Bankruptcy plan has repairs, sale MEDICAL WASTE RESCUE

October 20, 1994|By Kim Clark and Eric Siegel | Kim Clark and Eric Siegel,Sun Staff Writers

Medical Waste Associates Inc. has assembled a bankruptcy reorganization plan that calls for a new investor to make badly needed repairs to the rundown Hawkins Point incinerator and purchase the company for about $13.5 million by early next year.

In the plan, filed in Baltimore's federal bankruptcy court, the Timonium-based Grotech Capital Group agreed to make up to $5 million worth of repairs, take responsibility for about $8 million worth of bonds and pay more than $2 million to settle claims against the incinerator. About $1.5 million of the money will come from a Medical Waste Associates escrow account.

But the document also warned that the nation's largest medical waste incinerator was in "precarious" condition because of years of financial losses and mismanagement.

The plan, jointly written by lawyers for Grotech and the plant's operators, said that because the current owners couldn't afford to make many repairs, one of the two towers that catches acidic gases from the burners "has become so corroded that it is in danger of collapse."

The reorganization plan, which is being voted on by creditors through early November, calls for MWA to settle about $4 million in unpaid bills from about 300 contractors and suppliers for about 25 cents on the dollar.

And bondholders, who in 1989 lent MWA the original $24 million to build the incinerator, agreed to take about $9.5 million for their remaining approximately $23 million in bonds.

All but two of the founding partners, mostly well-connected Maryland business people, will lose most of their equity.

The founding partners -- including former head of the Greater Baltimore Committee William Boucher III; former head of the Maryland Environmental Service Thomas McKewen; developer Andrew H. Kaufman; developer Otis Warren Jr.; Parks Sausage Co. Chairman Raymond V. Haysbert Sr. and developer Theo Rodgers -- will each receive a 0.1 percent stake in the new company.

Florida developer Alvin Sherman, who controlled most of the MWA stock and lent the company almost $3 million, will get his money back if the plant meets profit targets over the next several years. In return, Mr. Sherman agreed to invest $500,000 for a 1 percent share in the new company.

And Neil Ruther, a founder who has served as general counsel to the firm, will receive a $130,000-a-year salary for the next two years, as well as a 5 percent stake in the new company.

Richard Wasserman, an attorney for MWA's suppliers, said he HTC recommended approval of the deal because unsecured creditors often get nothing when a company files for bankruptcy court protection.

Another hurdle was cleared yesterday when Baltimore's Board of Estimates approved an MWA settlement offer of about $500,000 in current and back property taxes, and $91,750 to settle about $367,000 in overdue waste disposal fees over the next five years.

But City Council President Mary Pat Clarke and Mayor Kurt L. Schmoke both expressed dismay over Grotech's decision to retain former MWA officials. And they wondered how Grotech could make money when MWA has driven away customers with poor service, violated city laws and lost millions of dollars in its three years of operation.

Mr. Schmoke called participation of the same people a "gut-wrencher."

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