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Stock owners could face sobering future unless new reorganization plan submitted

Friede Goldman Halter looking for calmer water

GULFPORT — By the time the April 12th deadline for the company’s exclusivity on its reorganization plan passed, Friede Goldman Halter Inc. (OTCBB: FGHLQ) had amassed a laundry list of woes.

The company, once the second-largest employer in the state, had been on a selling spree. Its president, John Alford, has resigned. And it had alerted the Securities and Exchange Commission (SEC) that it couldn’t file an annual report on time.

Since the company filed a Chapter 11 petition April 19, 2001, listing assets of $802 million and liabilities of $704 million, creditors have essentially owned FGH, a global designer and manufacturer of equipment for the maritime and offshore energy industries, and its operating units: Friede Goldman Offshore, one of the largest builders of offshore drilling rigs in the world, Friede & Goldman, Ltd., the leading naval architecture and marine engineering firm in the offshore market, Halter Marine, the largest builder of small and medium sized ocean-going vessels in the world, and FGH Engineered Products.

Financial problems have cost FGH coveted projects. Last year, Halter Marine bowed out of competition for a $407-million U.S. Navy project.

Most Mississippi analysts contacted for this story admitted they no longer followed FGH stock. Several mentioned they lacked confidence in Jack R. Stone Jr., chief restructuring advisor to FGH, because of his apparent lack of interest for shareholders. Stone, a principal of Glass & Associates, Inc., a nationally prominent management-consulting firm, has been advising the board of directors since October 2001 on restructuring matters.

Stone was named president and CEO April 5, after Alford resigned April 2. Alford, who began his career in banking, joined Friede Goldman Offshore in 1996 and had served as FGH president and CEO since August 2000.

“I resigned voluntarily,” said Alford, who declined to comment on the reorganization plan.

“I can say there has been a fair amount of interest in buying the company,” he said. “I think some people are interested in buying parts of the company and potentially reorganizing and putting capital into the company. I think the company has a number of solid business units with a strong employee base and there is an opportunity for these companies in the future to be strong, viable businesses. I’d like to see that happen. The company has brought a lot of business to the state and hopefully in the future, it will be an important part of the economy along the Gulf Coast.”

Contacted 10 days before the deadline, FGH initially agreed to go on the record for this story. By press time, a company spokesman said no internal information would be released.

Unless another reorganization plan is submitted, the outlook for shareholders is sobering. FGH chairman J.L. Holloway is the largest shareholder, with more than eight million shares.

“Stock has been trading at eight or nine cents because there’s speculation that someone may come in with a better deal,” said Butch McKenzie, vice president and branch manager of A.G. Edwards & Sons of Jackson. “That’s the only way any stockholder will make money with it. Jack Stone has made it very clear there’s nothing for the shareholders.”

On March 13, FGH announced its plans to reorganize its offshore and marine segments. “Other divisions had been sold off,” McKenzie said.

On March 22, FGH submitted its reorganization plan to the U.S. Bankruptcy Court in Biloxi, providing no recovery for current shareholders. The company announced it had received a letter of intent from Lockheed Martin Overseas Corp. to design and build two tractor tugs as part of a contract Lockheed Martin signed with the Egyptian government. Financial details of the project were not disclosed.

At the same time, FGH announced that a “collection of F&G managers and outside partners,” called FGL Acquisitions, would buy Friede & Goldman Ltd. Naval design and engineering group for $8 million, pending the approval of U.S. Bankruptcy Court Judge Edward Gaines. Stockholders, of course, were excluded from the transaction.

“The company will continue,” McKenzie said. “It’s sad that so many Mississippi shareholders can lose their entire investment and the banks and bondholders that will own the company aren’t from this area or even this part of the country. They don’t do anything for the local economy. They don’t patronize the local businesses. And it’s sad that Mississippians that have put a lot of confidence in Friede Goldman and Halter Marine could potentially lose it all. Any time a big company like that — look at WorldCom, its stock has been hammered — it affects the local and state economy, charities, too. It hurts.”

In two short years, Holloway and WorldCom chief Bernie Ebbers have gone from being the darlings of their respective industries to being plagued with problems, a fact that has intrigued analysts and disheartened shareholders of both powerful Mississippi companies.

“I know both men,” said McKenzie. “They’re in extremely tough situations. Both have a tremendous amount of loyalty to Mississippi. Both have been enormous supporters of the economy and ambassadors to the world for the state. It goes to show you that the unthinkable can happen. Business can change rapidly. If it does, even the leaders of the industry will feel the effects of it.”

Contact MBJ contributing writer Lynne W. Jeter at (800) 993-3392 or lwjeter@yahoo.com</a.

About Lynne W. Jeter

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