Debt-Plagued Trash Hauler Takes Rival’s Buyout Offer

Saddled with debt, the family who owns and operates Ventura County’s second-largest waste hauling company has announced plans to sell all its stock in the firm to a Torrance-based rival.

If approved by a bankruptcy judge, the deal would allow Western Waste Industries to take over GI Industries, which hauls trash for Thousand Oaks, Moorpark and Simi Valley.

Government officials said Thursday that rates and services should not be affected by the takeover, but added that the firm’s new owner would not automatically pick up the exclusive contracts with the three cities and the county government.

“We have a responsibility to the public to ensure that whoever takes over the company has the qualifications and the financial wherewithal to fulfill the contract,” said Donald Hurley, Ventura assistant county counsel.

Hurley said the county has already told Robin Riblet, the U.S. bankruptcy judge handling the case, that it believes the contracts do not automatically transfer to whomever purchases the company.

“We would not expect that the terms of the contract would change,” he added. “The biggest problem here is with the change in ownership . . . what is the reliability and reputation of the new owner.”

If the buyout is approved, Western Waste would take control of the firm by swapping its stock for all the GI stock owned by the Asadurian family of Moorpark.

As part of the deal between the Asadurians and Kosti Shirvanian, president of Western Waste Industries, the family would receive one share of Western Waste stock for every nine or 10 shares of GI stock, said Manuel Asadurian, who with his brother Sam, son Manuel Jr. and nephew Carl controls about 1.5 million shares--or 40%--of the company’s stock. With those shares and the 25% interest Western Waste already holds, the Torrance company would control GI.

The deal will be considered by Riblet in Santa Barbara on April 22.

GI Industries filed for bankruptcy protection in August 1992 after losing several million dollars on failed attempts to diversify its holdings.

The firm has since sold off its unprofitable subsidiaries, cut staffing and focused its operations solely on picking up commercial and residential trash in eastern Ventura County and parts of Los Angeles County.

GI has been bogged down in bankruptcy court trying to shake off lawsuits seeking several million dollars--including one by Western Waste, which claims that GI owes the firm $5 million to $12 million.

Presumably, the new deal will include some provisions to resolve the suit with Western, Manuel Asadurian said.

“Hopefully this will settle everything and we can get out of court,” said Asadurian, who estimated that the two sides have spent more than $6 million in attorney’s fees during the long bankruptcy litigation.

Despite the bankruptcy, the company, which has exclusive contracts to pick up rubbish for about 40,000 customers in eastern Ventura County, generated an estimated $20 million in revenues last year.

A change in ownership should not affect service or rates set in contracts with GI Industries, said Ron Durkin, the court-appointed trustee who has overseen the company’s operation since it sought bankruptcy protection.

Although Durkin did not see any obstacle to the possible takeover, he said there is still the question of whether GI’s exclusive contracts can automatically be transferred to a new owner.

Last fall, the city of Simi Valley, with which GI Industries has an exclusive contract until 2003--sent a letter to the bankruptcy judge outlining similar concerns.

Joe Hreha, a deputy director of Simi Valley’s Environmental Services Department, said both government law and the city’s franchise agreement with the firm gives the City Council the right to approve a transfer of ownership.

The City Council cannot, however, object if the new owners can show they are qualified to pick up trash and are financially sound, Hreha said.

Even as the takeover deal is being considered, Western Waste is in the process of being acquired by Texas-based USA Waste Services Inc.

That deal, which is estimated to be worth about $435 million, would create the third-largest trash firm in the nation, with as much as $800 million in annual revenue and 1 million customers in 23 states, according to industry sources. The deal is expected to be closed by May.

How the Western Waste takeover will affect GI Industries’ bankruptcy reorganization is still unclear. Asadurian said he was assured the company would likely keep the same name and the same employees.

But the takeover would probably mean a change in the board of directors and possibly the management of GI Industries, said Joel Ohlgren, an attorney representing Western Waste’s interest in the bankruptcy case.

“I presume the management structure [of GI] would change,” Ohlgren said.

Even Michael Smith, GI’s chief executive officer, said he was not sure what the deal would mean. He had only learned of it in bankruptcy court on Wednesday.

The bankruptcy judge will review an amended plan of reorganization reflecting the new ownership at the April 22 hearing.

But the deal may not satisfy all of GI’s creditors. Benedor Corp. of Simi Valley is suing a subsidiary of GI Industries, Conejo Enterprises, for more than $40 million, a figure that Benedor says it is owed due to a breach of a 20-year contract to recycle green waste for GI Industries.

That claim, along with the GI Industries sale, is also being considered by the judge.