TOWN AND COUNTRY, Mo. -- A steel processor based in suburban St. Louis, saying it was hurt by the bankruptcy of Enron Corp., is itself filing for bankruptcy.
Huntco Inc. filed for Chapter 11 protection Monday as it seeks to liquidate assets and pay off debts, though officials don't expect to fully pay off the $90 million that the company and its subsidiaries owe creditors.
Huntco common shares trading in the over-the-counter market closed at 1.1 cents a share Tuesday, down 4.9 cents, or 82 percent, from Monday's close.
Chief executive Robert Marischen said Huntco tried to keep the operations going but ran out of working capital last week.
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.
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.
Because of the company's lack of financial resources, operations are unlikely to be restarted until a new owner takes over a facility, Marischen said.
Selling off plants
The bankrupt company's top priority now is selling off the plants, which could end up hiring back former workers, Marischen said.
"At this point, we expect it to move forward rather quickly," he said. "We've had a lot of interest in the operations."
Marischen didn't 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.
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.
But when Enron went bankrupt in December and stopped supplying steel coils, Huntco was forced to scramble for alternatives, Marischen said.
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.
"(Enron's) bankruptcy really complicated our ability to get financing," he said.
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.
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.