- Hurt by the bankruptcy of Enron Corp.,
steel processor Huntco Inc. has filed for its own bankruptcy after struggling
to keep operations afloat amid a slumping economy and a lack of working
capital.
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- The steel processor, based in Town and
Country, filed for Chapter 11 bankruptcy protection late Monday as it
seeks to liquidate assets and pay off creditors.
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- Huntco said it doesn't expect to fully
pay off the $90 million that the company and its subsidiaries owe creditors.
It also said shareholders shouldn't expect any money from the liquidation.
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- Huntco common shares trading in the
over-the-counter market closed at 1.1 cents a share, down 4.9 cents, or
82 percent, from Monday's close.
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- Chief Executive Robert Marischen said
Tuesday that Huntco tried to keep the operations going but ran out of working
capital last week.
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- The financial situation forced Huntco
to lay off most workers Thursday in its two principal subsidiaries: flat-rolled
steel processor Huntco Steel and compressed-air vessel and cylinder manufacturer
Midwest Products.
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- Marischen said only skeleton crews are
operating the plants. Huntco Steel has a plant in Madison, plus plants
in Chattanooga, Tenn.; Pasadena, Texas; Catoosa, Okla.; and near Ghent,
Ky. Midwest Products has a plant in Strafford, Mo.
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- Because of the company's lack of financial
resources, operations are unlikely to be restarted until a new owner takes
over a facility, Marischen added.
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- The bankrupt company's top priority now
is selling off the plants, which could end up hiring back former workers,
Marischen said.
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- "At this point, we expect it to
move forward rather quickly," he said. "We've had a lot of interest
in the operations."
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- Specifically, there was significant
interest in the cylinder plant in Strafford, he added.
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- Marischen didn't want to blame Enron's
collapse entirely for Huntco's bankruptcy. But he said an agreement on
inventory supply and price risk-management with Enron was a contributing
factor.
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- Huntco signed the 15-year contract with
Enron last year; under it the energy company supplied steel coils. The
measure was intended to reduce Huntco's steel inventory costs.
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- But when Enron went bankrupt in December
and stopped supplying steel coils, Huntco was forced to scramble for
alternatives, Marischen said.
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- At that time, a number of other suppliers
became concerned about how the Enron bankruptcy would affect Huntco. As
a result, they would only provide steel on a cash basis, Marischen said.
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- "(Enron's) bankruptcy really complicated
our ability to get financing," he said.
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- Huntco had been struggling in recent
years against an increasingly competitive cold-rolled steel market and
growing imports. In the first nine months of 2001, the company posted
an $11.3 million loss on net sales of $140 million.
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- The steel processor had been looking
for ways to refinance its debt, but "attracting capital to the steel
business is very difficult at this time," Marischen said.
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- The U.S. steel industry is facing one
of its worst downturns because of imports and the slumping economy. President
George W. Bush is considering a recommendation to increase tariffs on
various imported steel products.
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