Attorneys with the Port of Grays Harbor were able to salvage some of the publicly owned equipment inside the Turbine Building at the Satsop Business Park and get a settlement approved by a federal bankruptcy judge last week, clearing a major hurdle and allowing the business park to try to find a new tenant for one of the largest buildings at the campus.
BMT Northwest had been located at the Satsop Business Park in 2008 and laid off about 50 employees late last year. The company made giant steel tanks — and even helped build some of the seating structures for the new Husky Stadium at the University of Washington.
Records obtained by The Vidette show that the Satsop Business Park, itself, had loaned $1.5 million of public money as a kind of line of credit to make sure BMT Northwest could purchase the proper cranes and equipment needed to get itself going. Then, the company went bankrupt. And all of the assets — still owned by the public since BMT owed $1.2 million on its loan — were, Port attorneys argued, improperly and “fraudulently” listed as owned by BMT Northwest.
The Port of Grays Harbor, which operates the business park, had been in U.S. Bankruptcy Court in Delaware fighting to retain ownership of the equipment. There was some skepticism that the Port would win the case, since the federal judge had denied a motion to move the venue to Washington state and had already signed one motion clearing the sale of the assets to move forward.
The Port’s last hope was a formal objection, pinning its claims that the property was not being taxed as BMT Northwest’s personal property by Grays Harbor County. Assessor Rick Hole had been issued a subpoena to appear in federal court in Delaware.
At least two hearings these past few weeks were canceled as the parties worked something out.
Then, on July 16, U.S. Bankruptcy Judge Peter J. Walsh signed an order clearing the assets of BMT Northwest to be sold — except for a settlement contained in the order agreed upon by the parties to allow the Port to retain some of the property in question and get some back rent.
Port Attorney Art Blauvelt notes that the deal with buyer Hilco Industrial should close any day now.
Hilco will then conduct some kind of auction at the former BMT facility, where all of the items purchased by Hilco are to be sold to the public, he said. The auction may be done both live and via the Internet. Blauvelt said the details are still being worked out. After the auction, the winners will have until November to remove the purchased items from the facility. There’s actually a provision in the judge’s order that states if Hilco or the winners don’t remove items by November, then the property will become the property of the Port.
“Any abandoned assets remaining at the facility at the conclusion of the access term shall be deemed to revert to the Port,” the agreement states.
“The terms of the settlement have the Port retaining the four cranes it purchased, plus five additional overhead cranes,” Blauvelt said. “This keeps the facility fully served by cranes that can be used by a new tenant.”
BMT Northwest had stopped paying rent on the Turbine Building in March. As part of the settlement, the court-appointed trustee agreed to pay rent for March, April, May and June in the amount of $124,000 and Hilco will pay the Port $21,000 per month from July to November of 2014.
“The settlement also contains an insurance amount, removal procedures, provides for electrical systems to be left in place, provides for cleanup, disposal of liquids, and other details,” Blauvelt said.
There’s also a provision approved by the judge that notes that the unpaid PUD electric bills at the Turbine Building were the responsibility of BMT Northwest, not the Port.
Although Hilco agreed to buy BMT Northwest’s assets for $1.56 million, the real purchase price will come down to $1.245 million. The settlement agreement notes the value of the rent coupled with the value of the cranes being given back to the Port work out to $315,000.
That’s a far cry from the $1.29 million owed on the public loan — but Blauvelt points out that the equipment is five years old at this point with a depreciated value. Out of about 126 items that were slated to go up for bid, the Port protested a little more than a dozen items, purchased with the $700,000 of public money. Blauvelt notes that $800,000 in actual improvements of the Turbine Building will remain on site.
Some of the assets that should belong to the Port will be sold at auction under the settlement, including a paint booth and a sand blast booth as well as specialized machines for bending and cutting steel. The nature of a settlement, however, is neither party gets entirely what they want, Blauvelt said.
“The cranes were a top priority because they are usable by most of the businesses that are likely to want a space like the BMT facility,” Blauvelt said. “Several other Tenant Improvement items paid for by the PDA in 2008 are also remaining — all the crane rails and crane runways, the gas distribution system — welding gases, and chiller room improvements, such as electrical panels. None of the structural and physical improvements paid for under the Tenant Improvement Allowance are being removed, so the value of the labor and materials is not being removed. Finally, none of the improvements paid for by the state’s JDF grant are being sold or removed.”
The Port also had a claim for $1.17 million in rent since the lease with BMT Northwest went until 2023. However, there was a statutory cap of 15 percent that is in place, which turned that huge rent debt into a $175,500 unsecured claim. The Port was able to secure $124,000 in back rent — and a contract valued at $105,000 for rent until November — more than what they could have gotten under the statutory limits. And, since the claim was not a secured debt, it was possible they wouldn’t have gotten any money without the settlement.
In the end, the Satsop Business Park won’t get all of the money back or all of the equipment back, but there was a real possibility that the Port could have walked away with nothing.
The judge’s order notes it was “a reasonable resolution of the objection to the sale motion filed by the Port and is in the best interest of the debtor’s estate. The lender has consented to the Trustee, Hilco and Port Agreement.”
The Port will get its monetary settlement and The Private Bank and Trust Co. of Chicago will get $950,000. Other major creditors likely won’t see much.
Bankruptcy 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 was 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.
“As you noted, the most important aspect is having a defined path towards closure so we can get a new tenant engaged and working to provide jobs in Grays Harbor,” said Port Executive Director Gary Nelson.
The Port was represented in Delaware by attorneys Bill Sullivan, Bill Hazeltine and Zeke Allison. The firm’s name is Sullivan, Hazeltine and Allison, LLC.