Nation’s 12th-Largest Steel Firm May Lose Critical Federal Grant
WASHINGTON (AP) _ Sharon Steel Corp., which filed for protection from creditors last month under Chapter 11 of the bankruptcy laws, said Friday it is trying to convince the federal government not to withdraw a critical $5 million blast furnace modernization grant.
The Urban Development Action Grant was approved in 1984 but never awarded because Sharon, the nation’s 12th-largest steel producer, could not secure the private investment the grant requires. The Pennsylvania company is controlled by Miami financier Victor Posner.
Under the 10-year-old UDAG program, grant recipients must demonstrate the ability to share the cost of projects with the Department of Housing and Urban Development.
Since neither Sharon Steel nor local civic and business leaders have been able to come up with the required $20 million in private investment, HUD is about to withdraw the grant unless at least a large portion of the money is secured within 35 days, the company said Friday.
HUD confirmed Friday that the company had missed several deadlines and that a letter was being drafted saying Sharon Steel stood to lose the grant unless an investment package was imminent.
Phillip Smalley, senior vice president, said in an interview that the blast furnace modernization is ″critical″ to the survival of the firm.
″We’re hoping to get the local bankers and community leaders together and the governor’s office together to put together a package that will be acceptable to HUD,″ Smalley said. ″Being an optimist, I think it can happen. At least we have another shot.″
The blast furnace is expected to be a major topic of conversation when Posner meets Monday with company and union leaders and Rep. Tom Ridge, R-Pa.
″Everybody associated with Sharon Steel realizes that but for the blast furnace, they’re all in jeopardy,″ Ridge said Friday. ″HUD has given three extensions on this. It’s time for Victor Posner and Sharon Steel to ante up.″
The firm has one operating blast furnace, and one that was shut down several years ago, according to Smalley.
The operating furnace ″is overdue for a complete rebuild,″ said Frank Laaks of the United Steelworkers of America. ″They have been coaxing it along, but it’s on borrowed time,″ he said.
While plans are not finalized, the company might use the UDAG to help refurbish the non-working blast furnace while the other furnace continues production, Smalley said.
Any major modernization plans likely would have to be approved by Bankruptcy Judge Warren Bentz and a creditors’ committee, Smalley said.
″I would hope they have the same concern for the company that we do,″ he said. ″Without the blast furnace, it’s unlikely we would have an operation.″
Sharon Steel’s bankruptcy filing listed assets of $478 million and debts of $742 million. The filing came little more than an hour before a deadline set by a major creditor to redeem $96 million in corporate bonds that went into technical default in March 1985.