HRK has few answers for creditors

jsalman@bradenton.comJuly 31, 2012 

TAMPA -- HRK Holdings LLC had very few answers for courts officials and creditors who on Monday had their first shot to scrutinize the embattled firm's books.

Legal representatives for some of the 60 parties owed a collective $26 million by HRK gathered at the U.S. Trustees office in downtown Tampa for the first formal meeting of creditors.

The attorneys took turns pitching questions for HRK's top three officers about the financial circumstances that led to Chapter 11 bankruptcy -- from the handling of the toxic spill to the amount of dredging insurance required and leases now in place at Piney Point.

But CEO Jordan Levy, Chairman William "Mickey" Harley and Chief Financial Officer Lionel Singh only offered short-winded responses -- referring most of the inquiries to an attorney who was not present, declining to answer others and lacking vital details for explanation.

The meeting will be continued at a date to be determined in September -- allowing HRK to gather more information and time for the court to strike a disclaimer in the financial disclosures that indicates some of the numbers may not be accurate.

That didn't sit well with

the case trustee, who pointed out the disclosure forms were signed under oath and designed to hold HRK accountable. Many creditors also left the meeting unsettled.

"There's still a lot of questions," said Jim Mikes, who has filed a $250,000 claim in the bankruptcy case. "I think it's time some of these HRK executives are held personally accountable."

The 675-acre Piney Point site is a former phosphate facility purchased by HRK in 2006 to store disposal from Port Manatee's Berth 12 dredging project. The tanks and liners housing the dredge failed in May 2011 -- spilling 170 million gallons of toxic water into Bishop Harbor.

A series of Bradenton Herald reports have revealed the disaster could have been averted had the Florida Department of Environmental Protection laid a commonly used protective dirt cover on the gypsum stacks, or stopped the project when a tear in the liner was discovered months before the dredging began.

Now battling bankruptcy, HRK is trying to buy time to secure enough land sales for the company to satisfy its debt along with an estimated $15.8 million worth of environmental cleanup that still remains at Piney Point -- a bill that comes due in May 2013.

To date, HRK has announced one sale of 30 acres to Air Products and Chemicals Inc. for $5.8 million. There's a total of 325 developable acres at Piney Point. The remainder of the site houses the gypsum stack liners used in the dredging and massive water processing reservoirs.

HRK currently holds an estimated $33.4 million in assets, but more than $33 million of that is purely Piney Point real estate, records show.

Creditors questioned Monday whether HRK had the proper risk insurance required per the contract with Port Manatee, which could have helped ease some of the extra costs associated with the toxic spill.

"We expect to be in a position to make similar announcements in the near-term as global interest in the property remains robust and follows the upward trajectory we've witnessed since Q1," HRK CEO Jordan Levy said in an email statement last week, which he referred to when asked to comment on the meeting Monday. "The transaction underscores the value of the Eastport asset and our business plan."

HRK Holdings LLC was formed in 2006 to house the assets of Piney Point and revenue for the dredging project. At the same time, HRK Industries LLC was created for the leasing business at Piney Point.

The majority shares of both of those firms are controlled by parent company Arsenal Group LLC, which is controlled by Harley and 10 other institutional investors.

A top attorney with the DEP, down from Tallahassee to attend Monday's meeting, said the primary concern at Piney Point is getting the facility safely closed again.

Capacity at the water processing reservoirs will be topped by early September based on current rain levels, which would spill more highly acidic runoff into Tampa Bay waters, creating algae blooms that could be deadly for fish and aquatic plants.

"The water at the site has to be dealt with," said attorney Jonathan Alden, senior attorney for the DEP. "If HRK ceases to exist or is incapable of meeting those obligations, someone will have to address them."

HRK never submitted a water management plan to the state, which carried a Feb. 1 deadline.

"It's not DEP's function to manage sites for people," Alden said. "It's our job to oversee their management plan."

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