County approves loan to Linden Lumber
Published 12:00 am Friday, August 24, 2007
After a lengthy public hearing during which residents spoke before an over-flowing courtroom full of concerned citizens, the Marengo County Commission unanimously approved a loan of up to $7 million to Linden Lumber Company.
The proposal was accepted with four stipulations:
4An independent audit of Linden Lumber
4County approval of the restructuring of the loan with Wachovia Bank for the operating line
4County approval of restructuring of the loan with Federal Land Bank
4An independent audit of the assets the county would be taking mortgage on.
The commission has the authority to annul the loan agreement if they are not satisfied with the findings of any of the audits or restructuring agreements.
Under the agreement, the county will use a bond issue to borrow up to $7 million. They will in turn loan the money to Linden Lumber with an annual interest rate of 5 percent, not to exceed 6.5 percent. The terms of the loan extend for 20 years.
County Attorney Woody Dinning said Linden Lumber initially asked the county to take over ownership of the company, which the commission declined. He said Linden Lumber then made the request for the proposed loan.
Various Linden Lumber employees came before the commission expressing fear of the devastation to their lives if the company was to close, requesting a &8220;yes&8221; vote by the commission.
Employees expressed their satisfaction with the company&8217;s direction, citing the company&8217;s focus on a quality product. The employees told the Commission throughout the hardships they received their paychecks each week and felt a common bond with the Overmyers family, owners of Linden Lumber, and the efforts being made to recover the company.
Jimmy Delaney, a Mobile resident who has been visiting Marengo County for 25 to 30 years, said he had &8220;no axe to grind&8221; with the vote, however, he requested the Commission consider the financial effects the closure of the company would have on the county.
Mitzi Gates, a teacher and councilman for the City of Linden, said, &8220;I understand the commission is a forward thinking group. And I know that 425 jobs lost would devastate the town.&8221;
She encouraged the Commission in their decision saying, &8220;don&8217;t be afraid to do something because it has never been done before. Don&8217;t let the fear of setting a precedent affect your vote. Don&8217;t be afraid to set a precedent in order to help the situation.
Art Luckie, pastor of First United Methodist Church in Demopolis, said he thought the proposal to be an investment.
Opponents of the proposal expressed concerns of a precedent being set by the county of becoming a lender to private businesses that face financial hardships.
Rhodes said he did not understand why the commission would loan the company money if Linden Lumber was unable to find a financial institution willing to support their loan.
As for the employees of Linden Lumber, Rhodes said he sympathized with them and their possible hardship.
Rhodes told the commission if they finance the loan for Linden Lumber then they are endangering the future of the county.
Rhodes also expressed his concern of the loss of jobs being used as a negotiating tactic by Linden Lumber.
Rhodes encouraged the commission to try to locate financial assistance for Linden Lumber by outside sources and government agencies.
Other opponents of the proposal suggested the county search for industries to purchase the company citing other industries in the area, which closed under one ownership and were bought out by another company.
In regards to the finances of Linden Lumber, Chief Financial Officer Terry Dunnam said the loan the company has with Wachovia Bank for their operating line ensures they meet satisfactory cash flow projections each week. He said the Overmyers, proprietors of Linden Lumber, are limited on the salaries they can draw. During the last three to four years, Dunnam said, in which the company has taken a loss, the Overmyers have taken only half of what the bank allows them in the form of a salary.
George Griffin asked the commission what the Overmyers were willing to invest in the company to ensure they were wholeheartedly behind the investment by the county.
Dunnman said in the last 18 months the Overmyers invested $2.1 million in cash, along with $17.3 million in capital investments during the last six years.
Dunnman said the company has made mistakes throughout recent years, particularly when the company invested in the finished wood industry.
However Dunnman said with the approval of the proposed loan the company will go from having a $4.1 million annual debt payment to one of $1.5 million. Dunnman said it would take the company&8217;s debt from $21 million to $12 million.
Commissioner Dr. Ken Tucker said the decision was a weighing item on his mind during the past weeks. He said the commission is searching for ways to help Linden Lumber and have made progress in their efforts.
During the consideration of a motion by the commission to approve the loan, a member of the audience said, &8220;This was already a done deal.&8221;
The commission denied the statement. Commissioner Jerry Loftin said, &8220;This has never been a done deal.&8221;
Chief Operating Officer of Linden Lumber Hugh Overmyer said he was pleased with the Commission&8217;s decision.
Overmyer said he anticipates the county and Linden Lumber will proceed with the loan and expects approval of all of the factoring stipulations.
Federal Land Bank South of Alabama announced the foreclosure of the company last week including its properties in Linden and Thomasville.
As listed by the county in the notice of proposed action, the terms of the loan would be for the company to repay the loan in 240 equal installments of principle and interest with the outstanding principle balance of the loan to accrue interest at an annual rate of 5 percent and no more than 6.5 percent.
It reports the county expects the loan to enable the company to retain 425 jobs and the county to retain $13 million of annual payroll having an estimated economic impact on the county of $50 million per year.
The foreclosure sale date is set for Sept. 7 in front of the Marengo County Courthouse. The sale notice includes all the buildings, fixtures and other tangible and intangible property. The property is to be sold as is. The notice of the sale names Donald H. Overmyer Jr., Hugh Overmyer and Kathryn Overmyer Earthman as proprietors of the company. Rushton, Stakely, Johnston&Garrett, P.A. of Montgomery is representing Federal Land Bank in the sale.