Lynch tries to keep control of smelter
Tuesday, July 29, 2003 8:08 AM PDT
By Pat Forgey
Printable version
E-mail this articleFor the first time, Longview Aluminum Chairman Michael Lynch has acknowledged that the plant cannot operate profitably under present market conditions, but he still wants to keep control of the plant so that when conditions change, he will be in a position to restart the smelter.
In court documents Lynch filed last week with the U.S. Bankruptcy Court in Chicago, he made the case that the court should not turn control of the smelter over to a trustee, whose job would be to protect the plant's assets for creditors, not to preserve the property for the owner.
Creditors who say they're owed tens of millions of dollars by Longview Aluminum have asked the Bankruptcy Court to appoint a trustee to protect the company's remaining assets. If the judge agrees, Lynch would become the owner of the smelter in name only. Two other Lynch companies, McCook Metals and Scottsboro Aluminum were liquidated after they were taken over by a trustee.
Lynch's lawyers have been fighting the appointment of a trustee, saying that the better option for both the creditors and the workers and community who rely on the plant would be to give him a chance to get the plant up and running.
His lawyers told the court last week that while he "still believes in the long-term viability of the enterprise, it lacks funds and creditor support necessary to sustain operations until profitability can be achieved."
The price of the plant's raw material, alumina, is going up, while the finished product, aluminum, is going down so that operation of the plant is no longer sustainable, they said.
Instead, Lynch made another proposal. He said another company with which he's affiliated, Northern Energy, anticipated making a bid for the operating assets of Longview Aluminum under section 363 of the bankruptcy code.
Section 363 of the code allows some or substantially all of a debtor's assets to be sold off without the development of a reorganization plan, giving them to a new owner, free and clear of other claims. Some claims could be transferred to the new owner, if the owner agreed to accept them. That might be done to get approval from certain key creditors for the transfer in what's known as a "363 sale."
Lawyers for the United Steelworkers of America, one of Longview Aluminum's creditors, had not filed a response in court by Monday. Local union officials were not available for comment.
One of the issues that forced Longview Aluminum into bankruptcy court was an attempt by the Bonneville Power Administration to collect on millions of dollars in bills the company had not been paying.
As part of the 363 sale, Lynch identified one BPA contract, for power transmission, that would be transferred to the new company. Another, for millions in unpaid power, would not be transferred. That power transmission contract is key to restarting the plant, because BPA's lines would be needed to get power to the smelter.
Financing the deal would involve arranging $12 million in credit, which Lynch offered to "personally guarantee."
Appointment of a trustee, Lynch warned, would likely result in a "meltdown" scenario, where each creditor tried to individually address their claim without regard to the plant as a whole.
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