I work for a steel company that is close to filing chapter 7 bankruptc

[Guest AmishKid]

I work for a unionized steel company that employees 1375 and is close to filing chapter 7 bankruptcy. Is an ESOP a viable option for keeping the company operating? It is being discussed by company and union officials. Much of our operations have been shutdown already and mothballed. To restart these departments and bring in the necessary supplies and equipment would cost millions. We are currently operating under Chapter 11 (since January 12) and could file for chapter 7 as soon as February 13th. From what I have learned about ESOP programs, it is not used primarily to save a failing company. However, there is a local steel mill that did so over 15 years ago, and it is still operating with a profit. However, it did not start up all operations - it was a much reduced work force. So, again, is an ESOP a viable option to pull a failing company out of bankruptcy and how might it work with all the money required to do so successfully?

[BeckyMiller]

Huge question. First you need to address the basic issue - does the business have a sound economic future if there were changes in management, etc? If the answer to that is Yes, then you can look at possible employee ownership or community ownership options.

I suggest that you contact the National Center for Employee Ownership at http://www.nceo.org or The ESOP Association at http://www.the-esop-emplowner.org. They both have company members who have gone through this situation and may be willing to share ideas. There is at least one attorney that I know who has extensive experience with these situations. Her name is Deborah Groban Olson. You can reach her at Deb@shared-equity.com. I am sure that there are many other competent attorneys in this arena. I just know that Deb has a special interest in turnover, union situations.

Good luck.

[RLL]

AmishKid ---

These types of situations are very difficult. I think you need an investment banker/financial adviser to assist in determining the feasibility of an ESOP "rescue" of the company. A lawyer can tell you the rules, but the financial/economic issues are the more critical concerns.

Check with the NCEO and The ESOP Association (as referred to by BeckyMiller) for financial advisers with experience in ESOP buyouts of financially-troubled unionized companies.