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Port fights bankrupt BMT Northwest in court

MACLEOD PAPPIDAS | THE DAILY WORLDSections of steel destined for Husky Stadium are ready for painting at Brown-Minneapolis Tank in the Satsop Business Park in 2012.Buy Photo
MACLEOD PAPPIDAS | THE DAILY WORLDSections of steel destined for Husky Stadium are ready for painting at Brown-Minneapolis Tank in the Satsop Business Park in 2012.
MACLEOD PAPPIDAS | THE DAILY WORLD Visitors to the BMT-Northwest facility are dwarfed by completed structure comprised of 10 "mud modules" on the third floor its building at the Satsop Development Park during an employee open house Saturday. Folks who worked on the project were encouraged to bring their families to see the unit, which will eventually contain and manage 10,000 barrels of drilling mud. Once dismantled, it will take 37 truckloads to transport to it Aberdeen, where it will embark on a barge trip to Alaska.Buy Photo
MACLEOD PAPPIDAS | THE DAILY WORLD Visitors to the BMT-Northwest facility are dwarfed by completed structure comprised of 10 "mud modules" on the third floor its building at the Satsop Development Park during an employee open house Saturday. Folks who worked on the project were encouraged to bring their families to see the unit, which will eventually contain and manage 10,000 barrels of drilling mud. Once dismantled, it will take 37 truckloads to transport to it Aberdeen, where it will embark on a barge trip to Alaska.
MACLEOD PAPPIDAS | THE DAILY WORLD Brown-Minneapolis Tank Manager Rollie Irwin describes how his company manufactures large holding tanks in its new production facility  at the Satsop Development Park.Buy Photo
MACLEOD PAPPIDAS | THE DAILY WORLD Brown-Minneapolis Tank Manager Rollie Irwin describes how his company manufactures large holding tanks in its new production facility at the Satsop Development Park.
MACLEOD PAPPIDAS | THE DAILY WORLD A tractor trailer pulling a portion of a 14-foot diameter steel tank rounds the corner of the BMT production facility at the Satsop Development Park.Buy Photo
MACLEOD PAPPIDAS | THE DAILY WORLD A tractor trailer pulling a portion of a 14-foot diameter steel tank rounds the corner of the BMT production facility at the Satsop Development Park.
MACLEOD PAPPIDAS | THE DAILY WORLD Four 50,000-gallon tanks are headed down the Chehalis River on their way to Chevak, Ala. Tuesday for diesel storage. Their first stop is Aberdeen where they will be loaded on to an ocean-going barge.Buy Photo
MACLEOD PAPPIDAS | THE DAILY WORLD Four 50,000-gallon tanks are headed down the Chehalis River on their way to Chevak, Ala. Tuesday for diesel storage. Their first stop is Aberdeen where they will be loaded on to an ocean-going barge.

It seemed like such a good idea. A company out near the Port of Olympia named BMT Northwest was being squeezed out by development. They built huge steel tanks. The Satsop Business Park had lots of room — and was in need of a major tenant.

The idea was hatched — turn the old turbine building originally constructed for the 1970s-era WHOOPS project at the Fuller Hill development park into a facility specifically built for BMT Northwest. The company would bring dozens of jobs and esteem for the business park. It would be a story it could use to attract other clients. The state Legislature kicked in millions of dollars for renovations of the building. Pressure was put on county building inspectors to approve the project. And records obtained by The Vidette show that the Satsop Business Park, itself, ponied up $1.5 million of public money as a kind of line of credit to make sure the outfit could purchase the proper cranes and equipment needed to get itself going. A lease stretching out to 2023 was signed.

But it all came crashing down last fall as BMT Northwest ran out of money. To make matters worse, the equipment bought with public funds was listed as an asset in bankruptcy filings and is about to be sold off to another company, even though $1.2 million is still owed to the taxpayers. The Port of Grays Harbor has hired attorneys, who are using words like “fraud” and making claims that BMT Northwest inappropriately assigned leases in violation of statute.

