WILMINGTON, Del. (AP) -- Troubled Columbia Gas System Inc. received approval from a federal bankruptcy judge yesterday for $275 million in loans over two years.
The loans by Manufacturers Hanover Trust Co. are to be used for operating and other costs, company officials said. The financing approved by U.S. Bankruptcy Judge Helen Balick must also be approved by the federal Securities and Exchange Commission.
The money will allow Columbia, one of the nation's largest natural gas distributors, to pay wages and salaries, make loans to its subsidiaries and cover daily operation costs.
Robert Oswald, Columbia's chief financial officer, said once the company gains SEC approval, it will pay off a $75 million loan due Sept. 30.
Columbia Gas, based in Wilmington, and its main pipeline subsidiary, Columbia Gas Transmission Corp., based in Charleston, W. Va., each filed for protection under Chapter 11 bankruptcy in July. Under terms of the financing agreement, Columbia Gas will not make loans to the pipeline subsidiary.
Mr. Oswald said company forecasts show it will need to borrow $215 million in November, but will be able to pay the loan back in early 1992 once colder weather increases sales and revenue.
Although the company only expects to borrow $215 million, he said it negotiated a $275 million loan because "we needed a cushion." Included in the $275 million will be letters of credit of up to $50 million.
Columbia Gas and Columbia Transmission said they were forced into bankruptcy by long-term, high-priced natural gas contracts the subsidiary had with suppliers. The companies filed for bankruptcy after efforts to renegotiate the contracts failed. Columbia Gas said it faced a loss of $1 billion over 10 years if the contracts were not renegotiated.
Last month, Judge Balick allowed the subsidiary to break 4,141 of the long-term contracts.