The Toledo-Lucas County Port Authority has taken the painful but necessary first step to help keep Owens Corning from leaving downtown. Now the community must hope that outside bondholders for the company's downtown headquarters complex realize they too have a stake in helping the bankrupt Fortune 500 company through its difficulties.
The port authority board agreed to forgo at least $18 million in future income from its lease arrangement with OC, a key concession if Toledo is to keep the company in its unique Middlegrounds headquarters location.
That's money that would have continued to enrich an important low-interest business loan fund administered for the community by the port authority, a fund that is now seriously compromised.
So the agency, and the city, are taking a hit, which is precisely the point board members hope will impress OC bondholders. The message is that if the local agency which helped broker the deal to build the spectacular OC headquarters can relinquish millions in future fees, others can make similar sacrifices to protect their investments.
“Nobody likes it,” said board member Tom Schlachter,” but everybody's going to go along with it because it's the best you can get out of a bad situation.”
Bondholders, who fronted the bulk of cash to finance the OC headquarters, do not necessarily have the same allegiance to Toledo and its downtown and may not be convinced that agreeing to reduce the company's payment plan for the building is in their best interest. But this may be the best deal they can expect.
Since filing for Chapter 11 protection under a huge mountain of asbestos liability, the company has been looking for ways to reduce its overhead - which includes its real estate facilities and related obligations.
With creditors demanding that OC lower its expenses, the company says it can't continue paying $13.8 million in annual lease payments and will move out of its home if the rent isn't decreased. The $4.9 billion company has already said it won't pay its semi-annual lease payment scheduled for November if it's not lowered.
Under federal bankruptcy laws OC can get out of its lease now.
So it makes sense for bondholders to reach a payment compromise with OC - closer to rates offered for other prime downtown real estate - and lose less than if they were to sit on a sprawling complex of empty office space without any huge market demand for it. OC spokesman Dave Dimmer emphasizes that “without 100 percent of the bondholders on board, there's just no way we can stay in the building.”
In return for the port authority's largesse, OC agreed to become a more active contributing community partner in Toledo instead of largely isolating itself on its headquarter campus. It also agreed to support the port authority-managed Toledo Express Airport with more business travel. Those were reasonable caveats.
The loss of future fees by the port authority, and dollars that provide vital startup and seed money for new businesses, is a serious concern.
But the urgency of keeping Owens Corning where it is obvious. As we have pointed out, Owens Corning is Toledo.