Lenders expect losses, OK auction
Companies continue to be interested in buying the mill, but none has stepped forward with firm plans.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- Lenders to CSC Ltd. expect to lose between $50 million and $60 million even if a buyer for the steel mill steps forward.
The loss would be nearly half of the $116 million owed to a group of lenders, said James Ehrman, a lawyer for First Union, the lead lender.
Ehrman told Judge William Bodoh at a hearing Thursday in U.S. Bankruptcy Court in Youngstown that lenders think they could get equal or perhaps greater value by selling the shuttered Warren mill piecemeal, but they agreed to go along with CSC's auction plan to preserve jobs and speed up the process.
If lenders are right about receiving less than they are owed, the unsecured creditors would not receive anything from the sale, Ehrman said.
Argued against auction: Mark Hebbeln, a lawyer for unsecured creditors, argued against setting an auction date, saying he had not received enough information to determine whether CSC's adviser had done enough work to find a buyer.
Judge Bodoh said he would consider CSC's request for a July 12 auction, which would be held at the Cleveland offices of CSC's legal firm, Baker & amp; Hostetler.
Lawyers said they don't know if any company will bid.
Jeffrey Baddeley, a lawyer for CSC, said the company has been talking to several companies but no one has agreed to bid yet. CSC asked for the auction date to force these companies to make a decision.
If no company bids, CSC asked for authority to sell the mill in up to three sections, which also could allow the restart of operations.
Potential buyers have repeatedly expressed interest in the newer parts of the mill, such as the melt shop, continuous caster and 12-inch mill, said Don Caiazza, a spokesman for the Reserve Group of Akron, which owns the mill.
Separate companies: These major parts of the mill could be operated by separate companies, he said. These companies could run independent operations or act in partnership with each other, sending steel from one production area to another, he said.
CSC spent $90 million over the last few years to install modern processing equipment.
If sale isn't possible: If the mill can't be sold, CSC has said it would propose to liquidate the company. In that case, the mill's equipment would be sold piecemeal.
If there is an auction, bidders will have to meet a minimum bid. Judge Bodoh approved a motion by the lenders that the minimum bid will not be revealed before the auction.
If a bidding company knew the minimum, it could just try to meet that amount in hopes no one else would bid, Ehrman said.
David Fusco, a lawyer for the United Steelworkers of America, questioned keeping the minimum bid secret. He said a potential bidder could decide not to bid because it might think its bid wouldn't be high enough.
CSC filed for bankruptcy protection in January and shut down operations in April, idling more than 1,300 hourly and salaried workers.