Owens Corning's top executive made his first appearance before the Toledo-Lucas County Port Authority and vowed his company would work harder to be a good neighbor - a vow that could keep his bankrupt firm in its downtown headquarters.
That promise by David Brown, OC's president and chief executive officer, was enough to get reluctant members of the port authority's overseeing board to sacrifice about $18 million in future income.
The port authority's approval allowed OC to take an even tougher step in its quest to stay in its 7-year-old home. Now, the Fortune 500 firm's top executives must convince OC's de-facto landlords to lower the rent, and they must convince the firm's creditors that the rent is the best deal the firm can get for office space in the area.
OC executives and attorneys were racing last night to beat a midnight deadline to file the paperwork to begin the negotiation process. They must resolve it by a May 19 hearing in federal bankruptcy court in Delaware or prepare to move, Mr. Brown said.
The company filed for bankruptcy in 2000 after struggling to find the cash to pay off legal settlements with people sickened by an asbestos-filled product OC made in past decades.
The creditors now have a strong say in how the company is run, and the firm has the right to break its leases to find ways to shave expenses - including canceling its headquarters' lease.
The port authority used its public status to obtain a cheaper loan, for which it collects an annual fee. OC borrowed $85 million from about a dozen institutional investors to pay for most of its facility.
Additionally, OC borrowed $10 million from Ohio and $5 million from a port authority business loan fund.
The port's fees from its OC deal have been substantial - $1.4 million so far. It's set to earn an additional $1.6 million through 2015, and had been planning to earn as much as $18 million more in fees after that.
But OC's bankruptcy changed those plans - with the board agreeing yesterday to essentially give up its fees after 2015.
Board members Carty Finkbeiner, Jerry Chabler, and David Boston had been angry a day earlier that they'd been asked for such a giveaway on such short notice. They and member Ken Dobson wanted Mr. Brown to come to today's meeting, explain the need, and offer some type of vow to help the community in some way.
They got their wish. He promised to push OC employees to fly more from port-authority managed Toledo Express Airport. Now only about a third of OC travelers use that airport.
Mr. Brown said he is trying to step up the firm's role in the community, conceding it had isolated itself too much on the Middlegrounds.
But he said he did not want to do it piecemeal, instead working out a firm plan with officials about how OC could help Toledo, such as sharing its parking lot.
“Just to have a call that says, `I have 14 people and we want to park there and walk to Frischs,' we can't do that,” he said.
In case the board wasn't sold, Mayor Jack Ford made a pitch.
“I don't think we can run the risk of sending a message to secure creditors that we're willing to fool around with this,” the mayor told the board.
With the unanimous board action, the company now can go to those investors who lent the $85 million and ask them to reduce the firm's payments on the debt. Those investors, in essence, are OC's major landlords, receiving the bulk of OC's lease payments, so they must agree to lower the payments for a deal to work.
Mr. Brown estimated that at least half of those bondholders are OK with the deal.
But all the bondholders must agree to it - as well as the creditors - by the May 19 court date for it to become official. Otherwise, the deal is off, and OC said it will plan to move out of the building by November.
That would force the bondholders to sell the building to get their money. The port authority would lose all future fees, and its special loan fund wouldn't get paid back by OC - putting the fund in default for five years.
That worst case scenario led to the deal's support by port authority board members, like Chairman Tom Palmer.
“This is not a time when anybody wants to play chicken,” he said.
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