A Pact of Steel.

 

About a week and a half ago I read in the newspaper about the chapter 7 bankruptcy filing of Gorham, NH based Steel Elements Inc. At the time I simply accepted it. It’s a challenging marketplace environment and a bankruptcy reorganization certainly fits into the landscape of Coos county and indeed, alot of northern New Hampshire.

But then last night as I’m sleeping, like the headless horseman galloping though the night I’m sensing some type of idea or message about Steel Elements Inc. that I hadn’t thought of until now.  And through the mist and the fog I saw it.

State Loan Guarantee.

It’s dated for September 8, 2004 and the NH Business Finance Authority states that a loan in the amount of $374, 305 is given to Steel Elements Inc. to purchase equipment for the startup of a light gauge steel manufacturing faculty.

I’m interested in numbers 6 and 8 Scope of Recommended Guarantee- “Accordingly, if the Borrower defaults under the Loan and after pursing all collection rights a deficiency of $374,305 is determined to exist under the Loan, the Authority and the State would be obligated to pay the Lender 75% of such amount (or $280,728)."

And Number 8- “The statue requires that the appraised fair market value of the collateral securing the Loan equal or exceed 125% of the total principal amount of the Loan at the time the Loan is made.”

I’m hoping that Steel Elements can emerge from its chapter 7 bankruptcy filing and continue to operate. If not I think the State of New Hampshire may find itself both in the steel business and having to pay the lender 75% of the remaining loan balance.

Inasmuch as I support the use of State Loan Guarantees to create economic development and jobs, this is an example of what can happen.

And I hope that it doesn’t happen.