REPUBLIC ENGINEERED PRODUCTS Steel company files Chapter 11

An analyst dismissed the company's claim that the blackout forced the filing.
FAIRLAWN, Ohio (AP) -- Debt-ridden Republic Engineered Products LLC in part blamed damage from the massive blackout in August for driving the company to seek bankruptcy protection.
The northeast Ohio steel company, with 2,500 workers in three states, was formed just over a year ago through a different bankruptcy case. It had been trying to arrange new financing and reopen steel bar operations.
The Chapter 11 petition, filed in U.S. Bankruptcy Court in Cleveland Monday, lists assets of $481 million and debts of $468 million.
The company said it could not recover after its main blast furnace in its Lorain, Ohio, plant was severely damaged when cascading outages hit eight states and Ontario, Canada.
"Before today, we had exhausted our financial resources in addressing the tragic, unforeseeable blast furnace explosion and fire we sustained Aug. 14, and we had been refused further funding support," said Joseph Lapinsky, president and chief executive, said in a prepared statement.
Analyst's view
Analyst Charles Bradford of New York-based Bradford Research said the company was in trouble before August.
"Forget the blackout," he said. "Their first-half financial results were not very good."
Following losses in the first and second quarters, Bradford said, "They were almost out of equity, and that was in a pretty good environment."
Republic was formed in August 2002 after investor groups KPS Special Situations Fund of New York and Hunt International Group of Dallas paid about $463 million for some assets of bankrupt Republic Technologies International. About 2,000 RTI employees lost their jobs then.
The company, based in this Akron suburb, operates plants in Canton and Lorain, and rolling and finishing facilities in Canton, Lorain and Massillon in Ohio; Lackawanna, N.Y.; and Gary, Ind.
Total sales for the Big Three U.S. auto makers, Republic's main customers, were off 4.3 percent through September compared to the same period last year.
Republic last week closed most of its operations during talks with lenders and said it hoped to restart those operations as soon as possible. Details of those talks were not disclosed. The company said that it resumed shipping products on Friday.
Seeking loan
The company said it was trying to work out a debtor-in-possession loan, which would help get all departments operating again. Union presidents said supervisors were telling employees everyone would be back to work by Wednesday.
Court documents show the company's creditors included 14 banks and other lenders.
The company is asking the court for permission to pay its employees' salaries, benefits and business expenses during the reorganization. The average monthly payroll, including benefits, is $11.7 million, according to the documents.
Last week, the company told the Securities and Exchange Commission it was in default on a major bank loan, couldn't make interest payments on its bonds and expects to default on a $5 million loan from the Ohio Department of Development.
The company also said it was forced to delay payments to suppliers and that it owed more than $2 million in taxes on inventory and equipment in areas involving its Canton, Lorain and Massillon operations.
Union's view
"It was expected," said Jacqueline Kiedrowicz, president of Steelworkers Local 1200 at the Canton plant. "A lot of the employees have not had full paychecks in a couple of months."
Kiedrowicz said this will be the third Chapter 11 proceeding she's gone through at the plant. Each time, the union has "lost ground" in employment, pay and benefits, she said.
"They always have money to bring management back, but they don't have money to bring all of our people back," she said.
At the Massillon cold-finish plant, mechanic Ray Perez said he was surprised there would be a new bankruptcy case so soon after the company was formed. The Massillon plant has always been busy, said Perez, vice president of Steelworkers Local 1124.
"I've never seen them shut the doors like they did this time," he said.
Both he and co-worker Gay Gallagher, four years from retirement, said many workers lived through past bankruptcies.
"It gets scarier every time," Gallagher said.