Phoenix Reaches 11th Hour Accord With French Bank Creditors
CLAYMONT, Del. (AP) _ Phoenix Steel announced Tuesday it averted seizure of its inventory after reaching a tentative agreement with its French bank creditors.
At the same time, Phoenix announced its seamless tubing mill in Phoenixville, Pa., would temporarily close at the end of the workday Tuesday while the steelmaker finalizes the agreement, seeks financing to restock the inventory and reestablishes customer accounts over the next several weeks.
The 175 workers at the Phoenixville mill were expected to be laid off for two to three weeks, according to Don Durocher, Phoenix spokesman.
Phoenix closed its Claymont mill in February and it will remain closed until a new owner is found. Durocher said there are prospective buyers, but there have been no offers.
Phoenix has said all along it has no plans to sell the Phoenixville mill.
The steelmaker began phasing down operations at the Phoenixville mill in mid-February to prepare for a March 3 closing, prompted by the insistence of the French banks that they would consider the company in default that day on $8.5 million in outstanding notes, secured in part by inventory. The French banks said they would seize the company’s inventories.
Under the agreement, which has yet to be drafted, Guardian Ventures, Phoenix’ majority common stockholder, will buy out the $8.5 million in notes outstanding with the French banks for $5.5 million over the next three years.
Guardian Ventures will pay the French banks $1 million on June 1 and Sept. 1, 1987, and $3.5 million on Sept. 1, 1989, according to Donald B. Lifton, Phoenix president and chief executive officer.
In return, Lifton said Guardian Ventures will assume the position of the French banks as the noteholder.
″Because the negotiations with the French banks took us into the 11th hour, we have a depleted inventory and an empty order book,″ said Jay Alix, Phoenix vice president and chief operating officer.
″While we’re formalizing the agreement with French banks, we’ll be determining how much additional financing will be required to restock our inventory and at what level, depending on how many customer accounts can be reestablished after this major disruption to every customer account we have,″ Alix said.