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VINEYARD, Utah (AP) -- A Chinese company is offering to buy bankrupt Geneva Steel's major equipment assets for a fraction of what the Utah company put into the operation.
According to court documents, Qingdao Iron and Steel Group Co. said it is willing to buy the assets for $35.3 million in cash.
That is nearly $5 million less than what Joseph Cannon and a group of investors paid when they purchased the plant from U.S. Steel in 1987, and is less than 10 percent of the more than $400 million poured into a modernization campaign during the 1990s.
The sale, if approved by the bankruptcy court, would cover about one-third of the roughly $108 million still owed to Geneva's secured creditors -- the U.S. government and Citicorp.
"There have been several offers made for various pieces of equipment and for the entire site, but this is the first major offer that we've found acceptable," said Ken Johnsen, Geneva's chief executive officer."
Geneva tentatively has agreed to sell its equipment to Qingdao, but is reserving the right to accept a higher offer should one be made before Jan. 30, the deadline for competing bids.
"There are still a couple other steel companies that could outbid them. I've literally been in discussions with other Chinese steel companies today," Johnsen said Tuesday.
"The steel industry in China right now is expanding at a phenomenal rate. It's expanding at about 10 percent per year when the rest of the world is on average about 1 percent a year. The primary buyers for steel equipment these days are in China," he said.
The sale would include the plant's core production line: the steelmaking facility known as Q-BOP, a slab caster that turns liquid steel into a slab, a rolling mill which rolls the steel into plate or sheet and a plate finishing line.
Used steel equipment appeals to the Chinese steel mills because it is cheaper than new equipment and the lead time for installing the used equipment is shorter, Johnsen said.
J. Thomas Beckett, an attorney representing Geneva's roughly 2,500 unsecured creditors who are collectively owed about $35 million, said he is encouraged by Qingdao's offer.
"There are still other assets to be sold," Beckett said. "I think that there is still a fair amount of substantial value in the emissions credits, in the water rights and in the real property. ... The fact that this particular asset is to be sold for at least $35 million gives the unsecured creditors some hope."
Under bankruptcy rules, secured creditors have a higher priority to be paid over unsecured creditors.
Johnsen said the company has sold some water rights and emissions credits, but nothing significant. Earlier this month, Geneva sold its pipe mill equipment for $1.45 million to a company based in India.
(Copyright 2003 by The Associated Press. All Rights Reserved.)
