Nichols Brothers sells at auction for $9.2 million
June 25, 2008 · Updated 10:00 AM
SEATTLE Nichols Brothers auctioned off its assets during a bidding war earlier this week to a Texas-based capital investment group. The Freeland shipyard was purchased Ice Floe, a limited liablity corporation backed by Treadstone Capital Management, L.P. of Dallas and Joseph E. Usibelli, of Alaska, for nearly $9.2 million.
The sale was approved by U.S. Bankruptcy Court Western District of Washington Judge Samuel Steiner during a hearing Friday morning.
However, Nichols Brothers employees can also expect to lose their jobs as result of the companys sale, court documents said.
Because the workers are not part of the assets, they will be laid off at 4:30 p.m. on the day of the closing, which we anticipate to be Feb. 12, said Nichols Brothers president Bryan Nichols.
But they will be hired right back on the next day by a new company with the same name, he said.
Nichols said the shipyard earned a good sales price.
I think that is a good number. It will be used to pay the debts, he said. But were back in business.
Danial Pharris, an attorney for a committee of creditors seeking repayment in the Nichols Brothers bankruptcy case, was present at the auction and the hearing Friday morning.
I think everyone was well-placed. Unsecured creditors in this case were looking at receiving zero return on their claims if another bidder wasnt found, he said. The bidding went over $9 million and my clients were very pleased to see that. $3.9 million in cash went into the coffers for distribution to the creditors.
Documents provided to the court indicated that more than $2 million was needed to satisfy the shipyards debt to
45 creditors. Businesses that are due money will be paid in full, Pharris said.
Nichols Brothers financial woes became public when the company laid off nearly its entire work force on Nov. 2. Less than two weeks later on Nov. 16, the shipyard the largest private employer on the South End filed for bankruptcy.
The shipyard said it was forced to shut down due to a lawsuit by Hornbeck Offshore Services, a Covington, La. company that operates a fleet of 80 vessels, including ocean-going tugs, offshore supply vessels and tank barges. Hornbeck filed a multi-million dollar lawsuit against Nichols Brothers for defaulting on a contract to build two 240-foot offshore supply vessels.
The Freeland shipyard enjoyed a temporary upswing when a limited number of workers returned to the yard in December when Baydelta Maritime Inc. paid 50 employees directly to work on its latest tugboat, the Vigilant, which was launched weeks later.
After the Chapter 11 bankruptcy filing, Nichols and his father, Matt Nichols, CEO of Nichols Brothers, looked for another shipyard to buy their company.
Before the auction, a number of shipyards and maritime investment firms expressed interest in buying Nichols Brothers, including Vigor Industrial of Portland, Ore., Todd Pacific Shipyards of Seattle, Craftsmen United Inc. of Port Townsend, J.F. Lehman & Company of Dallas, Texas, which acquires maritime industry companies, Everett Shipyard and Crowley Maritime of Seattle.
Steiner approved auction and bidding procedures on Jan. 25.
Only one qualified bidder beyond Ice Floe, Crowley Maritime Corporation, stepped up to bid for the beleaguered shipyard on Jan. 28.
Ice Floe, which had already lent bailout funding to the tune of $350,000 to pay for employee wages at Nichols, stood poised to buy the companys assets and satisfy Nichols Brothers debts if no one else came to the table.
The first bid of more than $2 million by Ice Floe started the auction, held Monday at Nichols Brothers attorneys office in Seattle.
For 14 rounds of bidding over six and a half hours, the two companies squeezed their checkbooks. But Ice Floe came out on top with a total bid of $9,154,104.
Ice Floes successful bid included $3.8 million of secured debt and $3.9 million in cash.
In the deal, Ice Floe assumed the contract with the San Francisco Bay Area Water Emergency Transit Authority for the construction of two ferries, as well as a contract with Baydelta Maritime Incorporated for construction of two vessels.
Ice Floe agreed to distribute $173,691 for potential contract claims as well.
As part of the bidding process, Ice Floe agreed to finish work on F/V Carly Renee, a fishing vessel currently undergoing repairs, and to complete repairs of a vessel owned by RGWT, Inc., which owns Catalina Express shuttles in California.
The company also agreed to store unfinished projects for a limited amount of time at the Freeland boatyarduntil they can be sold to further pay off debt.
Several creditors filed objections to the sale before it began, however.
Minette Bay Ship Docking Ltd. filed a limited objection to the sale with the court over concerns that the new shipyard owner would not finish Minettes project.
Nichols Brothers said ownership of the unfinished project technically resided with Nichols Brothers, though, and said it intended to sell the unfinished hull.
He and Mah Investments, Ltd. also filed an objection to the proposed sale.
The proposed sale is a transaction solely to benefit the interests of an insider and should not be approved, said court documents filed by the investment company.
Ice Floe LLC is an insider of Nichols Brothers Boat Builders Inc. Joseph Usibelli is a 20 percent shareholder of the debtor.
The objection called for closer scrutiny by the court of the sale.
He and Mah Investments officials also intended to foreclose on Nichols Brothers property holdings in an effort to recoup capital.
He and Mah Investments Ltd. officials said they were now satisfied with the sale.
After the auction process, my clients were quite pleased with the results of the auction, Todd Tracy, an attorney for He and Mah. We supported the sale as it was proposed to the court. We were happy with the sale because of the active bidding process.
Nichols Brothers owes Ice Floe $4.2 million, which includes $1.5 million in contingency claims for undrawn letters of credit, or existing
indebtedness, according to court documents.
Reaction to the sale in Freeland Friday was a mixture of relief and joy.
Thats just fantastic, said Sandy Hubert of Bush Point. Theyve been here too long and done too much good for the community. Thats great news.
Hard at work restocking in the back room of the store his family owns, Adam Lind admitted he heard the news on Sunday.
No details but since Im Bryans (Nichols) brother-in-law, the word leaked out, he explained. This news means a lot to us here in the store and for the whole South End.
Im very interested in the financial well-being of the community and this is excellent news, added Don Rowan, a financial advisor who works in Freeland. The employee payroll will recycle through the island and give all of us a financial boost.
The sentiment was echoed by small business owners in town.
Manager Dave Hardesty at Napa Auto Parts in Freeland said hes had employment applications from laid-off Nichols workers.
There are 150 families affected by this and the news is good to hear, he said. We havent seen the regular Nichols bunch come in since they closed.
Down the street at Besta-Round Pizza, owner Loyd McMahon said hes always supported the boatyard. Matt and Bryan are customers and the news is clearly a plus for the whole island, he said.
Head pharmacist Rod Stallman at Linds Drugstore said that, though he didnt like the idea of losing local control of a business, if the new owners put money back into the community, then thats a good thing.
Weve missed our regular customers and look forward to seeing them back, Stallman said.
Spencer Webster can be reached at 221-5300 or firstname.lastname@example.org.