Officials for 84 Lumber Co. say the LBM giant is asking for a $15 million federal loan because it's trying replace a two-year-old, $195 million funding deal that requires the company to pay 18% interest and use the proceeds of any asset sale to help pay its debt, the Pittsburgh Tribune-Reviewreported today

"What it is not, is a bailout," the newspaper quoted Larry Segal, a consultant with Impact Pennsylvania Strategies of Berwyn in Chester County, as declaring at a hearing Wednesday at the Fayette County, Pa., Redevelopment Authority office. "What this is, is an economic development loan request."

Published reports say 84 is applying for a total of $20 million worth of loans through the federal Community Development Block Grant program. That $20 million would be combined with $25 million in loans from a private lender and 84 owner Maggie Hardy Magerko to replace a loan package the company got in 2008 after the housing market crashed. That current loan is with Cerberus Capital Management, an investment fund that also is 55% owner of BlueLinx, the Atlanta-based distributor. 84 borrowed $195 million and has since paid the loan down to $55 million, company officials said.

Wednesday's hearing concerned $15 million of the $20 million in federal funds that 84 seeks. Nearby Washington County would be responsible for recommending that 84 get the other $5 million. Fayette County commissioners could decide as early as Thursday, Aug. 26, whether to sponsor their area's part of the loan request.

Segal said the current $45 million loan has an 18% interest rate and requires that the proceeds of any sale of company assets be used to pay down the loan, the Tribune-Review said. He said that such rules are, "for cash-flow purposes, really putting 84 Lumber in a pinch," the newspaper added. In contrast, the Community Development Block Grant loan lasts 17 years and has interest-only payments the first two years.

84 corporate counsel Cheri Bomar was reported as saying 84 is seeking a government loan because traditional banks are not lending to businesses in the housing industry. In addition, she noted Magerko doesn't have instant access to the cash 84 Lumber is seeking. "It's not like Maggie has a billion dollars liquid," the newspaper quoted Bomar as saying. "What she's trying to do, is save the company, save jobs." Segal said the loan would enable the comipany to stabilize as it waits for the housing industry to improve, creating 325 jobs across Pennsylvania.

Late last week, 84 spokesman Jeff Nobers told the Herald-Standard newspaper that the company is ahead of schedule on paying its loan with Cerberus, "but the issue with those kinds of loans at that point is they are onerous loans. Your ability to do certain things is restricted by the loan. We will have much better terms if we can pay those off and it will give our company a lot more flexibility and liquidity."

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. At the start of this year it had just over 300 locations and 4,000 employees; it has about 280 locations now.