TAMPA -- HRK Holdings LLC has identified its first funding option to fix a laundry list of environmental concerns at Piney Point.
The embattled firm proposed in federal court Thursday a plan to borrow another $3.5 million from Regions Bank and allocate $2.5 million of it to bring the former phosphate plant into compliance. HRK would keep the remaining $1 million for operating capital until its bankruptcy case is resolved.
The plan also would eliminate a sticking point that has delayed Air Products and Chemicals Inc. from closing on the sale of 32 acres of the massive site, where the company plans to build a plant and employ 250 workers.
Negotiations on that deal stalled last month when Air Products requested the Florida Department of Environmental Protection clear the Pennsylvania company of any future financial obligations for cleanup at Piney Point -- a stipulation the state only would agree to upon immediate repairs there.
"Without the loan, the debtor will close all operations by the middle of the month; they will be out of cash," said Rick Malchon, an attorney representing Regions Bank, which already is owed $17.2 million by HRK. "That's the reality. Without the financing there will be no sale and no proceeds to argue over."
A judge will rule on the proposal at a continued hearing in bankruptcy court Sept. 18.
The $3.5 million loan would satisfy environmental maintenance requests from the DEP, erase the largest hurdle for the Air Products deal and allow HRK time to find more buyers, Malchon said.
It also would push Region's to the top of the creditor priority list. Final terms, including interest on the loan, were not disclosed.
Under the plan, Regions would then collect all of the $5.9 million in expected net proceeds if and when the Air Products sale closes Oct. 30.
That didn't sit well with some of the other creditors owed upwards of $26 million by HRK, much of which was incurred when the company was ordered to fix emergency leaks in the liner system in May 2011 that sent 170 million gallons of toxic water gushing into Bishop Harbor on the southern edge of Tampa Bay.
They questioned why future work at Piney Point should be funded through bankruptcy when work in the past still has not.
HRK argued the loan was a crucial step to the Air Products sale, which would set a bar for future purchases of the 675-acre Piney Point site, and create more revenue to be split down the road.
"It's not as if this sale closes and there's nothing left for the bankruptcy estate," said Scott Stichter, an attorney representing HRK. "There's still land we're going to sell ... This debtor has a lot things going for it. Time isn't one of them."
Piney Point is a former phosphate facility purchased by HRK in 2006 with the sole purpose of housing disposal from Port Manatee's Berth 12 dredging project.
The dredging was completed in October. But while the work was in progress in May 2011, liners and pipes that housed the dredged material at Piney Point sprung leaks, gushing 2,700 gallons of water a minute into Bishop Harbor.
HRK filed for Chapter 11 bankruptcy protection in late June over the expenses tied to the environmental fallout.
But a series of Bradenton Herald reports revealed the disaster could have been averted had the state stopped the dredging project when a tear was discovered in the liner months before the work began, or applied a commonly used protective dirt cover on the exterior of the gypsum stack. State officials have acknowledged they never notified port staff of any previous problems before the toxic spill.
If approved, $2.5 million of the Regions loan would be used to immediately address eight deficiencies at Piney Point, including high levels of ammonia in an adjacent ditch, a punctured liner that has not been fixed since the spill, and watershed still contaminated with dredging sediment, among five other repairs outlined in a DEP letter sent to HRK in June.
The total cost of maintenance at Piney Point has been estimated at $15.8 million -- the balance of which could fall to taxpayers if not raised by HRK, according to the DEP, which has opened an internal review into its handling of Piney Point.
"There's obviously work that needs to be done in excess of $2.5 million," DEP senior attorney Jonathan Alden said.
"But it doesn't need to be done in the immediate future. As long as water is not coming out of that thing, I'm happy."
HRK has yet to submit a water maintenance plan for the dredging stacks at Piney Point, which are holding water considered toxic from exposure to radioactive phosphate waste including ammonia, phosphorus and nitrogen -- all of which have been known to trigger algae blooms that can become deadly for aquatic wildlife.
Since reaching maximum capacity last month, HRK is still funneling some of the contaminated water from Piney Point's main reservoirs into a 77-acre emergency container to prevent overflow into nearby waterways.
Once that transfer is complete, the company must also submit a plan to treat and release the water from both reservoirs.
Josh Salman, Herald business writer, can be reached at 941-745-7095. Follow him on Twitter @JoshSalman.