Wednesday, July 11, 2001
Attorneys say a piecemeal sale and dismantling of the mill could be next.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- After weeks of anticipation, an auction scheduled Thursday of the financially troubled CSC Ltd. steel mill has been canceled because of lack of interest.
"Obviously we are very troubled and very unhappy to say there will be no auction on Thursday," said Jeffrey Baddeley, a CSC attorney who has often talked with optimism about the number of bidders expressing interest in the shuttered Warren plant.
The attorney explained that bidders wanting to participate in the auction were required under a court-approved plan to transfer a $1 million deposit by Monday to Baker & amp; Hostetler LLP, the Cleveland law firm representing the CSC in its Chapter 11 bankruptcy case.
No deposits were received.
Background: Once Trumbull County's fourth-largest employer, CSC left about 1,300 workers jobless when it ceased operations April 13. The Cleveland office of McDonald Investments has been searching for nearly a year for a buyer willing to operate the mill and save jobs.
Baddeley announced the cancellation Tuesday during a hearing on another matter in U.S. Bankruptcy Court here.
When an attorney for CSC's unsecured creditors asked why he and representatives from the United Steelworkers of America would not be allowed to attend the auction, Baddeley replied: "The concerns are moot. There will be no auction."
What happens next? Baddeley noted that Bankruptcy Judge William T. Bodoh approved the hiring of a liquidation specialist and an auctioneer in the spring.
Michael Fox International, a Baltimore-based auctioneer, and Development Specialists Inc., a Chicago-based financial liquidation firm, have been working since early May to prepare the massive mill for dismantling and a piece-by-piece sale.
Stipulation: CSC stipulated in a motion filed last month requesting an auction date that it planned to convert the case to Chapter 7 and conduct a piecemeal liquidation if the mill was not sold at auction. The company had also agreed, with consent of its lenders, to sell the assets in up to three sections.
Baddeley said it's too soon to say, however, if the company will opt to move into Chapter 7 or whether a buyer might still emerge to keep the plant intact.
"If there's a buyer out there, they'd better move quickly," he said. "They've already missed the first deadline."
Atty. James Ehrman, who represents CSC's lenders, said bank officials are disappointed but not surprised that no buyer made an offer on the mill.
"We had hoped for an in-place sale because it looked like the most efficient way to sell what is there," he said, "but you've got to think, they had McDonald Investments looking for a buyer for months before the company even filed Chapter 11 and nobody had come forward. It was in the back of our minds all along that this might happen."
Ehrman said he knows of "at least two" prospective buyers who seemed seriously interested in buying parts of the plant or parts of its equipment.
"I can say this with certainty," he said, "the lenders are not going to keep it open just to keep looking for an in-place buyer. The party was canceled because nobody showed up, and now we're saying, 'Anybody want to come to a smaller party?'"
The lenders will likely meet through a conference call later this week or early next week, he said, to decide on a course of action. The next step will likely be liquidation, he said, but that could be accomplished without switching to Chapter 7.
Ehrman said the banks expect to lose at least $50 million when CSC is sold, not counting the money spent on legal fees and other expenses of the bankruptcy.
What union chief said: John Kubilis, president of Local 2243 of the United Steelworkers of America, said he was "not too concerned" that no buyer chose to make the $1 million deposit required to participate in the auction. "We think the ground rules may change," he said.
The union leader, who represents most of CSC's furloughed hourly workers, said the local is working with a partner, a Pennsylvania company or group that he would not identify, with plans to try to buy the company under an employee stock ownership plan.
"I've always believed that an ESOP would be best for the employees and the community," he said.
Kubilis said he also believes there are "at least five other potential buyers" who, because they didn't like the terms of the auction or had some other reservation, might have only postponed making an offer for the mill.
The union leader said he suspects some prospects might have balked at the prospect of having to match or top a reserve amount, a figure set by the lenders but which was not revealed. Any bid less than that reserve would have been thrown out.
Kubilis said union leaders have made numerous trips to Columbus and Washington, D.C., in recent months to hammer out financial incentives with government officials. They believe they can offer a prospective buyer the promise of $40 million to $60 million in federal loan guarantees and a tax incentive package from the state of Ohio worth about $30 million.
"We've made it easy for them," he said. "Everything is in place for someone to step in and buy it, and I still think it's going to happen."