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HomeMy WebLinkAbout03-21-1986 Special Council Minutes - , 1 ' A special meeting of the Canton City Council was held on March 21st, 1986 in Council Chambers. PLEDGE OF ALLEGIANCE OPENED THE MEETING, FOLLOWED BY THE INVOCATION j GIVEN BY CITY CLERK NANCY WHITES. ~ ' Mayor Edwards asked for roll call at 6:30 p.m. Present: Aldermen " Kovachevich, Zilly, Steck, Sarff, Workman, May, Chapman. Absent: , Alderman Bohler. ' j PURPOSE OF THE MEETING: to consider an amendment to the HHS Loan Agreements, both the Working Capital and Building & Grounds Loan Agreements with B& K Specialty Casting Company. Mayor Edwards reported that at the Loan Committee meeting of March 20th, the committee recommended to the council that they amend Section 18 (B) of the Loan Agreement. O Jim Malmgren City Attorney went back to the beginning of this week ' M to explain what has been taking place. B& K Specialty Casting , 'w/~ Company had called Jim to indicate that ground breaking on the u, construction of the building will be in about 3 weeks. Z Jim thought that at that time we would take rather immediate action m on the Building & Grounds Loan in terms of any cash disbursement Q so that the building could proceed. In view of the filing of Chapter 11 bankruptcy, it seemed to me ~ that it was appropriate the matter be returned back to the Loan Committee, for the committee's consideration and recommendation to the Council as to what if any terms and conditions would be placed in the agreement prior to the city's obligation to the disbursing of cash. One of the amendments that I recommended last night would be the requirement that the bankruptcy judge first approve the agreement and the disbursement, and that the judge's written order contain provisions providing super priorty status to the loan proceeds. What this means is in terms of the bankruptcy action, that we would be secured in the disbursement of those funds in a secondary position. It would be second only to the payment of the court fees, expenses, ~ and trustees fees. This means we would have the best collateral I position in terms of the bankruptcy that we could possibly have. ~ So with respect to both the Working Capital agreement and Building ' ! & Grounds agreement it is the Loan Committee's recommendation and ~ my recommendation to you, that an additional term and condition be added to the effect no monies to be disbursed until a certified copy of the bankruptcy judge's order is filed with the city. Which shows not only that the loan and the disbursement was authorized by the judge, but that also that disbursement would have a super prior status in the bankruptcy case. In terms of Working Capital, B& K Specialty Casting Company would be very quickly experiencing a$50,000 Working Capital Loan the city was tentatively going to make. That is brought about because of the new condition the Department of Commerce & Community Affairs ~ has placed on their grant to the city. That new condition is that ~ none of their monies will be disbursed until the reorganization plan is filed, approved by the creditors and approved by the bankruptcy court. The bankruptcy plan is now not scheduled to be ' filed until the hearings take place which is scheduled for August ' 14. ' i ' i , i ~ Ili I I ' 2 CONTINUED What this means is in terms of the DCCA monies your going to see a longer period of time in where those monies are not available. Because the city is not desirous and the Loan Committee is not desirous of recommending to the Council we disburse monies unless we know that all financing is in place. It is the Loan Committee's rcommendation to the Council that an additional condition be placed on both loans which is that no monies will be disbursed until its made apparent in writing of record in our files, that all the required financing is in place and binding commitment. The third matter has only to do with the city's Working Capital Loan at paragraph 18 (B) of the agreement. This section requires the $50,000 Working Capital Loan that we had obligated ourselves to make be used here in Canton, it could not go to the St. Louis area and support the operation there. At the Loan Committee meeting last evening, Bruce Buehrig requested the Loan Committee consider recommending to the Council that this subparagraph B numerical paragraph 18 of the Working Capital Loan be deleted. The legal effect of that is the Working Capital Loan then could be used by B& K Specialty Casting Company in the St. Louis area, and its use would not be restricted to the Canton area. Those are the 3 recommendations the Loan Committee makes. Basically because B& K Specialty Casting Company has taken bankruptcy and has filed Chapter 11 and requesting reorganization, and is now and will at some future point be a reorganized corporation. It technically is a new corporation. Even though he's current on his utility bills, he has to put up a security deposit and has to make new annual premium payments to his insurance company. The aggregate of the insurance payment is in the area of $70,000. The deposit that has to be made with the utility company is $36,000. The utility company is requesting either an actual cash deposit made with that or a letter of credit be given by someone who has the cash on hand. If the amendment is approved the city will issue a letter of credit and keep the $36,000 actually here in an escrow account. If its done we can't change our minds. If the city post a letter of credit, and B& K Specialty Casting Company would default in the payment of the first months bill, it would be the city's obligation to actually send a check to pay the bill. The letter of credit that we would issue, would provide however, that in the event of default we would be able to revoke the balance of the letter of credit. David Leezer Community Development Director and Budget Administrator gave a report that says Bruce Buehrig had met with the financial institutions. Right now the banks are projecting $165,000. From the Farmers State Bank in Lewistown their total giving is $105,000; and the four banks in Canton, the Community Bank, State Bank, National Bank and Midwestern have each pledged $15,000. We were hoping to get $10,000 additional from these banks, but Bruce Buehrig didn't think they would be receptive. I tried to get DCCA to free up $50,000 funds from the $150,000 grant. DCCA was not that receptive from the very beginning. The State said they could not issue a check in a matter of a few days, because they need the reorganizational plans, the Loan agreement and other steps that need to be approved. They were not receptive on any suggestion that was made. t i 3 CONTINUEI~ March 21, 1986 Mayor Edwards said Bruce wanted to come and look at CIC, and he will tour the business tomorrow. It creates other problems as the loan package would change, the city's collateral would change. And we would have to go back to DCCA again. If nothing happens by 10:00 a.m. Monday morning its over, he'll file Chapter 7. ~ The Mayor wants the city in the position to be ready if it happens. ~ As of now the city has distributed $12,500. Jim Malmgren City ' Attorney said once the bankruptcy court and the trustees get paid for their expenses, and if anything is left over, it would go to us. ' Motion by Alderman Sarff, second by Alderman Workman, to approve ' O the issuance of $50,000 and both Loan Agreements be amended so that M no monies from either fund will be disbursed until, or, unless we n have a certified copy of the bankruptcy judge's order in hand V~ indicating, 1) the loan be disbursed by the court, 2) that no = funds would be disbursed from either fund until we have written m proof in hand that all other financial commitments are met, 3) that Q with respect to the $50,000 HHS, OCS Working Capital Loan Agreement that subparagraph B of numerical paragraph 18 be deleted so that the Working Capital funds can be used not only in Fulton County by B& K Specialty Casting Company but also in the St. Louis area. Roll call. AYES - Aldermen Chapman, May, Workman, Sarff, Steck, Zilly, Kovachevich. NAYS - None. Motion carried. 7 AYES 0 NAYS 1 absent. ADJOURNMENT: Motion by Alderman Sarff, second by Alderman Workman, ~ to adjourn. Voice vote, motion carried. Council adjourned at 8:38 p.m. ( I i ,n ~ CIT CLERK J ~ %1 ~ APPROVED. ~ ~~.YC-v¢--?Z""~- MA~OR i ~