84 Lumber borrows $20 million
84 Lumber Co. is borrowing $20 million in federal money to help pay off loans it took out under less-than-favorable circumstances during the national financial meltdown. Jeff Nobers, 84 Lumber vice president of marketing, explained the company is seeking the loans through the Community Development Block Grant (CBDG) program administered by the Fayette County Redevelopment Authority.
“The way the block grants work is this is federal money, HUD (Department of Housing and Urban Development Section 108 CBDG) money administered by the state. We are seeking $15 million in Fayette County and $5 million in Washington County, so we are seeking a total of $20 million. If successful, these loans will be part of a total financing package of $45 million. The rest of the money will come from a private lender and the owner of the company, Maggie Hardy Magerko,” he said.
He said since the state administers the block grant program, “technically, Fayette County is the applicant and the commissioners have to approve the loan. We have to go through the public hearing first before the commissioners vote on it.” He added Washington County commissioners also will have to vote on approval.
A public hearing on the loan request will be held at 4 p.m. Wednesday at the Fayette County Redevelopment Authority, 86 W. Main St., Uniontown.
Andrew French, Fayette County Redevelopment Authority executive director, explained his agency serves as the administrator of the program through which the loans are made, “So, we are familiar with all the state and federal requirements to operate the program. The county has a cooperation agreement with us to serve as the administrator.”
Nobers explained 84 Lumber Co., which sells construction supplies, was thrust into the throes of the national financial meltdown and housing industry crisis that began in 2008.
The lender the company borrowed from imposed a number of restrictions on the loan that would not, under normal circumstances, be imposed.
84 Lumber will use the new financing to pay that loan off.
“In 2008, we entered into a loan package with primary lender Cerberus Capital Management and we have been paying that loan down. In fact, we are ahead of schedule. But the issue with those kinds of loans at that point is they are onerous loans. Your ability to do certain things is restricted by the loan. We will have much better terms if we can pay those off and it will give our company a lot more flexibility and liquidity,” Nobers said.
“From the standpoint of the state and county, they are collateralized loans with hard assets of ours (84 Lumber Co. real estate) so there is security and a means for the state or county to recover money,” he said.
“We don’t have any concerns about our ability to repay the loan,” he added.
The housing industry, Nobers said, “isn’t out of the woods yet. It’s not booming but it is better than where we were two years ago.
“This loan will help us expand and continue to grow in new projects we are doing, like installed services we offer, such as where we install framing, doors and insulation, and where we have gotten into more commercial construction. These will give us the capability in the long term to be a more successful company,” he said.
Nobers emphasized, “These are loans. No one is giving 84 Lumber Co. money. It’s just like you or I taking out a mortgage or borrowing money to buy a new car.”
Terms of the loan include repayment within 17 years and only interest payments will be made during the first two years of the loan. Interest and principal will be amortized over the remaining 15 years.
The use of the Section 108 loan is eligible under CBDG regulations in that the proposed project will benefit low- and moderate-income people in the creation and retention of jobs.