YOUNGSTOWN Judge to rule on equipment sale delay
CSC can make money if the union agrees to concessions, a potential buyer says.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- The company considering restarting CSC Ltd. asked a judge to delay a piece-by-piece sale of mill equipment for 45 days.
Judge William Bodoh of U.S. Bankruptcy Court said after listening to lawyers' arguments Wednesday that he would rule on the matter later.
Renaissance Partners of Cleveland said it needs more time to complete a new labor deal that is critical to making the Warren steel bar mill profitable.
George Petrenko, a Renaissance principal, said after the hearing that the labor deal is the last major hurdle preventing the company from making an offer for the mill. The company has a five-year business plan that demonstrates that operations can be profitable, he said.
Petrenko said he spoke with United Steelworkers of America officials this week and he hopes an agreement can be reached "fairly shortly." Union officials understand that concessions must be made to restart the mill, he said.
Asked for sale OK: Ronald Hanson, who represents CSC's lenders, asked the judge to approve the piece-by-piece sale, saying Renaissance has had enough time to put together an offer and delaying the sale would be too costly.
The company that would handle the sale needs two months to schedule and advertise an auction, and past history shows that such an auction can be done no later than October while the weather is still reasonably good, Hanson said.
The auction would include only the equipment that isn't sold in earlier sales, which can begin 10 days after a piece-by-piece sale is approved.
Petrenko said Renaissance will walk away from the deal if any of the mill's equipment is sold.
Sean Malloy, a Renaissance attorney, told the judge that a 45-day delay would not prevent the auction from being held in October. He said the auction company could prepare for the auction and negotiate other deals, as long as none were completed for 45 days.
Sincerity questioned: Hanson questioned the sincerity of Renaissance's interest. An auction for the entire plant was scheduled in July but canceled because no one was interested. Renaissance now says it is interested but hasn't provided detailed information on its financing, he said.
"Hearing 45 days demonstrates to me that skepticism, and a lot of skepticism, is in order," he said.
Hanson, who said lenders will lose more than $70 million on the case, said CSC officials should focus less on chasing "tire-kickers" and focus more on preparing assets for sale.
Lenders' costs: CSC's lenders spent $1.6 million in June and July and budgeted $950,000 for August and September to maintain the idle plant in the hopes of finding someone interested in restarting the mill, he said. The lenders don't want the process to drag on further because it is too costly, he said.
Malloy said, however, that Renaissance, which specializes in turning around troubled companies, has a financing partner with assets of more than $1 billion, which is willing to invest in CSC if the business plan is completed.
"The money is there," he said.
Donald Caiazza, CSC vice president of sales, testified that he worked with Renaissance in preparing the business plan. When asked if he thought it was viable, he said, "Yes, I think so."
Judge Bodoh laughed and said he considered that a "qualified maybe."
Significant cuts: Caiazza said the plan calls for significant reductions in wages and staffing at the mill. He said he thinks local union officials are willing to accept the staffing reductions, but international union officials have "lots of concerns" about cutting wages and benefits.
John Kubilis, president of USWA Local 2243, said after the hearing that he thinks a deal can be reached. He said the concerns expressed by international union officials are part of the normal negotiating process.
Petrenko said the mill would have less than the 1,300 workers who used to staff the mill, but he wouldn't give a number. He said Renaissance could have the mill operating within 60 days of closing a deal, and would produce about 150,000 tons of steel the first year and work up to its capacity of 300,000 tons a year.
In other business, Judge Bodoh rejected a request from CSC's unsecured creditors to convert the case from Chapter 11 of the bankruptcy code, which allows a company to reorganize, to Chapter 7, which leads to liquidation.
He said the conversion would add to costs, eliminate a tax advantage available under Chapter 11 and add another layer of management as a trustee would oversee the case.