Bankruptcy filings in the U.S. District Court of Delaware show that the only assets BMT Northwest has is $1.2 million in assets inside the Turbine Building, part of which is still owned by the public. The Port has multiple filings trying to make its case. But a bankruptcy judge in Delaware has formally cleared BMT to sell it all off, removing all liens and debt owed by BMT Northwest. That means the equipment that should have been held as collaterral because it was paid for using public funds is about to be sold to a private company. And because BMT owes upwards of $10 million in debt — the public may not see a dime from the sale.

In fact, an order from the bankruptcy judge even invited the Port of Grays Harbor to make its own bid to get back the equipment paid for by public dollars. The deadline for the bidding was on June 20. The sale is expected to be completed this week. Port Attorney Art Blauvelt said there is still a chance for the Port to recover something and will be filing objections to the sale.

So, was it worth it?

HISTORY

BMT Northwest was located in the former nuclear plant’s reconfigured turbine building, which was originally designed to house steam turbine generators for the twin nuclear plants that were never finished. The company took over the facility in 2009, and after a year-and-a-half conversion process, began manufacturing and shipping behemoth industrial steel storage tanks for various uses around the globe. The company manufactured and shipped tanks weighing up to 1 million tons out of its 360,000-square-foot plant.

Officials with the Grays Harbor Public Development Authority, which ran the Satsop Business Park up until the end of 2012, saw the business as a success story for the Satsop Business Park. BMT Northwest owner and CEO Chuck Travelstead saw the facility as a good fit for his business. At the beginning, there was plenty of positive press for the park, with hopes that it could attract even more business.

In 2011, more than 120 engineers, technicians and owners from steel tank manufacturing plants throughout the Americas attended the Steel Tank Institute/Steel Plate Fabricators Association conference and made a special trip to the BMT facility, recognizing the business as one of the largest steel fabrication plants in the country.

In 2012, the company secured the contract to paint the large seating structures for the new Husky Stadium at the University of Washington. The company built the steel framework to hold the cement forms used to create the pontoons for the State Route 520 bridge replacement project between Seattle and the Bellevue area. On the bridge project, the company processed 800 tons of new steel and then modified another 400 pieces of existing heavy steel frames for future phases.

The company was a “must” stop for any state or federal politician moving through the county.

It was also a consistent stop for economic development tours.

In fact, just days before the employees were laid off in September of last year, the company was a designated stop for Showcase Grays Harbor, hosted by Greater Grays Harbor Inc., the regional chamber of commerce, geared to highlight the county’s economic strengths and diversity. Community leaders and the media toured the facility, most unaware that three days after the tour, everybody would receive pink slips.

PUBLIC FUNDS

In 2008, Public Development Authority board members, consisting of private parties as well as commissioners from the county, port and PUD, lobbied local legislators for funding to help renovate the turbine building specifically to get BMT Northwest into the facility. They were successful, garnering a grant of $5.053 million in state funds. The county chipped in $250,000 from an economic development fund.

Then, in 2009, the county chipped in another $150,000 and the old Public Development Authority spent an extra $300,000 to retrofit a barge slip near the Satsop site. The slip, 60 feet wide and 300 feet long, was renovated to remove sediments and make it deeper, specifically so BMT Northwest could use it to send giant steel tanks down the river. The tanks were too wide to travel on regular roads and some are too high to make it safely under overpasses.

As part of the lease for BMT Northwest, $1.5 million in tenant improvement funds were loaned to BMT Northwest so the company could make further improvements and buy more equipment. The funds were supposed to be paid back over the life of the lease, which went until the end of 2023. Before the company went bankrupt, $1.29 million was still owed.

There were promises that the business would be an anchor tenant, attracting many jobs and potentially other tenants over the years. That never happened. In 2008, the company had about 50 employees in Olympia, with a pledge to bring in dozens more. When the company finally moved into the turbine building in 2009, it still had 50 employees. And, by the time it laid off everybody last year, it still had about 50 employees.

