Freedom Industries to shut down 'sooner rather than later'
CHARLESTON, W.Va. -- What has seemed inevitable for weeks was made official today: Freedom Industries will soon be finished as a company.
Mark Freedlander, a lawyer representing Freedom, told U.S. Bankruptcy Court Friday morning that the company responsible for contaminating the water of 300,000 West Virginians will wind up its affairs -- including environmental remediation -- and then begin sending all its customers to its former competitors.
That will happen "sooner rather than later," Freedlander said.
All of Freedom's remaining chemical inventory will be sold in a matter of days, he said.
"It just became apparent in relatively short order," Freedlander said, "that it was not practical or financially viable" to continue operating the company.
Freedom was represented at Friday's bankruptcy hearing only by its lawyers. No company executives attended.
In a news release issued after the hearing, Gary Southern, Freedom's president, said that selling the company's inventory and shifting its business to competitors "represents Freedom's best opportunity to generate funds it needs for our environmental remediation efforts."
Southern said the company would do its best to help its employees find jobs with competitors, although job losses were inevitable.
In late January, Freedom agreed to an order from the state Department of Environmental Protection to begin tearing down its facility on the Elk River by March 15.
Dozens of class-action lawsuits filed against Freedom are on hold while the bankruptcy process plays out. Today's announcement made clear what was already apparent -- the pool of money for those lawsuits, and for all of Freedom's hundreds of creditors, will be limited.
"Based on what we've heard announced today, there's a serious limit on funding available," U.S. Bankruptcy Judge Ronald G. Pearson told the court.
Pearson recommended that plaintiffs' lawyers and Freedom's lawyers work together to come up with a standardized claim form for people seeking damages from Freedom for things like lost wages and lost business, to try to preserve Freedom from excessive legal costs.
Freedom estimates it will pay more than $700,000 in legal and financial advising fees in the next three weeks, according to bankruptcy filings.
"Everyone recognizes that the course that Freedom Industries is on was inevitable following the Jan. 9 spill," said Anthony Majestro, a Charleston lawyer involved in lawsuits against Freedom. "It's good, in that the bankruptcy process appears to be proceeding in an orderly fashion and limited resources aren't being used unnecessarily over how the bankruptcy should proceed."
Pearson approved Freedom's request to retain two additional law firms: Babst Calland, a Pittsburgh environmental firm; and Pietragallo, Gordon, Alfano, Bosick & Raspanti, another Pittsburgh firm.
The judge approved Freedom's request to hire environmental experts to inspect the site -- a metallurgist, a structural engineer and a hydrologist -- at an estimated initial cost of $75,000. He said the plaintiffs would be hiring environmental experts, so it was only fair to let Freedom do the same.
"Unless we have an agreement to all hire the same experts," Pearson said, as laughter echoed in the courtroom, "then you're each entitled to your own experts."
When it filed for bankruptcy in January, Freedom had requested a $4 million emergency loan, called debtor-in-possession financing.
Pearson ended up approving a $3 million DIP loan, but Freedom told the court Friday that it had not used that loan, and would not need it because the company is shutting down.
That money was lent to Freedom by a brand-new company called WV Funding LLC, whose parent company is owned by J. Clifford Forrest, the man who owns Freedom Industries.
Freedom will pay back the $3 million loan, with interest and a $20,000 lender fee, even though both Freedom and WV Funding are ultimately owned by the same person.
Freedom now has about $4.5 million in cash balance, according to bankruptcy filings. On March 16, after it has sold all its inventory and must begin tearing down its Elk River site, it expects to have about $5.4 million in cash, according to filings.
In the month ending March 16, Freedom expects to spend more than $1.7 million on environmental expenses, including environmental legal fees, according to filings.
Another bankruptcy hearing is scheduled for Tuesday.
Reach David Gutman at email@example.com or 304-348-5119.