Anchor reaches deal for supplies
The deal makes it possible for the financially strapped glassmaker to continue production . . . for now.
By SCOTT BARANCIK
Published August 20, 2005
Anchor Glass Container Corp. reached a partial agreement Friday with a key supplier that had cut off shipments over an unpaid debt. Failure to resolve the dispute could have forced the Tampa bottlemaker to idle several of its factories.
But a lawyer for Anchor, which filed for Chapter 11 bankruptcy protection on Aug. 8, warned the cease-fire might be short-lived.
Documents filed with the U.S. Bankruptcy Court in Tampa outline a make-or-break situation involving OCI Chemical Corp., a Shelton, Conn., company that provides Anchor with 65 percent of its soda ash under a contract that goes through 2007.
Soda ash is a mineral and a critical raw material in the manufacture of glass bottles and jars.
On Aug. 9, OCI wrote Anchor that it had stopped shipping ash because the Tampa company owed it $1.8-million. An invoice showed some Anchor payments were as much as one year overdue.
OCI not only stopped filling new shipments from its Wyoming facility, but put the brakes on all railcars en route to Anchor. OCI subsequently agreed to release those in-transit deliveries.
As for new shipments, however, the soda ash company demanded Anchor pay a 32 percent premium until its debt was paid off.
On Thursday , Anchor sued within the confines of its bankruptcy case, arguing that the law requires suppliers like OCI to honor prebankruptcy contracts unless the debtor agrees otherwise.
Anchor asked U.S. Bankruptcy Court Judge Alexander Paskay to force OCI to resume shipping ash at the original price and, temporarily, by truck, which is faster.
Even a brief disruption in ash supply, Anchor wrote, "will cause the shut down of one or more plants . . . causing Anchor to disrupt and perhaps default on its sales and shipment obligations."
Carlton Fields lawyer Rob Soriano, whose Tampa law firm is representing Anchor in the bankruptcy proceedings, said OCI and Anchor worked out a temporary, partial settlement Friday morning. OCI will resume new shipments of ash at the existing rate, some of them by truck, until the parties meet for further discussions on Wednesday .
"At least for a few days, the pipeline has resumed," Soriano said. "They (OCI) probably are the most critical of the critical vendors."
A number of issues remain unresolved, including the debt owed: OCI puts the figure closer to $3-million, Soriano said, while Anchor estimates it at about $2.5-million. Among other issues are who will pay the trucking fees and the price and billing of future ash shipments. Though Anchor said it is willing to wire payment the moment a shipment arrives, OCI wants payment in advance. The parties may agree to let an arbitrator resolve some of the issues.
The Anchor-OCI dispute over soda ash shows how vulnerable bankrupt companies are to supply disruptions. It also shows that what a company says in its regulatory or court filings may not always square with reality.
In its Aug. 8 bankruptcy petition, for example, Anchor listed its debt to OCI at $614,100, one-quarter of the level it now admits.
And in its most recent annual report to the Securities and Exchange Commission, the company said it was "not dependent on any single supplier" of key raw materials.
Scott Barancik can be reached at email@example.com or 727 893-8751.