Potomac Supply sells for $10M
BY CHELYEN DAVIS
RICHMOND—A bankrupt Northern Neck lumber company will be sold to a company that plans to keep it running.
Potomac Supply, once a major employer in the Northern Neck before it filed for bankruptcy early this year, will be sold for about $10 million to American Industrial Partners.
The sale price is about what AIP would have bid for Potomac at an auction in September, attorneys said, but the auction was cancelled because bids were so low.
Potomac owed its main lender, Regions Bank, more than that, and had valued its assets at about $17 million.
But a potential sale of the company for $20 million to Chesapeake Bay Enterprise also fell through when Chesapeake’s lender backed out last month.
A group of creditors, Regions Bank and Potomac Supply worked out the sale agreement, approved by federal bankruptcy judge Douglas O. Tice Jr. Tuesday in court in Richmond.
Under it, attorneys said, Regions agreed to accept less money than it was owed so that all creditors could receive some amount of compensation—about 10 cents on the dollar, they said, for unsecured creditors. According to court documents, Potomac had been on the market for a while and had aggressively tried to find a buyer; attorneys for the various parties decided that the AIP deal was the best they would get.
“This settlement would bring a contentious case to a close,” said attorney Vernon Inge, speaking for a committee of creditors.
Inge said the sale should keep about 100 Potomac employees on the job.
That was the main priority for the Carden family that founded Potomac, said Bill Carden Jr. outside the courtroom.
“We believe we have saved the opportunity for the community” to keep the plant and its jobs going, Carden said. “It’s just that the ownership will be different.”
The company did lay off several dozen employees earlier this year as it headed toward bankruptcy, squeezed by a tight credit market and downturns in the forest products industry. Before the layoffs, Potomac employed more than 200 people; it currently employs about 100.
“We went through a horrendous process” trying to keep going in a poor economy, Carden said.
Inge told Tice that AIP’s offer to buy Potomac’s core assets was the only viable offer Potomac had from a purchaser.
Chesapeake’s attorney said that his clients had worked up until Tuesday morning to put together a new deal to buy Potomac after their lender withdrew.
But that clearly didn’t happen, and creditors and the bank were ready to accept the lower offer on the table.
The sale covers Potomac’s core assets—others will be liquidated later, attorneys said.
One remaining question is what happens to a $500,000 deposit Chesapeake paid to Potomac, currently being held by Potomac’s law firm.
The bank, the creditors’ committee and Potomac believe that deposit is forfeited and can be used to pay creditors; Chesapeake attorney John Maddock disagreed, saying his clients had acted in good faith and tried hard to make the deal work.
“There is no basis for the debtor to retain that $500,000,” Maddock told Tice.
Chesapeake’s deposit is one of a number of details remaining to be worked out, but the major part of the case was essentially resolved Tuesday, Inge said after the hearing.
The sale to AIP is expected to be finalized in December.
Chelyen Davis: 540/368-5028