By: Patrick Danner
Source: San Antonio Express-News (TNS)
Apr. 4—As San Antonio construction and engineering giant Zachry Holdings Inc. exits bankruptcy, it’s trying to extricate itself from an embarrassing predicament.
Thousands of tools worth millions of dollars have gone missing from the $10 billion Golden Pass liquefied natural gas export terminal project that drove Zachry into bankruptcy last spring.
It has recovered only a fraction of the 17,000 missing small tools, according to one court document—but it’s getting pushback in its quest to conduct another search of the construction site to find the rest of those it rented from Sunbelt Rentals Inc.
Zachry alleged the tools are in the possession of its former Golden Pass partner—CB&I LLC.
Court approves Zachry restructuring plan
The U.S. Bankruptcy Court for the Southern District of Texas has confirmed Zachry Holding’s plan for reorganization. The company expects to successfully complete its restructuring and emerge from the court-supervised process in the coming weeks.
Under the terms of the plan, all vendors and suppliers will be paid in full.
“We initiated this process to resolve issues related to the Golden Pass LNG export terminal project, and with the Court’s approval of our Plan, we are ready to close this chapter and move forward,” said John B. Zachry, chairman/CEO, in a statement.
Additional information regarding the restructuring process is available at www.ZHIrestructuring.com.
CB&I, though, said Zachry knows “full well that nearly all of the unaccounted-for tools left the project” in Sabine Pass when it issued pink slips to about 4,400 workers in May.
CB&I said it has no obligation to mitigate Zachry’s liability to Sunbelt. Nonetheless, CB&I said it allowed Sunbelt to conduct “an exhaustive, weeks-long search for their tools” in September that Zachry declined to take part in.
“Despite an expectation from the outset that the overwhelming majority of tools at issue walked off the project site when (Zachry) abruptly fired thousands of employees and subcontractors near the commencement of these chapter 11 cases (evidently, with no plan in place to recover the Sunbelt tools), CB&I again accommodated (Zachry’s) pursuit to recover them,” CB&I said in the filing.
Zachry representatives and others conducted their own search of the project site in January, a hunt that “turned up only a few hundred of the thousands of missing tools,” CB&I said.
CB&I, a designer and builder of storage tanks and terminals that’s based in The Woodlands, and Japan’s Chiyoda International Corp., which were Zachry’s partners on Golden Pass, have taken over construction. QatarEnergy owns 70% of Golden Pass, while Exxon Mobil Corp. holds the other 30%.
A Zachry representative and a lawyer for CB&I didn’t respond to a request for comment regarding the tools dispute.
Zachry and 20 subsidiaries sought bankruptcy protection May 21, blaming soaring costs on the Golden Pass project. The company alleged in a lawsuit that the project’s owners induced it and other contractors to front the increased costs.
Last summer, the feuding parties reached a settlement that allowed Zachry to exit the project and secure releases from liabilities that CB&I said were in the hundreds of millions of dollars.
Sunbelt says its tools are missing from project site
In a court filing, Zachry said Sunbelt submitted to the bankruptcy court a proof of claim that included more than 12,000 tools that remain unaccounted for at the construction site.
In February, the two companies agreed that Zachry is on the hook for $44.1 million in Sunbelt claims, including an almost $7.3 million “lost tool claim,” a court document shows.
Zachry, though, can reduce the lost tool claim on a “dollar-for-dollar basis” for any tools that Sunbelt recovers or are returned to it. So Zachry wants to carry out a third search of the construction site, which CB&I said would include inspections of thousands of employees’ personal toolboxes.
It added that the circumstances of the dispute are entirely of Zachry’s making, saying the San Antonio company exited the Golden Pass project in a “rushed and disorganized manner” and terminated employees without “asset protection protocols in place.”
CB&I also accused Zachry of “attempting to disrupt the project once more.” Some 5,500 workers have been hired, and any additional search of the worksite would cause an “undue burden” for CB&I, it said.
“Enough is enough,” CB&I added.
Sunbelt’s search team was equipped with radio frequency identification (RFID) scanners to detect the company’s tools, CB&I said. The scanners “pinged” when Sunbelt tools were detected. The crew physically searched any toolbox suspected of housing Sunbelt tools.
The Sunbelt search team recovered 939 of 958 missing pieces of large equipment and 939 of the 17,328 missing small tools, or about 5%, following a five-week search in September, CB&I said.
The list of rented tools is as varied as it is long, including everything from air hammer chisels to torque wrenches to screw guns.
Zachry’s search in January was comprised of three of its representatives, four from Sunbelt, CB&I personnel and Golden Pass staff. They recovered about 500 missing tools, though CB&I said about half were first discovered during the Sunbelt search and left at the construction site, according to a March 26 declaration by Jack Stein, commercial manager on the Golden Pass project.
“I believe a third search of the ... Project site — particularly one involving what I estimate to be more than 4,500 personal toolboxes, spread across a site that is six miles in circumference — would again significantly disrupt ... Project operations,” Stein said. He cited safety concerns and added employees “might view the searches as harassing,” he added.
CB&I wants a judge to quash Zachry’s bid to conduct another search.
Zachry accused CB&I of “gratuitously throwing mud” at it and its subsidiaries.
“All this is subterfuge to cover the simple fact that CB&I is in possession of Sunbelt Tools it has no right to possess, and it is asking this Court to provide cover in much the same way that it used its own safety rules to prohibit Zachry from searching the most likely places where tools might be stashed, or in use” on the worksite, Zachry said.
A hearing on the dispute was held Tuesday in U.S. Bankruptcy Court in Houston.
The judge, however, did not make a ruling, apparently hoping the parties could work it out. He directed them to file a status report by April 16. If it hasn’t been resolved by agreement, then the judge will issue a final ruling.
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