Potential savior emerges for USA Springs

A mystery firm has agreed to invest $55 million to purchase nearly two-thirds of the assets of USA Springs, the company that wants to build a water bottling plant in Nottingham, according to a letter of intent allowed Thursday by the U.S. Bankruptcy Court in Manchester.

The new company would continue to work with the controversial Pelham-based water company to finish the bottling plant, said Alan L. Braunstein, an attorney for USA Springs.

If the deal goes through as scheduled right before Christmas, all creditors in the case should be paid in full.

The identity of the firm, referred to as “NewCo” and represented by Boston attorney Daniel S. Bleck, was redacted from the letter of intent and will be kept secret from the public until next month, when a disclosure statement is due. (All of the attorneys in the case learned of the identity Thursday).

During that time, USA Springs could entertain competing bids from other buyers, but if the bottling company backed out of the deal, the bankrupt estate would have to pay as much as a $1.5 million penalty. If the deal fizzles and the company ends up going at a fire sale, “NewCo” will have to wait in line like all the other unsecured creditors.

“NewCo” was described as a U.S.-based entrepreneurial company, backed by a “known financier” who’s also based in the United States and had expressed interest in investing in USA Springs years ago, before it received its permits, according to Braunstein. NewCo would continue to use the services of the company’s principals, including USA Springs founder Francesco Rotondo, on a contractual basis, he added.

NewCo would own 65 percent of the new company, while Rotondo and the other USA Springs investors would retain 35 percent interest.

“Talk about nine lives,” said a smiling Rotondo, whose company was on the very brink of liquidation in April.

But Rotondo also said he “felt awful” at the thought of losing control of the company he had worked so hard to build. He said he still had some hopes that this offer would spark some competing bids that would enable him to do so.

Rotondo and USA Springs have faced opposition from local community groups, especially Save Our Groundwater, which claim that the plant would put residents’ drinking water at risk in order to sell water to people from out of state, and even out of the country.

Rotondo has said that much of this opposition was tinged with prejudice against his Italian origin, and that 95 percent of community was on his side now, because it needed the economic development his project would bring.

One bankruptcy filing did reveal an international connection: An organization from Malta, an independent island outside of Italy near Sicily had contracted for at least some of the water. Indeed, Braunstein said that a representative from that Malta-based group would travel to New Hampshire to answer questions about that contract at the proper time.

As for Rotondo’s economic development claims, Save Our Groundwater spokesperson Denise Hart said that a bottling plant is fully automated, would produce few jobs and loads of truck traffic. “After not paying his taxes, leaving a half-finished building and forcing thousands of dollars of legal bills, I’d like to see evidence of his support.”

Whatever the merits of the competing claims, USA Springs company did eventually obtain its permits, but the long battle, as well as the deepening recession, forced the company to file for Chapter 11 bankruptcy protection in June 2008. At the time, the company said that it owed more than $13.9 million, with little more than $300 in its checking account. But Rotondo claimed his company and land was worth $127 million, and that he had several buyers ready to close a deal any day.

But as months passed buy, creditors became increasingly impatient, and when Rotondo and his attorney didn’t even show up at a hearing in April, the creditors forced it into Chapter 7 liquidation.

Rotondo, with a new attorney, convinced creditors to hold off a few weeks, and succeeded in reverting the filing back to Chapter 11 reorganization.

Still, while both sides have filed a letter of intent, the deal is far from finalized.

Indeed, said U.S, Bankruptcy Court Judge J. Michael Deasy. “This deal is not really a deal. It is premature.”

He said there were too many conditions, including a very “aggressive” schedule — that would enable NewCo to walk away with a bit of that potential $1.5 million penalty (as much as $500,000).

But the creditors — if they ever hope to get repaid — have little choice but to go along with the deal, and neither does the debtor, said Deasy.

“You all have to follow the Golden Rule: Those that have the gold, makes the rules,” he said.

But USA Springs’ attorney Bleck said the company does not intend to walk away unless it becomes a bidding war sparked by the initial offer. And the strict schedule was to discourage that from happening.

“This is a lock-up deal,” Bleck said.

Hart of Save Our Groundwater, however, was skeptical that it will all pan out.

“We are going to have to wait and see. There have been many promises that this company would find a way out of this morass. As far as we are concerned, this is just speculation. None of the entities have been disclosed,” she said. — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW

Categories: News