CSC STEEL Court OKs auction plans

Liquidation plans have begun, but the company still believes a buyer is waiting in the wings.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Somewhere out there, CSC Ltd. attorneys say, at least one prospective buyer appears close to making an offer for the darkened Warren steel bar mill.
Nevertheless, just in case the deal falls through, the steelmaker got court approval Tuesday to hire an auctioneer and prepare for a piece-by-piece liquidation.
Michael Fox International, a Baltimore-based auctioneer specializing in industrial machinery, commercial and industrial property, will begin work immediately.
Fox workers will take inventory and catalog CSC's equipment, machinery and furnishings, with plans to conduct a liquidation sale, if necessary, within nine months.
"It's just a backup plan," said Jeffrey Baddeley of Baker & amp; Hostetler, the Cleveland law firm representing CSC in its Chapter 11 bankruptcy case in U.S. Bankruptcy Court here.
Buyout efforts: He said CSC officials don't think the Maryland auctioneer's cataloging activities will hurt efforts to sell the plant intact. The company's first choice is to sell CSC as an operating unit, if possible, to save some of more than 1,300 jobs that will be lost if the mill closes permanently.
"We have very strong indications of interest from a buyer who will be able to submit at least the outline of a letter of intent by April 13," Baddeley said.
He wouldn't identify the buyer, citing a confidentiality agreement. CSC attorneys have said that six prospects are considering the purchase, and United Steelworkers of America Local 2243 have talked about two others looking into a partnership with workers under an employee buyout.
Deadline: April 13 is the deadline CSC's lenders have set for finding a buyer to purchase the plant as a whole operating unit. After that date, if no offers have been received, lenders want to liquidate the mill.
Baddeley said company officials hope to have a letter of intent from the prospect by the deadline. Failing that, they believe they will be able to persuade lenders to grant an extension if they have some concrete evidence that the buyer is close to making an offer.
Attorneys representing the lenders said in court last week that bank officials don't believe CSC can find a buyer willing to operate the plant.
If and when the company gets a purchase offer, Baddeley said, company attorneys will ask the court to establish a bid procedure. The potential buyer's bid would likely be made public, but the buyer's identity might initially be kept confidential, if requested.
Companies and investment groups often want to remain unidentified when bidding on a business, he explained. Eventually, when the purchase is approved and the successful bidder determined, the buyer's name and purchase price would become public. The unsuccessful bidders' identities might never be revealed, however.
Baddeley said CSC hired the auctioneer at the request of the banks. Michael Fox International will be paid a 10-percent buyer premium, a 10-percent fee to be added to the final purchase price, plus up to $150,000 for expenses.
CSC also is negotiating an employment contract with a sales agent and collection manager, who will help managers collect payments owed by customers. Company officials said last week that CSC was awaiting payment of more than $17 million in unpaid customer bills.
The situation: CSC filed for Chapter 11 bankruptcy protection Jan. 12, citing financial troubles caused by competition from cut-rate foreign steel imports combined with start-up problems related to a $93 million plant modernization project.
A skeleton crew is still employed inside the mill, most assigned to mothballing equipment and machinery to prepare the plant for long-term storage.
Health insurance has expired for 1,100 hourly workers and 260 CSC retirees. About 1,300 retirees of the former Copperweld Steel Co., a CSC predecessor, still have health benefits under a separate fund.