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Apollo-Backed Steel Mill Servicer Phoenix Files for Bankruptcy

Sept. 27, 2022, 4:38 PM

Phoenix Services Topco LLC, an international service provider to steel producers, filed for Chapter 11 bankruptcy in an attempt to renegotiate customer contracts it says have become unprofitable due to recent economic pressures.

The Radnor, Pennsylvania-based company, which employs 2,600 people around the globe, sought Chapter 11 protection Tuesday in the US Bankruptcy Court for the District of Delaware with an agreement to borrow $50 million in new financing from its existing lenders and refinance $150 million in pre-bankruptcy debt.

Phoenix is controlled by an affiliate of Apollo Global Management Inc. following a 2017 acquisition.

Phoenix specializes in removing and handling molten slag that has been separated from steel. The company, which operates at 39 customer sites, also prepares and transports metal scraps, raw materials, and finished products. It entered bankruptcy with $587 million in funded debt.

Phoenix’s contract portfolio has recently become “unsustainable” due to “inflationary pressures and rising fuel costs, coupled with suboptimal contract terms,” the company said in court papers. Phoenix has also encountered operational challenges at customer sites, including equipment failures and management turnover, it said.

“The contracts and operational challenges, in turn, have placed a significant strain on the debtors’ liquidity, which was further weakened by capital lease payments, rising interest rates, and increased capital expenditures,” the company said.

The company has developed a strategy to renegotiate or terminate unprofitable contracts and emerge from bankruptcy in March 2023 “as a going concern with a sustainable and profitable contract portfolio,” it said.

To assist in the process, Phoenix has retained legal counsel from Weil Gotshal & Manges LLP and Richards, Layton & Finger PA. The company has also hired AlixPartners LLP as a financial advisor and PJT Partners LP as an investment banker.

The case is In re Phoenix Services Topco LLC, Bankr. D. Del., No. 22-10906, petition filed 9/27/22.

To contact the reporter on this story: Alex Wolf in New York at awolf@bloomberglaw.com

To contact the editor responsible for this story: Maria Chutchian at mchutchian@bloombergindustry.com, Melissa B. Robinson at mrobinson@bloomberglaw.com