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Florida Steel under the gun

Florida Steel Corp., facing a March 31 deadline from its lenders, must come up with a plan to reorganize millions of dollars in loans, the company's chairman said Friday.

The Tampa-based manufacturer has hired Alvarez & Marsel Inc., a New York financial consulting firm, to suggest ways of dealing with some or all of the company's $287-million in debt, said Ed Flom, chairman and chief executive officer. He said one of the options may involve selling ownership in the company.

Florida Steel is current on all of its debt, including payments on $150-million in bank loans, but the company is in violation on some technical terms of its loan agreement, Flom said. The banks want a report from the company by March 31, Flom said, and the final deadline for refinancing or restructuring the loans is May 1.

If Florida Steel is unable to come up with a plan by then, the company would be in default, and the lenders, which have the right to take over almost all of the company's assets, could demand payment, according to documents filed last month with the Securities and Exchange Commission.

Also, the company also would be unable to make a $9-million interest payment to bondholders due on May 15, Flom said.

The financial situation is so desperate that Ernst & Young, Florida Steel's accountants, raised doubt about the company's ability to survive in the recent SEC documents.

But Flom, whose father was among several founders of Florida Steel in 1956, is optimistic about solving the problems. "We feel very confident we will come up with a plan to satisfy the banks by May 1," he said.

Most of the company's debt problems stem from a $300-million leveraged buyout led by management in 1988. Florida Steel today owes about $150-million to a consortium of 12 banks led by Ameritrust and Chemical Bank and owes an additional $125-million in bonds, Flom said.

Meanwhile, the company, which relies on sales of steel reinforcing bars to the construction industry, is suffering from the slowdown in the real estate industry. Florida Steel posted a net loss of $8.9-million in fiscal 1991, compared to net income of $8-million the previous year.

The current recession is similar to the one that hit Florida Steel hard in the early '80s, Flom said, but "the big difference .


. is we really don't know where the economy is right now. In 1982, we knew more about '83 than we now know about 1992."

The company today is primarily owned by Goldman Sachs (46 percent), a group of company managers (34 percent), a group of employees (about 15 percent) and Citicorp (4 percent). A small amount of preferred, nonvoting stock is traded publicly on NASDAQ.

Florida Steel owns and operates five mills in Florida, North Carolina and Tennessee. The company employs a total of 2,200, including 500 in the Tampa area.