CHARLESTON, W.Va. (AP) — The embattled company behind
West Virginia’s chemical spill has reached a bankruptcy court deal for
up to $4 million in credit from a lender to help continue operations, an
attorney said.
The arrangement reached Tuesday will allow the
company to continue paying its employees and top vendors and also
provide funds to cover environmental cleanup from the spill in the Elk
River, said Freedom Industries attorney Mark Freelander.
In
bankruptcy court testimony, Freedom Industries President Gary Southern
called the 12 days since the company’s Jan. 9 chemical spill "completely
chaotic."
The spill contaminated water supplies for 300,000 people in West Virginia.
Southern had said the company spent $800,000 last week to remedy environmental damage from the spill.
Southern
said money isn’t the solution to lift the stigma on his company for its
suppliers and customers. He said the spill was causing "perception
problems" for the firm.
Freedom Industries filed for Chapter 11
bankruptcy Friday, freezing dozens of lawsuits against the company. Many
are by local businesses that remained closed for days during a
water-use ban. State and federal investigations into the spill of a
coal-cleaning chemical are continuing.
The deal Freedom Industries
reached Tuesday lets the company continue paying its 51 employees in
the short term, a biweekly payroll of about $172,000, according to
Freelander. The company can also continue paying costs for environmental
remediation and will have money for critical day-to-day administrative
expenses, and can pay top vendors, according to the attorney.
West
Virginia American Water Company, the supplier for the nine-county
region, objected to Freedom Industries’ first proposal for emergency
financing of up to $5 million in credit. Freedom Industries is using a
lender created Friday that essentially is run by the company’s top
executive, J. Clifford Forrest of Pittsburgh.
West Virginia
American Water argued through its attorneys that Freedom Industries’
financer could foreclose on the company’s valuable assets and abandon
the rest, leaving behind "only the toxic facilities and huge damage
claims caused by the Freedom spill."
Chief Judge Ronald G.
Pearson, who called the case one of the most unusual he’s seen, said
Freedom Industries wouldn’t obtain all the protections it sought, since
the company so far has offered very little financial information.
After
about five and a half hours in court, lawyers for the water company and
Freedom Industries agreed to strike out the possibility of
controversial liens. Freedom Industries can access $3 million in credit
initially, with the chance for another $1 million, according to
Freelander.
The rest of the hearing offered a closer look at the company.
Freedom
Chief Finance Officer Terry Cline said the company owes hundreds of
thousands of dollars in back taxes to the Internal Revenue Service. Most
of its business isn’t in coal-cleaning chemicals like the one that
spilled; it’s in a variety of anti-freeze agents, the court also heard.
The
company has about a $1 million to $2 million insurance general policy,
and a $3 million policy specifically for pollution incidents, Southern
said.
Charleston attorney Anthony Majestro, representing several
businesses that sued Freedom Industries, said it is still possible to
try to collect on the insurance policy during bankruptcy proceedings. He
hasn’t indicated whether his clients will attempt that.
Freedom
Industries had $1 million in an escrow account to make "certain upgrades
in facilitation of the business" when it merged with several other
companies Dec. 31, Southern said.
Department of Environmental
Protection officials have said that money was set aside to fix the
cracked containment wall that ultimately let chemicals seep into the Elk
River. But Southern would not specifically say the money was for fixing
that wall.
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