Meridian Star

March 17, 2013

Handy says it has no debt on CDBG funds

By Terri Ferguson Smith / tsmith@themeridianstar.com
The Meridian Star

MERIDIAN —     Opinions differ as to whether a recently-closed distribution center owes the state of Mississippi millions of dollars invested in an industrial park, but if you ask Handy Hardware, the answer is no.

    A Handy Hardware distribution center in Meridian closed on Dec. 31, after about two years of operation. Handy Hardware laid off 109 workers and in January, filed for Chapter 11 bankruptcy reorganization.

    The Mississippi Development Authority told the Lauderdale Board of  Supervisors in December that it should recoup $3.6 million in Community Development Block Grant (CDBG) money the county received in 2009 to fund water, street, sewer and gas lines for the site upon which Handy Hardware located. The county owns the property  but Handy still owns the building until a settlement is worked out through bankruptcy to transfer the title to Capitol One or until it sells the building.     Handy defaulted on a $26 million dollar construction loan from Capitol One.

    Morrie Aaron, president of MCA Financial Group, which is managing the company's restructuring process through the bankruptcy, said Handy does not owe the state or county anything, pointing to a paragraph in a contract signed by, among others, officials with Handy Hardware, the Mississippi Development Authority, Lauderdale County and the city of Meridian that says:

    "Notwithstanding anything to the contrary contained herein or any other document executed in connection herewith, the county agrees that the company (Handy Hardware) will have no obligation to repay any portion of the CDBG grant in the event that the company fails to meet the investment and/or jobs requirements under the CDBG grant Memorandum of Understanding."

    Aaron seemed puzzled at the idea that county and state officials think that Handy owes any money.

    "The members of Handy Hardware invested $22 million of their money in Meridian Mississippi," Aaron said. "It's a big disappointment that it didn't go."

    Handy Hardware did not receive the CDBG funds. Instead, the county received the funds and used the money to build infrastructure and a road to the site. According to Aaron, the county agreed that it would not seek any reimbursement from Handy.

    Rick Barry, county attorney, said he disagrees with that interpretation of the contract. The paragraph doesn't apply, Barry said, because Handy Hardware stopped doing business and went into bankruptcy. He said he is hopeful that Capitol One will continue its efforts to find a business for the building.

    "I hope nobody has to pay anything back. None of it was paid directly to Handy Hardware," Barry said.

    As to the county's efforts to collect the debt through bankruptcy court, Barry said, "We will make every reasonable effort that we are required to do."

    Wade Jones, EMBDC president, said efforts are under way to find a business to locate in the building, which he views as highly marketable. It has 463,000 square feet, very high ceilings, a wall of loading docks and all of the conveyer belts and the racking systems are still there, Jones said. And it has the added benefit of visibility at the I-20 and I-59 interchange, as well as Lauderdale County's proximity to Atlanta, Dallas, New Orleans, and Memphis, Jones said.

    "Obviously it has been a great benefit to have that building in the park, because with it came a third party logistics company called Trans Power," Jones said."Trans Power has built a very significant business here. We would not have had them if it had not been for Handy Hardware."

    Because the company built here, Jones said, Meridian has this industrial park, and a new access road with lighting.

    "All the money used from the CDBG was for public improvements," Jones said. "All of that is owned by Lauderdale County."

    Jones said he is working with the Mississippi Development Authority and others to find a business that will locate in the building. Part of that is meeting with consultants who look for site locations for companies that are about to expand or open a new facility.

    "We have already had inquiries on the building," Jones said.

    Another plus for the area is its strong work force, according to Jones. Aaron made similar remarks about Handy's employees here.

    "The workers were fantastic," Aaron said. "It's really a shame that it didn't work out."

Aaron is optimistic that Handy will come out of bankruptcy strong.

    "We filed its initial disclosure statement and a plan of reorganization on March 6 in federal bankruptcy court and we expect to emerge from bankruptcy as a healthy entity in June, 2013," Aaron said.