Washington County, Pa., commissioners voted 2-1 today to endorse 84 Lumber's application for a $5 million federal loan, the second step in 84's campaign to pay off the final quarter of a $195 million, 18% interest loan that has hobbled the LBM giant's operations, the Pittsburgh Tribune-Review reported.
"They've been a stalwart of the business community for over 50 years. For us to walk away from them in their moment of need would have been unworthy," the newspaper quoted commissioner Bracken Burns, a Democrat, as saying. He was joined by commissioner Diana Irey, a Republican, while Democrat commissioner Larry Maggi voted no, saying he opposes providing financial support to any business.
The $5 million Community Development Block Grant that the commissioners supported would be awarded by the federal Department of Housing and Urban Development. That $5 million then would be combined with a similar $15 million federal loan being championed by neighboring Fayette County, Pa., whose commissioners voted Aug. 26 to sponsor 84's request. With those $20 million in grants under HUD's Section 108 program, 84 intends to apply the money to the final $55 million of the $195 million loan that an arm of 84 called Pierce Hardy Limited Partnership entered into in the spring of 2008 with Cerberus Capital Management. 84 plans to pay the rest through a new private loan with Wells Fargo worth about $20 million, $10 million from property sales expected to close before the rest of the refinancing is put together, and $5 million from 84 president Maggie Hardy Magerko.
The Section 108 loans can be repaid in 17 years and require interest-only payments for the first two years. Getting the money means 84 would enjoy much more financial maneuverability than it does with its current loan. Aside from the 18% interest, the Cerberus loan requires that all asset sales be used to pay down the debt and is set to expire in April 2013.
Assuming there aren't any technical problems, Wells Fargo's money could arrive by the end of the month, 84 spokesman Jeff Nobers told the Tribune-Review.
84's $1.35 billion in sales last year put it sixth on the latest ProSales 100 list of top LBM operations. A merger higher up the list has since moved it to fifth place. (See latest ProSales 100 list.) At the start of this year it had just over 300 locations and 4,000 employees; it has about 280 locations now.
The 2-1 vote echoes the divided but generally supportive debate in southwestern Pennsylvania regarding 84's request for federal loans. According to the Washington, Pa., Observer-Reporter, about 40 people, many of them employees wearing the 84 Lumber logo, attended a 40-minute public hearing Wednesday afternoon. Five employees asked that the loan be approved, the newspaper reported, as did the president of a local moving company who noted 84 Lumber has relocated 480 of the its employees to various locations across the country.
But another Washington County resident, head of a group that supports independent living, said 84's request raised a red flag because, "for people with disabilities, this is the pot that they depend on in this region."
Meadows Racetrack and Casino also has urged Washington County against sponsring the loan because the Nemacolin Woodlands Resort in the area, owned by 84's Maggie Hardy Magerko, is seeking a casino license. Meadows argues that the subsidy "would allow Magerko to channel more of her own money toward a possible casino at Nemacolin," the Tribune-Review said. But it also quoted Nobers as saying that the financing for the prospective casino is being handled by the Isle of Capri Casinos, and Nemacolin is basically providing the location.
