THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Wednesday, June 21, 1995 TAG: 9506210572
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 84 lines
Navy downsizing since the end of the Cold War has claimed its first shipyard victim in Hampton Roads.
Without ship-repair work to keep it afloat, Jonathan Corp. is shutting down its Norfolk shipyard just four months after coming out of bankruptcy, according to the Navy and lawyers familiar with the bankruptcy.
Jonathan's contracts officer notified the Navy on Monday that it is shutting down its ship-repair business, said Thomas P. Odom, command deputy at the Navy's Supervisor of Shipbuilding, Repair and Conversion-Portsmouth.
Jerrold G. Weinberg, a lawyer who represents Jonathan's unsecured creditors, said he was told Monday by Jonathan's bankruptcy attorney that the Norfolk ship repairer was shutting down its waterfront operations.
``The outlook is there isn't going to be any more Jonathan in the ship repair business,'' Weinberg said.
C. Grigsby Scifres, Jonathan's bankruptcy attorney and Weinberg's source, declined to comment. He said he may have something to say in a few days.
Calls to Jonathan's phone number were answered by DALCO Electronics, an electronics-repair subsidiary that is still in business. Jonathan's founder and president Gary M. Bowers did not return a phone call.
It's unclear how many people will lose their jobs as Jonathan shuts down. One lawyer familiar with the case said he heard 200 employees were laid off June 16.
Weinberg said Scifres told him that Jonathan hoped to continue operating DALCO and a steel fabrication business it owns.
It's unclear what effect closing the shipyard will have on Jonathan's plan to repay its debts, which was approved Feb. 28 in Norfolk's federal bankruptcy court.
Weinberg said Scifres told him that Jonathan wants to repay its debts by selling the shipyard and its assets. Scifres wants to avoid a formal liquidation under Chapter 7 of the U.S. Bankruptcy Code, Weinberg said.
Weinberg said he didn't know whether all the creditors would go along with Scifres' plan.
``The outlook isn't good,'' Weinberg said ``They just didn't get the government contracts.''
Jonathan apparently has been unable to win a substantial repair contract since it emerged from bankruptcy.
``If they can't keep ships in there, that's an expensive facility to keep open,'' the Navy's Odom said.
Jonathan would be the first Hampton Roads shipyard to close since the end of the Cold War. As the Navy has shrunk, there has been less repair, overhaul and maintenance work to go around. Jonathan and other shipyards in the region fought hard for slices of an increasingly small Navy maintenance pie, but losers were nearly inevitable.
Jonathan was hamstrung in the battle by debt payments on its real estate, including the Front Street shipyard, a ship-repair site on Little Creek in Virginia Beach and a riverfront steel-fabrication facility doing business as Tidewater Steel Co. Inc. in Chesapeake.
Unable to make ends meet, Jonathan sought bankruptcy protection from its creditors in December 1993. Its reorganization plan was approved 14 months later in February 1995.
However, the shipyard had difficulty getting the ship-repair contracts it needed to make the plan work.
``Their business had wound down to the point that their absence from the market should not really be felt,'' said Doug Forrest, vice president of Colonna's Shipyard Inc., a competing Norfolk shipyard.
Founded in 1972, Jonathan grew dramatically through the 1970s and 1980s. By 1989, it had developed into a $70 million-a-year business with 900 employees. Along the way, it pioneered the Navy ``phased-maintenance'' contract, which involves mini-overhauls by the same shipyard on vessels every couple of years instead of major overhauls every four or five years.
When Jonathan sought bankruptcy it owed $11.6 million to more than 400 unsecured creditors. It also owed NationsBank of Virginia more than $7 million under several loans.
NationsBank loaned Jonathan an added $5 million-plus to continue operating in bankruptcy. NationsBank's attorney in the case could not be reached.
Under the reorganization plan approved in February, the unsecured creditors agreed to accept 9 cents on each dollar they were owed, paid during the next six years, plus a portion of future profits and of any recovery on $15 million of disputed government claims. by CNB