A bankruptcy court Tuesday approved the sale of Signal International Inc. to Alabama pension plans, which promised other creditors “meaningful distributions.”
The Teachers’ Retirement System of Alabama and Employees’ Retirement System of Alabama were the only bidders for the shipyards which filed for Chapter 11 protection in July. The plans owned about 47% of Signal’s shares and agreed to serve as a stalking horse bidder and provide about $90 million in bankruptcy financing.
Mobile, Ala.-based Signal was hurt by falling oil and gas prices and faced $20 million in federal court claims for allegations of abusing Indian guest workers.
Without “substantial concessions” from many sides, the sale might not have gone through, the assets would have had to be liquidated, only the pension plans likely would have been paid and hundreds of jobs would have been at risk, an attorney for the retirement systems of Alabama (RSA) said in filings with the Delaware court. Signal was expected to keep its Mobile and Pascagoula, Miss., yards and 302 employees working.
The agreement “brought an end to seven years of protracted, costly and highly contentious multi-action litigation,” the pension plan representative said. “The RSA was willing to make significant financial commitments through the plan, such that other creditors could receive meaningful distributions.”
The company was marketed to possible domestic and international buyers, and several did due diligence but none bid. The $90 million-plus stalking horse bid “was the starting price, and that’s a big number,” J. Scott Victor, managing director of SSG Capital Advisors, which was handling the sale, earlier told WorkBoat. The retirement systems are going to run the yards with existing management as an equity holder and debt holder, he said.
As part of the court settlement with the Indian workers, Signal issued an apology saying it “deeply regrets the living conditions the guest workers were subjected to,” according to a copy of the letter from CEO Richard Marler posted on the site of the Southern Poverty Law Center, which represented the workers in the case.
Signal hired about 500 welders and shipfitters from India through a recruiting service on H-2B visas to handle increased business after Hurricane Katrina in 2005. The workers claimed they lived in substandard conditions for which they were charged $1,050 a month and had to pay as much as $20,000 each for a job.
The Chapter 11 case is the latest development in the history of a company which has itself acquired other yards out of bankruptcy court. Five years ago, Signal bought Bender Shipbuilding & Repair’s Mobile assets for $31.25 million. In late 2002, another bankruptcy court approved the sale of Friede Goldman’s Offshore Division to ACON Investments, a Washington, D.C.-based private investment firm, for $18 million cash and the assumption of $49 million in debt. ACON formed Signal to operate Friede Goldman’s Texas and Mississippi fabrication yards.