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KEDB: Heritage Glass has defaulted on its lease

September 6th, 2015 5:46 pm by Hank Hayes

KEDB: Heritage Glass has defaulted on its lease

This Times-News file photo shows employees stand behind the gate at Heritage Glass in Kingsport.

KINGSPORT — Heritage Glass is officially in default in its lease agreement with the Kingsport Economic Development Board, according to KEDB Chairman Bill Dudney.

The glass maker suspended operations in late May and cited a “potential reinvestment and reorganization situation.”

But there’s no indication the situation has gotten any better.

Kingsport, state and private investment came together in April 2014 in a $15.8 million deal allowing Heritage Glass to restart patterned glass production at facilities closed by AGC Flat Glass North America in November 2012. The move restored local ownership at the former Blue Ridge glass plant, and was expected to employ 120 people short term plus up to 300 long term.

At that time, back-to-back morning meetings by the Kingsport Board of Mayor and Aldermen and KEDB allowed the deal to move forward. KEDB secured a $2.6 million loan toward a $4.7 million purchase of the 35-acre site, excluding the AGC corporate office facility and credit union operation.

KEDB, in turn, leased the real estate back to the Heritage Glass ownership group for 15 years in amounts equal to the monthly loan payments, according to the deal.

The company also had the option to purchase the real estate from KEDB at any time, according to KEDB legal counsel Gorman Waddell.

But a third party, a lender, was also part of the deal.

“When the board bought the property from AGC, there was a lender involved with Heritage who loaned them money secured with certain assets, namely equipment,” Dudney explained. “We entered into basically a tri-party agreement with that lender that in the event of the default with that company on their loan, we would give them a certain amount of time to sell their collateral. That’s where we are today. That time period runs to December 31 ... From the economic development board’s standpoint there’s nothing for us to do. After that time period runs out, when and if we were to take back possession of the building, we would obviously then market the building to any prospective buyers.”

The Lincoln Street glass plant site is bordered by Eastman Chemical Co.

Dudney also observed that during this time period, there’s still an opportunity for Heritage Glass to recapitalize or for other investors to step up.

“(But) we’re not directly involved in those discussions. I don’t know what the probability of that is,” Dudney added. “They are still doing some operations, and there’s product on the floor that is finished product that could be shipped to buyers.”

As for reports that company employees have not been paid for their services, the Tennessee Department of Labor and Workforce Development (TDLWD) has attempted to intervene.

“Applicable monetary penalties” will be assessed against Heritage Glass for potential violations of state wage regulations, according to a TDLWD letter sent to Kingsport attorney Bruce Shine, who is representing some workers.

Shine, in an email, noted banks and secured creditors are generally compensated before hourly workers in these kinds of situations.

“One of my clients has been paid, but others haven't,” Shine said. “I don't know the actual number unpaid workers or the total amount of earned but unpaid wages.”

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