Bankrupt company says it owes county nothing
Published: March 20,2013
MERIDIAN — The financial consultant brought into reorganize bankrupt Handy Hardware says the Texas company disputes a claim by the state of Mississippi that it owes $3.5 million to Lauderdale County.
Handy Hardware President Morrie Aaron cites a 2009 memorandum of agreement that says Handy would not have to repay a federal Community Development Block Grant used to improve the industrial park where its Meridian warehouse was built.
Particularly, an agreement among the company, the county, the city of Meridian and other parties states “…the county agrees that the company will have no obligation to repay any portion of the CDBG grant in the event that the company fails to meet the investment and/or jobs requirements under the CDBG grant MOA.”
Lauderdale County attorney Rick Barry disputes that claim. He told The Meridian Star that paragraph in question doesn’t apply because Handy Hardware stopped doing business and went into bankruptcy. Barry could not be reached for comment by The Associated Press.
Another agreement between the county and Handy Hardware that relates only to the grant money states that if Handy didn’t create 175 jobs, the “sole remedy, and the limit of the company’s liability under this agreement, will be for the company to reimburse the recipient the amount awarded under this agreement.”
The Mississippi Development Authority provided $3.5 million in federal CDBG money to Lauderdale County to build a road, extend a sewer and prepare the site for the warehouse. The amount came from a special pot of money Congress gave Mississippi after 2005’s Hurricane Katrina.
An MDA official wrote a letter to the county in December telling it to retrieve the money from Handy because the company didn’t keep its pledge to create 175 jobs over three years.
“We will make every reasonable effort that we are required to do,” Barry told the newspaper.
Aaron is a financial consultant whose MCA Financial Group was hired to lead Handy after it filed for Chapter 11 bankruptcy in January. He wrote in an email to the AP last week that “during the negotiations regarding incentives for the project, the company made it clear that the company would not consider building its facility if there were any liability for repayment of amounts made available under the CDBG program.”
Handy Hardware, based in Houston, is a hardware distribution cooperative owned by member stores. The company built the warehouse in Meridian in a failed bid to expand eastward, and the debt burden was one contributor to its bankruptcy. The company announced last year it was closing the warehouse, laying off 109 employees. Capital One Financial Corp. says Handy owes $26 million on the warehouse and associated equipment.
“I find it insincere for folks to be twisting the unfortunate business circumstances of a failed expansion by Handy into a media show for the benefit of the County,” Aaron wrote. “Is this what future businesses who look to Meridian and Mississippi as a partner should expect?”
Though the state helped recruit Handy, it didn’t sign either of the contracts in question with the cooperative. Tuesday, MDA spokeswoman Sallie Williams said the state isn’t involved in seeking the money. She declined to answer when asked whether Lauderdale County would have to find other money to repay the state if it couldn’t get the $3.5 million back from Handy.
“We’re speculating on something that hasn’t happened yet,” Williams said.
Local officials have said they’re working on finding a new tenant for the 463,000-square-foot warehouse, which is visible from Interstate 20/59 on the eastern edge of Meridian. Williams said that it might be possible for a new tenant to meet the requirements of the grant, which would mean the state would waive repayment by the county and Handy.
“We could certainly look at it, if a new tenant were in the building,” Williams said.
She said MDA is working with local officials to seek a new tenant.
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