
The Debtors’ boards of directors, board of managers, and managing members (collectively,
the “Authorizing Bodies”), as applicable, have approved the Plan and the transactions contemplated therein and
believe the Plan is in the best interests of the Debtors, the Debtors’ Estates, and the Debtors’ creditors. As such, the
Authorizing Bodies recommend that all Holders entitled to vote, accept the Plan by returning their ballots, so as to
be actually received by the Debtors’ Notice and Claims Agent no later than August 19, 2016, at 5:00 p.m.
prevailing Eastern Time. Assuming the requisite acceptances to the Plan are obtained, the Debtors will seek the
Bankruptcy Court’s approval of the Plan at the Confirmation Hearing and thereafter recognition of such approval
order by the Canadian Court.
The Plan and all documents to be executed, delivered, assured, and/or performed in connection with the
Consummation of the Plan, including the documents to be included in the Plan Supplement, are subject to revision
and modification from time to time prior to the Effective Date (subject to the terms of the Plan).
ARTICLE II.
TREATMENT OF CLAIMS AND INTERESTS
As set forth in Article III of the Plan, and in accordance with sections 1122 and 1123(a)(1) of the
Bankruptcy Code, all Claims and Interests (other than Administrative Claims, Professional Fee Claims,
DIP Facility Claims, and Priority Tax Claims) are classified into Classes for all purposes, including voting,
Confirmation, and distributions pursuant hereto. A Claim or Interest is classified in a particular Class only to the
extent that the Claim or Interest qualifies within the description of that Class. A Claim is also classified in a
particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent that such Claim is
an Allowed Claim in that Class and has not been paid, released, or otherwise satisfied prior to the Effective Date.
The table below summarizes the treatment of all unclassified Claims under the Plan. The treatment and the
projected recoveries of unclassified Claims are described in summary form below for illustrative purposes only.
Risk factors addressing the effects of the actual amount of Allowed classified Claims exceeding the Debtors’
estimates, and the effect of such variation on creditor recoveries, and other risks related to Confirmation and the
Effective Date of the Plan are addressed in Article VIII hereof. To the extent that any inconsistency exists between
the summary contained in this Disclosure Statement and the Plan, the terms of the Plan shall govern.
Estimated Allowed Claims identified in this Article II are based on the Debtors’ books and records after
reasonable inquiry, and are presented assuming a hypothetical Effective Date of September 30, 2016. Actual
amounts of Allowed Claims could differ materially from the estimates set forth herein, and actual recoveries could
differ materially from such estimates, on account of, among other things, any rejection damages that may occur as a
result of the Debtors’ rejection of Executory Contracts, including those deemed rejected pursuant to Article V of the
Plan.
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Estimated Range Estimated Range
of % Recovery of % Recovery
5
Unclassified Claim Plan Treatment Estimated Allowed Claims Under the Plan Under Chapter 7
Administrative Claims Unimpaired $36,692,000 100.0% 0.0% to 100.0%6
Professional Fee Claims Unimpaired $16,480,000 100.0% 100.0%
DIP Facility Claims Unimpaired $92,250,000 100.0% 98.0% to 100.0%
Priority Tax Claims Unimpaired $3,002,000 100.0% 0.0% to 100.0%7
The tables below summarize the classification and treatment of all classified Claims and Interests against
each Debtor (as applicable) under the Plan. The Plan shall apply as a separate Plan for each of the Debtors, and the
classification of Claims and Interests set forth herein shall apply separately to each of the Debtors. All of the
potential Classes for the Debtors are set forth herein. Certain of the Debtors may not have Holders of Claims or
Interests in a particular Class or Classes, and such Claims or Interests shall be treated as set forth in Article III.B of
the Plan. For all purposes under the Plan, each Class will apply for each of the Debtors (i.e., there will be
thirteen (13) Classes for each Debtor);8 provided, that, certain Classes, as outlined in the Debtor-specific Claims
classification tables below, shall be vacant with regard to certain Debtors.
The classification, treatment, and the projected recoveries of classified Claims are described in
summary form below for illustrative purposes only and are subject to material change. In particular,
recoveries available to the Holders of General Unsecured Claims are estimates based on information known
to the Debtors as of the date hereof and actual recoveries could differ materially based on, among other
things, whether the amount of Claims actually Allowed against the applicable Debtor exceed the estimates
provided below. In such an instance, the recoveries available to the Holders of General Unsecured Claims
could be materially lower when compared to the estimates provided below.9 Additionally, Holders of General
Unsecured Claims in Class 8B will receive their Pro Rata share of the General Unsecured Creditor Cash
Pool, which has been allocated to each of the Debtors other than Zochem as agreed to among by each of the
Ad Hoc Group of Noteholders, the Debtors, and the Creditors’ Committee, and subject to reallocation, as set
forth in Exhibit A attached to the Plan. To the extent that any inconsistency exists between the summaries
contained in this Disclosure Statement and the Plan, the terms of the Plan shall govern.

5 The estimated chapter 7 recovery ranges are set forth in the Debtors’ liquidation analysis, attached hereto as Exhibit C
(the “Liquidation Analysis”).
6 As set forth in the Liquidation Analysis, each Debtor other than Zochem is projected to be administratively insolvent in a
hypothetical liquidation undertaken pursuant to chapter 7 of the Bankruptcy Code.
7 As set forth in the Liquidation Analysis, each Debtor other than Zochem is projected to be administratively insolvent in a
hypothetical liquidation undertaken pursuant to chapter 7 of the Bankruptcy Code.
8 For the avoidance of doubt, though estimated Allowed Claim amounts and recoveries in the tables below are aggregate
Claim amounts and recoveries for all obligated Debtors, the recoveries against each Debtor with regard to the Macquarie
Credit Agreement Claims, Secured Notes Claims, Unsecured Notes Claims, Convertible Notes Claims, and Banco Bilbao
Credit Agreement Claims are not duplicative.
9 Additionally, estimated recovery percentages for Class 4 and Class 5 are based on the valuation of the New Common Equity
set forth in the Debtors’ valuation analysis, attached hereto as Exhibit D (the “Valuation Analysis”). The estimated value of
the New Common Equity is based on and corresponds to the estimated enterprise value of the Reorganized Debtors in the
Valuation Analysis, which falls within a range from approximately $255.0 million to $305.0 million, with a midpoint
estimate of approximately $280.0 million. Accordingly, actual recoveries available to Holders of Claims in Class 4 and
Class 5 could materially differ based on, among other things, the underlying assumptions set forth in the Valuation Analysis.
6

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