Oakland port strikes deal with bankrupt terminal operator

Oakland port strikes deal with bankrupt terminal operator
By George Avalosgavalos@bayareanewsgroup.com
OAKLAND -- The Port of Oakland and bankrupt operator Outer Harbor Terminals have struck a deal whereby the insolvent terminal company will pay two months rent and undertake other concessions in return for a termination of its 50-year lease with the port.

The deal is a key milestone in the port's efforts to cope with the aftermath of the collapse of the Outer Harbor Terminals business in Oakland, including a more flexible operation for the Oakland port.
"We're not pleased to see a terminal close, but this agreement helps ensure a smooth transition for our customers," said John Driscoll, the maritime director for the Port of Oakland.
Outer Harbor Terminal accounted for 24 percent of the East Bay cargo hub's maritime operating revenue of $158.7 million for the 2015 fiscal year that ended June 30, according to Michael Zampa, a spokesman for the Port of Oakland. That would equate to roughly $38 million.
The terminal operator, in papers filed with the U.S. Bankruptcy Court in Delaware, told the court that heavy losses in recent years, pressure to be a competitive operator at the Oakland port and an inability to restructure its lease agreement with the port combined to force them into a corner. Matters were made worse, the terminal operator claimed, due to a lawsuit by the company against the city of Oakland over taxation issues and having to defend itself in an unfair labor dispute brought by National Labor Relations Board on behalf of the machinists union.

"In 2015, Outer Harbor Terminal began to explore potential financing alternatives that would allow it to fund long-term capital investments that would be necessary to remain competitive in its industry and, in particular, at the Port of Oakland," the bankrupt terminal operator stated in the filing. "Those efforts, however, did not prove successful."
Under the new deal that includes a termination of the lease, Outer Harbor Terminal has agreed to pay about $6 million to cover the February and March rent to the port and continue Oakland vessel and cargo operations through March 31. It will also clean up debris and remove equipment on the 166-acre property where it operates and pay the port $5.1 million for additional cleanup and repairs.
In addition to letting Outer Harbor Terminal exit its lease, the Oakland port also agreed to provide free rent in April to ensure that the terminal operator stays open for cargo operations until the final shutdown.
"All our attention now is on efficiently migrating their cargo to the other terminals in Oakland," Driscoll said.

Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.