DATE: Friday, October 24, 1997              TAG: 9710240800

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER 

                                            LENGTH:   79 lines

SHIPYARD BACK FROM BRINK COMPANY PAYS CREDITORS EIGHT YEARS AHEAD OF SCHEDULE

Two years after it emerged from a bankruptcy reorganization, Marine Hydraulics International Inc. is looking like a shipyard that has turned the corner.

The small Norfolk shipyard just finished paying off its creditors from the bankruptcy - eight years ahead of schedule - and it's hiring workers to handle more than $5 million in Navy repair contracts it has recently won.

``We're busy, busy, busy,'' said Gary Brandt, vice president at MHI. ``Things are going great.''

Great enough that MHI is boosting its work force to 400 from about 250 for work on the destroyer Thorn and the guided-missile frigate Nicholas.

Great enough that the company recently negotiated a $1.6 million settlement with the trust representing its unsecured creditors from bankruptcy.

``It seemed like an opportune time for the company, and the trustees of the trust decided it seemed like the best time to liquidate,'' said Ross C. Reeves, attorney for the unsecured creditors.

The trust held a 43 percent stake in MHI and two notes secured by shipyard property, which is owned by MHI's majority owner and president Robert S. Walker. The notes, which were to be repaid over 10 years, were worth about $2.4 million when

MHI emerged from bankruptcy two years ago.

``Most of the creditors would rather have the cash now,'' Reeves said.

Checks went out to the creditors either Wednesday or Thursday, he said.

It's a remarkable turnaround for a company that didn't look like it was going to survive 2 1/2 years ago when it sought Chapter 11 bankruptcy protection from its creditors.

As the Navy cut the fleet after the end of the Cold War, MHI became the third Hampton Roads shipyard to file Chapter 11 in the 1990s. The first one, Colonna's Shipyard Inc., survived by switching its focus from Navy to commercial work. The second one, Jonathan Corp., died during MHI's bankruptcy from a lack of Navy work in the port.

But MHI restructured, scraped together a plan that satisfied its creditors and emerged from bankruptcy two years ago.

``We've paid everything off in full satisfaction of the plan,'' Walker said.

Walker said he now holds an 89.5 percent stake in MHI with the remainder held by three other managers.

``I'm ecstatic that our people have made this possible,'' he said.

The restructuring has helped MHI reduce its costs and better compete for Navy and other government ship repair contracts, Brandt said. It has trimmed overhead and cross-trained its workers in different trades, he said.

Now it's paying off.

The company has leased the former Jonathan Corp. shipyard property on Front Street in Norfolk to do the $3.5 million repair job on the destroyer Thorn. The Thorn arrives Monday and work on it will continue through January.

The frigate Nicholas will arrive in mid-November for $1.9 million of work at MHI's principal facility in Norfolk's Berkley section on the Elizabeth River's eastern branch. That job will last through February.

It's also working on a $400,000 deactivation of the Ready Reserve Force freighter Cape Nome for the Maritime Administration, which is supposed to wrap up at the end of November.

Winning the Cape Nome job has a touch of irony for MHI's managers. The Navy awarded an overhaul on the amphibious transport Nashville to Portsmouth shipyard Moon Engineering Co. Inc. even though MHI was the low bidder by $1 million.

The Navy said the Nashville was too wide to fit safely through a bridge en route to MHI's yard. MHI sued the Navy and lost.

The Cape Nome is six feet wider at the waterline than the Nashville, Brandt said. Maritime Administration standards are not as stringent as the Navy's.

``It's really a slap in the face,'' Brandt said. ``It's really interesting because (the Cape Nome) was brought in at night with just three tugs.''

While MHI lost that $5.5 million job, it quickly found other work.

``It's obvious we're doing something right because we're able to bid jobs competitively,'' Brandt said. ``And we're able to perform on them and make a profit.'' ILLUSTRATION: [Color Photo]

MARTIN SMITH-RODDEN

The Virginian-Pilot

Marine Hydraulics International...

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