Kaiser Steel Files for Chapter 11 Reorganization
DENVER (AP) _ Kaiser Steel Corp., a remnant of Henry J. Kaiser’s industrial empire and a victim of the foundering U.S. steel industry, announced Thursday it has filed for protection from creditors in U.S. Bankruptcy Court.
Faced with a reported $620 million in debt and pressing creditors, the board of directors, who were elected following a proxy fight on Jan. 7, filed for Chapter 11 reorganization late Wednesday.
Under Chapter 11 of the federal bankruptcy code, a company is given a reprieve from creditors while it works out a way to pay its bills.
Kaiser Steel makes steel pipe and components for offshore oil drilling platforms, another hard-hit sector of the American economy. It has not been a main-line U.S. steel producer since it shut down and sold its Fontana steel mill several years ago.
In addition to its steel-fabrication business, Kaiser Steel is involved in coal production and real estate. It employs about 1,000 people.
Minneapolis investor Bruce E. Hendry, who took over as chairman after the proxy fight from former chairman Monty Rial, said the move was made because ″creditor pressure was getting too great ... They were demanding immediate payment. This is a positive move and will stabilize the situation.″
″This is no great surprise,″ Rial said. He has accused Hendry of liqudiating troubled companies at the expense of employees. He has been critical of Kaiser’s recent decision to cut health benefits for about 6,000 retirees.
Kaiser Steel’s corporate offices are located in Colorado Springs, where about 100 people are employed, while its main facilities are in the Fontana, Calif., area.
Kaiser Steel reported a loss of $32.6 million for the nine months ended Sept. 30, 1986, compared with a loss of $31.2 million for the same period in 1985. Fourth-quarter earnings have not been released.
Subsidiary Kaiser Coal, put up for sale Jan. 29, reported $9.8 million in earnings for the first nine months of 1986. Kaiser Coal operates mines in Raton, N.M., and Sunnyside, Utah.
In a Jan. 30 interview with the Colorado Springs Gazette-Telegraph, Hendry said he would like to sell Kaiser’s steel fabricating operation and develop an industrial park and a hazardous waste treatment facility in Fontana.
Kaiser Steel’s Fontana blast furnace, built in 1942 by Henry J. Kaiser to provide steel for his wartime shipbuilding efforts, was the centerpiece of the powerful Kaiser industrial empire that expanded to include aluminum, cement, electronics, automobile manufacture and health care.
At its peak in the early 1970s, the Kaiser Fontana plant employed 13,000 people. After prospering along with other U.S. steelmakers, Kaiser’s fortunes waned in the 1970s because of low-cost steel imports and overcapacity in the industry.
Fragments of the Kaiser empire survive, but the Fontana steel mill was closed in 1983 and sold in 1984. Kaiser was the nation’s ninth-largest steelmaker at that time.
Observers said the sale placed about 6,000 Kaiser workers on the company pension rolls, adding about $240 million to the company debt.
Among Kaiser’s creditors are New York Life Insurance Co., which claimed the company owed it $4.3 million. Kaiser’s filing said it owed New York Life $1.8 million.