Columbia Gas System Inc., one of the region's most important suppliers of natural gas, may seek Chapter 11 bankruptcy protection if it doesn't win easier terms from its creditors and suppliers by today.
Last month, Columbia stunned its investors and customers by announcing that natural gas prices had fallen so far below the company's fixed-price gas purchase contracts that it faced losses totaling $1 billion over the next 10 years.
In its June 19 announcement, the company said that if it didn't get more credit from its bankers and better deals from its suppliers by the end of July, it would file for bankruptcy.
William R. McLaughlin, spokesman for the Wilmington, Del.-based gas company, said yesterday evening that the company was negotiating with its banks, a group of about 15 institutions led by Morgan Guaranty Trust Co. of New York, to reinstate its credit line.
In addition, he said that Columbia was trying to meet its self-imposed deadline to get a representative group of gas producers to agree by today to accept a payment worth 60 cents for every dollar to free itself from the old contracts.
Mr. McLaughlin declined to comment on how the negotiations were going.
But creditors and others familiar with the company said yesterday that while the company may fall into technical default on some bonds tomorrow if it doesn't get cash immediately, neither creditors nor suppliers were likely to push Columbia into bankruptcy right away.
In addition, officials at Baltimore Gas and Electric Co. and other local buyers of Columbia's gas have said that the company's financial difficulties will probably not affect customers, since there are other pipelines serving the state.
Michael J. Conelius, a fixed-income credit analyst for T. Rowe Price Associates in Baltimore, said that his company is owed a "tiny piece" of Columbia's long-term debts due tomorrow.
Though failure to make tomorrow's $33 million payment will put Columbia in technical default, T. Rowe Price won't panic if the payment isn't made, he said.
"We don't want to force the company into bankruptcy . . . but if worse comes to worse, we [and other debenture holders] own the company," Mr. Conelius said.
"They've been defaulting left and right on their short-term debt," he noted. Columbia has defaulted on a total of $65 million worth of short-term debts in the last six weeks.