interesting read 3rd party, not paid for hope your happy
Posted: 09/20/2009 01:00:00 AM MDT
A Canadian company bought the nation's largest tire dump near Hudson a month ago for $6.5 million in bankruptcy court with a plan to pulverize the tires and use the resulting powder in a variety of new applications.
Magnum d'Or Resources of Magog, Quebec, has partnered with a Malaysian firm to find new products made from the recycled tires, touting the technology as breakthrough.
How Magnum gained control of the tires once known as Tire Mountain — home to anywhere from 30 million to 85 million tires — is a case study in business intrigue.
The previous ownership, Tire Recycling, is gone after its idea of using the tires for fueling a power plant flamed out. So did a plan to crumble the tires into tiny pieces for use in landscape applications.
The principal of Tire Recycling, Dwain Immel, is under indictment in Denver for felony securities fraud on a separate oil and gas venture he tried to cobble together, and investors in Tire Recycling have sued him.
A member of an ad hoc state task force on what to do with Colorado's burgeoning stockpile of waste tires — it has the largest of any state — says if Magnum's method of making money from the tires doesn't work, the dump should be capped and closed.
"I think they have a really tough road to hoe," said Michael Blumenthal, vice president of the Rubber Manufacturers Association and the nation's foremost expert on scrap tires. "The piles in Hudson have been getting bigger year after year. It's been a long-running headache."
Others say the variety of plans for the site is exceeded only by the optimism that created them.
"Over the years, we've had lots and lots of people call us saying they had the right idea, but no one ever seems to have the money," said Trevor Jiricek, director of environmental health for the Weld County Public Health Department.
"They want to make oil from the tires, make material for football fields, burn
The massive tire dump near Hudson is the nation's largest, containing 30 million to 85 million tires, and getting bigger every year. (Kenneth D. Lyons, The Denver Post )it for energy. There's always something, and none ever seems to come to fruition," he said. "It would be awesome if it can be a viable recycling operation."
Big plans go flat
Immel's company filed for bankruptcy in August 2007, unable to come up with a market for the recycled tires or to satisfy creditors demanding payment. He'd bought the dump in 2003 for $3 million with the backing of one investor. Other investors followed.
After filing Chapter 11, Immel thought he had a deal to sell tires to Magnum, giving him hope that he would emerge from bankruptcy.
But that turned on him.
Bankruptcy records show the deal was to allow for Magnum to purchase about 35,000 tons of tires, shred them on site under a separate lease agreement, then transport the product to Quebec for final processing.
The agreement was to generate about $1.2 million a year, enough to keep Tire Recycling alive, Immel said.
Things suddenly changed a few months later in early 2009, records show. Magnum talked of purchasing the property, tires and equipment for $15 million, according to a letter of intent.
The company had already paired with Malaysian firm Sekhar Research Innovations Sdn Bhd to develop new rubber recycling solutions, according to Magnum's news releases.
Immel thought he'd found his payday.
"It was an acceptable deal to everyone, including the creditors, and a fair return on the investment," Immel said.
The principals at Magnum, though, had other plans. While Immel stopped seeking other deals for the tire inventory as part of his agreement to negotiate a sale, Magnum quietly set about buying up the secured creditor interests in the bankruptcy case.
Before anyone knew it, Magnum had become the single-largest secured creditor, taking over about $4.4 million in notes, court records show.
That's when Magnum made its formal bid to buy the dump site, equipment and tires for $6.5 million. It meant Immel and his investors — nine of them, according to court records — weren't likely to see a dime after creditors were paid.
Magnum president, Joseph Glusic, refused comment.
The bankruptcy trustee approved the deal and allowed only a few weeks for other interested parties to enter bids. There was no advertising, no public notices.
As a result, other companies with an interest in the tires had little or no time to make a viable play, according to interviews with three investment groups that tried. They refused to be identified because their investment strategies are proprietary.
"We simply had no time, and this would have been a decent deal to make," one investor said. "We learned of it through word of mouth. It was a coup for Magnum."
Court challenges
Immel's investors fumed, including Charles Kohlhaas, a retired Colorado School of Mines professor who decided to challenge the sale in court.
"They figured they could set a guy up at $15 million and snatch the whole thing for $6.5 million in court, and I screwed it up," Kohlhaas said. "They beat it into the dirt and did an end-run around Immel. Everyone except me lost all their equity."
Kohlhaas said Magnum settled the challenge for about $1.5 million, enough for him to make two other investors whole, both friends of his. Neither returned calls for comment.
For his part, Immel got about 500,000 restricted shares in Magnum to cover his secured interests, and has another $800,000 in unsecured debt.
Another investor in the tire business, Ron King of Morrison, said he has a judgment from another lawsuit he filed against Immel that should make him whole.
"I feel like we got left aside," King said of the tire project's investors. "The bankruptcy court just didn't care about us."
Meanwhile, the tire dump is still the single-largest entity near Hudson, and Magnum convinced state and local officials to give it a chance.
Blumenthal said he's OK with that — to a point.
"The state wants someone out there to succeed and get the tires out of the pile," he said. "I respect that and the rationale is sound. But if they're just sitting there, they're an environmental threat."
Should Magnum fail, what then to do with the largest heap of scrap tires in the world?
"We'd encourage the state to shut it down permanently," Blumenthal said. "Cut the losses, cap it, monitor it and move on."
AI
