The company says it has enough money to operate for only a few more weeks.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
YOUNGSTOWN -- A lawyer for Cold Metal Products said he's hoping for robust bidding at an auction of the company's plants.
"There's some action out there," Joseph Hutchinson told Judge William Bodoh in U.S. Bankruptcy Court in Youngstown Tuesday.
Hutchinson said interest has been expressed for all Cold Metal plants except a closed one in Connecticut.
Two companies are interested in buying all five operating plants, while others are interested in individual plants, he said. Two potential bidders have signed nonbinding letters of intent to buy plants in Roseville, Mich., and Montreal, he said.
Former workers at Cold Metal's Campbell plant, which closed in August, are trying to restart the mill. They are working with a consultant who is trying to arrange financing and buy the machinery from an equipment dealer that recently bought it through bankruptcy court.
The workers' bid and any others must be placed by Feb. 21 under an auction schedule that Bodoh said he would approve after the wording was reworked by lawyers. It calls for an auction Feb. 26 if there are multiple bidders and a hearing Feb. 27 to approve the results of the auction.
The judge expressed reservations about the size of a break-up fee that would be owed the lead bidder if it didn't win the auction. In the end, however, he said he would approve the proposed fee in the hopes it would entice bidding and save jobs.
"I sit here, not day after day, but week after week, presiding over the loss of far too many jobs," he said.
He said the proposed break-up fee of up to 3.5 percent of the transaction's value was high. The fee is supposed to cover only the costs of investigating a purchase so a company is encouraged to get the bidding started.
Hutchinson said he agreed that the fee was high but was set at that amount at the request of a bidder. He said the final percentage will be set after discussions with the unsecured creditor's committee and U.S. Trustee's Office.
Running out of money
Hutchinson said Cold Metal needs to move quickly toward an auction because it has enough money to operate for only a few weeks. The company has been unsuccessfully trying to sell its plants on its own.
The Boardman-based steel processor, which filed for bankruptcy protection in August, owes about $40 million to secured lenders, principally GMAC.
Sean Malloy, a lawyer for unsecured creditors, said after the hearing that the auction proceeds are uncertain but it seems likely that there won't be enough money to fully compensate the lenders. That means unsecured creditors would not receive any proceeds from the auction.
Besides Michigan and Montreal, Cold Metal has operating plants in Ottawa, Ohio; Indianapolis; and Hamilton, Ontario.