In what officials say is a case that sounds worse than it really is, the Vermont Economic Development Authority has foreclosed on SB Electronics and is readying to auction off the property it occupies in the Wilson Industrial Park.
Jo Bradley, chief executive officer of VEDA, said Thursday the foreclosure and planned public sale are designed to help, not harm, SB Electronics, or SBE Inc.
“This (foreclosure) was done as part of a balance sheet reconstruction, and it is intended to be good for the company in the long run,” she said.
Bradley said she could not discuss the particulars of what she described as a “complicated cooperative transaction” that put VEDA — Vermont’s statewide economic development finance lender — in the position of foreclosing on SBE and auctioning off the property it occupies in order to strengthen the company.
Joel Schwartz, executive director of Barre Area Development Corp., said Bradley’s cryptic explanation was consistent with what he was led to believe by SBE officials when the prospect of foreclosure surfaced recently.
“I was assured it wouldn’t have any affect on (SBE’s) operations,” he said.
Although Schwartz said he wasn’t privy to the details and what little he knew was admittedly hard to follow, the plan was to reduce SBE’s debt load.
“It isn’t about (closing) the business, it’s about (improving) the balance sheet,” he said.
Schwartz, like Bradley, said that fact was likely lost in the translation for anyone who read the notice of the looming “judicial sale” in Thursday’s edition of The Times Argus.
“It sounds worse than it is,” he said of the notice, which suggests the industrial park property that is owned by Power Ring Partners LLP will be sold to the highest bidder during a court-sanctioned public sale next month.
The April 17 auction is scheduled for 1 p.m. at SBE’s manufacturing plant at 81 Parker Road. Robert Prozzo, a licensed auctioneer, is to preside.
The notice raised eyebrows and questions about the fate of a company that, with VEDA’s help, landed $8.5 million in federal stimulus money to help finance construction of a new 53,000-square-foot manufacturing facility just five years ago.
The federally subsidized and state-supported $18 million expansion of the longtime Barre business was completed in 2010 amid ambitious predictions that SBE Inc. would create an estimated 140 new jobs. Those jobs, the company said at the time, would be needed for the production of a new generation of power ring capacitors that SBE developed for the powertrains of electric and hybrid vehicles.
For a variety of reasons that hasn’t happened, prompting some to openly wonder whether SBE might be on the verge of closing.
Though SBE executives, including President and Chief Executive Officer Ed Sawyer, weren’t available for comment Thursday, Bradley sought to dispel a rumor she feared might gain momentum to the detriment of the company.
The notice caught many by surprise, including Barre Town Manager Carl Rogers, who got a letter from VEDA awhile back informing him of the potential foreclosure without providing any details.
Although the foreclosure proceedings started in December and resulted in an eight-page order signed by Judge Mary Miles Teachout last month, Rogers said SBE Chief Financial Officer Bob Brit didn’t mention it when the two men spoke Wednesday.
Rogers said Brit called to tell him SBE would be unable to make its latest payment — roughly $22,000 — on a 10-year, $984,000 loan that the town funded with a community development block grant it obtained for the SBE project.
Rogers said he got a similar call in late December involving the payment that was due Jan. 1. When he saw the notice in Thursday’s newspaper, he worried the business might be experiencing more than a short-term cash flow problem.
Rogers said the town has been flexible with SBE. At the company’s request, the loan payments for 2013 were waived in favor of adding an extra year to the loan agreement.
The SBE manufacturing facility and the 10 acres on which it sits are assessed at $4.8 million, though the company is paying taxes on $2.4 million under a stabilization agreement approved by the Select Board.
The court file in the foreclosure proceeding, which names Power Ring Partners LLP, SBE Inc. and the U.S. Department of Energy as defendants, indicates SBE defaulted on a $750,000 mortgage that financed the acquisition of machinery and equipment for the manufacturing facility.
Based on the terms of the mortgage, VEDA sought to foreclose on the property and sell it to collect nearly $740,000 in principal, accrued interest and fees associated with the court proceedings.
Miles Teachout’s order gave each of the named defendants an opportunity to redeem the property by paying the amount owed on successive days last week. None did, setting the stage for the sale.
According to the order, Power Ring Partners can redeem the property by paying the money owed before the sale, and the U.S. Department of Energy could redeem within one year of the auction if its interest in the property is not satisfied by the sale. Documents don’t indicate how much the federal government is owed.
The order does require publishing notice of the sale for three consecutive weeks leading up to the sale — a procedural formality that Bradley hopes doesn’t prompt people to jump to the wrong conclusion about what is going on.
Attempts to reach all four of the lawyers involved in the case were unsuccessful Thursday.
