Parks gets debt deal from city Schmoke agrees to settle loan for 21 cents on the dollar

A time of forgiveness

NationsBank to get $3 million to close out a $5 million debt

June 26, 1996|By Sean Somerville | Sean Somerville,SUN STAFF

Mayor Kurt L. Schmoke, who last month said the city wouldn't forgive Parks Sausage Co.'s $2.4 million loan, will settle for 21 cents on the dollar as part of a deal to sell the company to former football star Franco Harris.

The agreement between Harris and Parks Chairman Raymond V. Haysbert Sr. calls for about $4 million in forgiveness on about $7.8 million in debt to secured creditors.

In addition to paying only $500,000 to satisfy a $2.4 million loan owed to the city, Parks would pay NationsBank $3 million to close out a $5 million debt.

The Baltimore Development Corp., the city's quasi-public development agency, would forgive interest charges on an additional $400,000 debt, and accept either $300,000 immediately or payment at an annual interest rate of 5 percent over 10 years. "We believe that the package we've negotiated is one that will allow Harris and Parks LLC to succeed," said Ira C. Cooke, one of Harris' attorneys.

A NationsBank spokesman said the bank would have no comment.

Clint Coleman, a spokesman for Schmoke, said yesterday that the mayor had not intended to say at a May 30 press briefing that he opposed forgiving Parks' debt. He said the mayor meant that he would not consider forgiving the loan to Haysbert.

"I don't know whether it was a misunderstanding of the question or a question that wasn't clear," he said. "What he meant to say was that he was not willing to entertain forgiving the debt with the current owners. There would have to be a change in ownership and a new direction."

The mayor's statement came shortly after Schmoke said he didn't know whether Harris' group would be seeking assistance from the city.

"What we're assuming is that they're going to ask us to change the payment schedule on the debt and we're certainly willing to entertain that if we get a good business plan from them," Schmoke said.

He was then asked, "Would you be willing to forgive the debt?" Schmoke responded, "No, not at this time."

Daniel P. Henson III, the city's housing commissioner, said the city has always "been willing to do what it takes" to retain Parks in Baltimore as an "African-American-owned company." The mayor "certainly didn't say to me to give away the shop," he said. "When we finish up this deal, it will show we didn't. We did what we had to do to maintain this business in the city."

Henson said the city's discount repayment must win approval from the federal Department of Housing and Urban Development, which supplied the $2.4 million in the form of an Urban Development Action Grant. Those grants are supposed to be repaid in full to cities.

HUD officials could not be reached for comment.

The Board of Estimates would likely have to grant approval before a July 24 hearing on the transfer of the company to Harris in federal bankruptcy court.

Parks, the city's largest black-owned manufacturing company, filed for Chapter 11 bankruptcy protection last Friday. The company on Monday won approval of a plan that will allow Harris to provide loans between $225,000 and $575,000 to re-start the company, which ran out of money and closed its doors on May 24.

Attorneys for Haysbert said Monday that details of the agreement would be filed as part of the company's Chapter 11 bankruptcy filing later in the week, possibly today or Thursday.

But a draft of the agreement was filed as an exhibit to other court filings and made available yesterday. The draft leaves unanswered several questions, including the terms of consulting agreements with of Haysbert and his son Reginald, the company's president. According to the draft, Harris, the majority owner of Pittsburgh-based Super Bakery Inc., will pay for the secured debt, about $3.8 million if the company satisfied the BDC loan immediately, as well as an additional $1.7 million.

Cooke, Harris' attorney, said the $1.7 million will satisfy obligations to the Haysberts and other creditors whom he would not identify.

The agreement calls for Harris to purchase the Baltimore plant and property owned by the company in New Jersey. According to a credit agreement also filed in court, the Baltimore building alone is worth $13.4 million and the Somerset, N.J., building is worth $150,000.

Plans for Parks' properties in New York, Philadelphia and Connecticut were not clear from court records because accompanying documents have not yet been filed.

But Harris, who could not be reached yesterday, has said he is mostly interested in the Baltimore plant. Mark Friedman, Haysbert's lawyer, has said Harris plans to sell off some of that property to pay off debts.

The agreement appears to be clear on the question of Parks' debts. The city would collect its debt only from Parks' "net after-tax" profits. If Parks doesn't repay the discounted amount, federal bankruptcy court would be limited at setting the city's claim on the loan to no more than $150,000.

The terms of BDC's $400,000 line of credit extended to Parks last summer were not available yesterday, so it was impossible to determine the value of the interest forgiveness and the 10-year 5 percent rate.

The agreement also disclosed that Harris had obtained $4.5 million in financing to try to revive the company whose sales dropped from $28 million in 1990 to $20 million last year.

Cooke would not comment on the financing or the source of the money.

Although the details of the Harris deal were not complete, Anthony S. Fugett, a Baltimore businessman whose bid to buy the company collapsed early last year, said Harris appeared to be getting more favorable terms.

Pub Date: 6/26/96

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.