Incinerator owner files Chapter 11

June 14, 1994|By Kim Clark | Kim Clark,Sun Staff Writer

Medical Waste Associates Inc., owner of the debt-burdened incinerator at Hawkins Point, filed for protection from its creditors in Baltimore's federal bankruptcy court yesterday as part of a tentative agreement to bring in new investors.

The nation's biggest hospital waste incinerator, which has long been surviving on the forbearance of its creditors, said it owed $31 million to 241 individuals, businesses and government agencies. It did not reveal its assets.

The company said yesterday's filing for Chapter 11 reorganization was part of a tentative deal with Grotech Partners Inc., a Timonium-based venture capital firm, which has been negotiating a bailout of the 150-ton-a-day plant.

Karen S. Goodhart, president of Medical Waste Associates (MWA), said Grotech and some unidentified local investors had tentatively agreed to absorb some of MWA's debt and invest up to $5 million in cash to make badly needed repairs in return for control of the company.

She said Grotech had insisted on the bankruptcy filing in order to reduce the company's indebtedness.

Grotech officials did not return calls asking for comment.

Ms. Goodhart said MWA will continue to pick up and incinerate waste from local hospitals and doesn't plan to ask the court for an increase in its $307-a-ton contract price.

But she predicted creditors would likely be asked to settle for a deep cut in their payments to ensure a sale of the plant, which was supposed to have been a prototype for a chain of huge hospital waste incinerators across the nation.

The four investors who put up seed money will likely lose much of their money, she said. And the five founders who put up little cash but used their time and connections to start the company may also lose some of their stake.

She called the filing a "good step" because it may give MWA a fresh start. "We should have done it some time ago," she said, adding that the case could be settled in 45 to 90 days.

The plant, which has long faced opposition from its neighbors, got into financial difficulty in 1991, when the contractor assigned to build the plant pulled out, leaving the owners with $4 million in unpaid bills and an unfinished plant.

Many of those bills, such as to electrical contractors and trailer suppliers, have never been paid. And MWA continued to add debt as it failed to pay bills for services such as security and laundry.

The company's problems worsened this winter as two hospitals -- including Johns Hopkins, the area's largest -- pulled out of their contracts, complaining of poor service.

As a result, MWA defaulted in March on its most pressing debt, about $23 million to bondholders.

Creditors reached yesterday declined to comment, saying they hadn't seen the filing. But some contacted last week had complained that the founders had paid themselves hundreds of thousands of dollars in salaries while failing to pay the company's bills.

The five founders, who each put up less than $100 for their shares of 6 to 8 percent, are: William Boucher III, former head of the Greater Baltimore Committee; Thomas McKewen, former head of the Maryland Environmental Service; Andrew H. Kaufman, a developer; Neil Ruther, a lawyer, and the late state Sen. Harry J. McGuirk.

The investors whose money is at risk are Alvin Sherman, a Florida businessman who lent the company almost $3 million for 55 percent of the company, and three prominent African-American businessmen who put up $100,000 apiece for a total 6 percent ownership share: Otis Warren Jr., Parks Sausage Co. Chairman Raymond V. Haysbert Sr. and developer Theo Rodgers.

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