To attract BMT Northwest and keep the company at the business park, it cost the public a combined $7.253 million. That means the taxpayers subsidized those jobs to exist at a acost of $18,132 per employee for the four years they all worked.

LEASE ISSUES

In 2008, the company signed a 15-year lease with the Satsop Business Park, which has since been inherited by the Port of Grays Harbor. The agreement allowed BMT to pay no rent in 2008 and 2009 with rent commencing at $4,000 per month in May of 2010. The rent remained at $4,000 per month and was set to increase to $6,000 in January of this year.

There were a number of lease agreement options allowing the company to stay at the park until 2058, if it wanted.

The company also had to compensate for security costs at the business park and pay an annual cost for use of the barge slip.

Part of the lease also pledged to pay back the $1.5 million in tenant improvements that the Satsop Business Park had loaned to BMT Northwest in a bid to help the company make the Turbine Building work better and purchase more equipment.

In the lease agreement, there is a lengthy asterisk explaining the reasoning for why the public entity was loaning a private entity so much money — as if hinting that someone in the future may question the loan.

The note in the contract explains that the county made a ruling that the 1970s-era building was “new construction” and needed to be updated to new building codes. The money provided by the state couldn’t cover the full costs.

The lease states: “The rent structure and tenant improvement allowance is provided to tenant in exchange for good and valuable consideration, including but not limited to tenant’s substantial investments in the premises, tenant’s payment of rent and other charges for premises that were previously generating no revenue for the owner, tenant’s willingness to relocate from its current facilities in Olympia to the premises, increases in tax revenue to Grays Harbor County, the creation of employment opportunities for local residents in family-wage positions, an increase in the owner’s opportunities for other leases as a result of tenant’s ability to attract related businesses to the Satsop Development Park and other good and valuable consideration. This tenant improvement allowance will allow the owner to provide for tenant’s installation of additional fabrication machinery in the turbine building, thereby increasing the variety of employment and training opportunities available for local residents. It also complies with the owner’s purposes under Grays Harbor ordinance No. 246, including but not limited to ‘undertaking development of an underutilized area of the county,’ ‘facilitating private investment which will build the county tax base’ and serving ‘the essential public purpose by relieving blight.’”

The tenant used the $1.5 million for machinery and equipment for installation and use in the Turbine Building, including compressor lines, gas lines, compressor systems, electrical distribution system improvements, security systems, sandblast and paint facilities, plate rolls, runway, three 10-ton cranes, a blast booth and a paint booth, among other items.

Blauvelt said about $800,000 in actual physical improvements to the structure were done and would not be removed under any bankruptcy scenario. There was another $700,000 in purchased equipment.

BMT Northwest was paying $12,675 per month beginning Jan. 1, 2009, and continuing through the term of the lease to pay back the funds used to improve the facility. On June 21, 2011, the business park agreed to defer the payments from May 1, 2011, to June 30, 2012. As a result, the monthly assessment would be boosted to $14,497 from July 1, 2012 through the expiration of the lease. The present balance due is $1,289,880.

FINANCE Issues

The company that signed the lease was Olympia Properties, LLC. It was an affiliate company behind BMT Northwest and owned by the same people.

Part of the approved lease forbid Olympia Properties to sublease or designate the lease to any other company. Blauvelt notes that’s an important part of the terms because, it turns out, Olympia Properties did exactly that without informing the Port.

In 2011, BMT Northwest ran out of money and defaulted on a loan owed to JP Morgan & Chase Co. Foreclosure proceedings began and a new company called BMT Northwest Acquisitions emerged, and, for simplicity’s sake, purchased the assets and forgave the debts at a discount. The debt was now owned by The Private Bank out of Chicago.

The new debtor asserted that it entered into a sublease for the leased premises at the Satsop Business Park— but neither the PDA nor the Port ever consented to the sublease, according to filings made by the Port in U.S. Bankruptcy Court.

