A spokesman for 84 Lumber warned today that the LBM giant could close more stores and lay off more workers if it fails to refinance the final quarter of a $195 million, 18% loan it has been paying for the past two years. But he also disputed the phrasing of a draft federal loan application crucial to its refinancing plan that said 84 "anticipates that it will cease operations and be forced to liquidate" if it couldn't accomplish the refinancing.

The Fayette County, Pa., Board of Commissioners is expected to decide Thursday whether to back 84's request for a $15 million Community Development Block Grant. Getting that money is a key step toward putting together a mix of other federal loans, private lender dollars and money from 84 chief Maggie Hardy Magerko to pay the remainder of the current, highly restrictive loan package it negotiated in 2008 with Cerberus Capital Management. Aside from having to pay 18% annual interest, that deal also requires that 84 use any proceeds from asset sales to help pay down the loan.

According to a story in this morning's Pittsburgh Tribune-Review, a draft of the block grant application says that if 84 cannot restructure the existing loan so it can obtain cash for operations, the company "anticipates that it will cease operations and be forced to liquidate." 84 reported $1.35 billion in sales last year, putting it sixth on the latest ProSales 100. At the start of this year it had just over 300 locations and 4,000 employees; it has about 280 locations now.

"Cease to operate totally is strong," Jeff Nobers, 84's vice president for marketing and public relations, said this morning in response to ProSales' request for clarification to the Pittsburgh newspaper article. "We would, however, not be operating as we are today. By this we mean additional layoffs, store closings and a further downsizing of the company."

The Community Development Block Grant definitely would help 84's financial options because, unlike the Cerberus loan's terms, it lasts for 17 years and requires interest-only during its first two years payments. Aside from the block grant overseen by Fayette County, 84 also is seeking another $5 million in Community Development Block Grant funds from nearby Washington County, Pa. That county's commissioners have yet to consider the proposal.

With $55 million to go on its $195 million loan from Cerberus, 84 now seeks to extinguish that debt with $20 million in Community Development Block Grant funding, at least $10 million in expected real estate sales, and another $20 million in loans from a private lender--presumably at much kinder terms than Cerberus charged. Depending on how the real estate sales fare, 84 chief Maggie Hardy Magerko would provide the rest needed.

"We believe we are a viable entity that will secure these loans through the HUD program and, coupled with the bank loan and Maggie Hardy Magerko's personal investment, will secure the $45 million [that would be needed after the planned property sales] to pay off the current loan package, which will provide us far more flexibility and allow us to continue growth and both maintain current employment and create new jobs," Nobers said.

But Fayette's commissioners have to act first. "The final decision by the private lender is contingent on the approval of the ... Loan Guarantee," said the draft application, which was written by a consultancy working for Pennsylvania's Department of Community and Economic Development. That's the group that officially would request the money 84 would get, providing that Fayette County's commissioners sponsor the idea.

84 made its case before the county commission last week. According to press reports, company officials stressed that the loan made economic sense and shouldn't be construed as a handout to a wealthy company.

"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."

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.