THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, June 9, 1995 TAG: 9506090574
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 68 lines
Marine Hydraulics International Inc., the Norfolk shipyard that sought bankruptcy protection in January, has fired its president and chief executive.
James M. Hong was asked to step aside last week, said Robert S. Walker, MHI's chairman and principal owner.
``None of these decisions are easy ones,'' said Walker, who assumed executive control of the ship-repair company. ``I felt, all things considered, that was best for the company going forward.''
Hong's firing comes a month after MHI filed its initial bankruptcy reorganization plan. That plan, disputed by the creditors' committee, was withdrawn by MHI on Thursday in Norfolk's federal bankruptcy court.
MHI owes 650 creditors more than $6 million.
Some of the dispute stems from transactions among MHI, Hong, Walker and related companies.
``The majority shareholder basically decided he couldn't resolve some of the problems of the creditors without removing Hong,'' said C. Grigsby Scifres, MHI's bankruptcy attorney. ``Bob Walker didn't want to do that, but he felt he had to.''
Hong, 52, could not be reached for comment.
Hong had been an executive at the small Elizabeth River yard since 1992. During his tenure at MHI, he accumulated a 35 percent ownership stake.
Walker owns 57 percent of MHI, and other executives own the remaining 8 percent.
MHI, which had sales of nearly $40 million in 1994, filed for bankruptcy in January, claiming $6.4 million in assets and $8.8 million in liabilities, including $1.1 million owed to Walker.
The company, which once employed from 200 to 600 people, now employs 129. It lost a major Navy ship-repair contract because of the bankruptcy.
The bankruptcy stemmed from a partnership dispute with Newport News Shipbuilding that led to losses. As a result, MHI lost a line of bank credit and was unable to pay its creditors. Added to that was less work available from a shrinking Navy.
Scifres is negotiating a new reorganization plan with the creditors' committee. Ross C. Reaves, attorney for the creditors' committee, said talks are constructive, and that creditors welcomed Hong's ``resignation.''
The creditors want MHI to void several transactions between MHI and other Walker- and Hong-owned companies that occurred in the year before the bankruptcy.
For example, a partnership of companies owned by Hong and Walker bought from MHI an office building on Indian River Road in Norfolk. In exchange, the partnership forgave $750,000 in debt.
Both Walker and Hong, and the companies they control are willing to void those transactions, Scifres said. In return, Walker and Hong want a guarantee they won't be sued later, he said.
But such a guarantee may be difficult to obtain.
``We don't think it's appropriate to have an MHI plan of reorganization releasing Hong and Walker from liability without them giving something to the company,'' Reaves said.
Walker already has made concessions that limit his recovery on the $1.1 million he is owed and reduce rent payments he receives for leasing the shipyard's property to MHI.
Reaves said he thinks the bankruptcy may be heading toward a reorganization. ``We're at a crossroads,'' he said. ``We've got serious matters yet to be resolved and we think they can be resolved.'' by CNB