In September of last year, Travelstead sent a letter informing the Port that he was experiencing more financial difficulties and was looking for a buyer to purchase the business. In that letter, Travelstead requested that the Port amend the lease so he or a future buyer would no longer have to pay back the $1.29 million still owed on the tenant improvements. On Sept. 23, Blauvelt wrote back and said the lease was remaining the way it was. The pink slips were issued by BMT Northwest that day.

Records show Blauvelt consistently wrote to Travelstead and received no response back.

Alissa Shay, the business manager of the Satsop Busienss Park, made phone calls — and was ignored.

In January, Blauvelt issued default notices and a notice ordering the debtor to vacate the premises.

By mid-February, the company filed Chapter 7 bankruptcy documents in the U.S. District Court of Delaware.

The filings showed that The Private Bank out of Chicago was owed $6.15 million and Street Tank Holdings Co. Inc. was owed $4.445 million. Altogether, there’s a combined $11.4 million in secured and unsecured claims owed by BMT Northwest — with assets only listed at $1.2 million for equipment inside the Turbine Building at the Satsop Business Park.

The Port’s claims were not listed as part of the original bankruptcy filings.

The Port says it’s owed $1,289,880 as part of the tenant improvement allowance. Between 2014 and 2023, $1.17 million in rent is owed to the Port. However, there is a statutotory cap of 15 percent that is in place, which turns that huge rent debt into a $175,500 claim.

In filings made with the federal bankruptcy court, the Port of Grays Harbor is now alleging “fraud” claims against BMT Northwest and its owners for including equipment that should belong to the public as private assets.

“Based on available information, the Port believes, and therefore asserts, that it is entitled to recover the damages set forth herein because the debtor, BMT-NW, Olympia Property, Mr. Travelstead and/or other principals of the debtor, may have committed fraud in connection with, among other things, the alleged transfer of the tenant improvement allowance property to BMT-NW, the alleged transfer of the tenant improvement allowance property and BMT-NW assets to the debtor and the assignment and/or sublease of the leased premises to the debtor,” the Port’s filings in bankruptcy court states.

So far, the claims have fallen on deaf ears and the federal district court judge has allowed the sale of the assets to continue.

Port officials tried to get the venue changed from Delaware to the U.S. District Court in Tacoma. But the Delaware judge denied the claim. The Port had argued that of the 75 scheduled creditors, 31 are located in the state of Washington, 12 were on the West Coast and there were only five on the East Coast — none in Delaware.

But, because BMT Northwest filed its corporation papers in Delaware, the judge ruled the venue was proper.

When Port officials tried to stop the debtor from coming on to its premises because the debtor was not the legal leasee, a trustee appointed by the U.S. District Court, threatened legal recourse “if any action is taken by your client without bankruptcy court approval with respect to any of the debtor’s assets or property of the bankruptcy estate,” according to the court filing.

Thus, the locks have remained unchanged and the Port has left the property paid for by the public in the building — unless Port officials want to be held in contempt of court by a federal judge.

At this point, unless a settlement agreement is reached, the Port’s only hope to stop the sale of its assets is to object to the sale after the equipment has been sold.

Blauvelt says there are assets in the turbine building which BMT Northwest brought with them from their Olympia operations. Out of about 126 items that are up for bid, the Port only protested 13 or 14 items, purchased with the $700,000 of public money. Blauvelt notes that those items were never listed by BMT officials as personal property that is taxed by the county. The property is owned by the Port, he said, but was co-opted and listed incorrectly as private assets.

The Port’s objections will be heard by the judge in the coming days.

Meantime, Shay says the marketing plans to try to get a new tenant in the turbine building has been in a holding pattern. It’s been that way since the end of last year.

“Because everything is up in the air, we haven’t really been actively recruiting someone to come into the building,” Shay said. “But, if someone were to contact us, we’d take their name and still meet with them.”

Blauvelt notes that the millions of dollars of work in the building to attract BMT Northwest will still be there to help attract another tenant in the building.

That said, despite best efforts of recruiting business in an area where unemployment has continued to be in the double digits or darn close, most of the business park’s major buildings are empty and have been empty for months, if not years.