E.C. Ernst Inc., a Washington-based electrical contracting and construction company, announced final approval yesterday of a series of financing and bonding agreements that will help Ernst's drive to reorganize under the Bankruptcy Act.
The 63-year-old firm, which has been operating under Chapter XI of the bankruptcy statutes since last Dec. 1, also obtained new contracts for three Washington buildings - the first major projects awarded to Ernst since its voluntary bankruptcy petition was filed.
Detailing a series of "positive developments in the difficult task of returning to profitable operaions," Chairman Joseph Griffin revealed:
Ernst has obtained a $6 million line of credit from banks to be used for working capital, overhead expenses and new electrical contracting projects.
The Travelers Indemnity Co. has approved up to $25 million in bonding for construction projects through May 31, 1980, and renewable for another year if Ernst is not then in default.
U.S. District Court in New York, which is overseeing the Ernst bankruptcy proceedings, has allowed Ernst to pay certain debts to material suppliers that occurred before the Chapter XI petition was filed.
Contracts have been awarded to Ernst for electrical contracting at the new Arnold & Porter law firm headquarters building, an office building at 1090 Vermont Ave. NW and a new J.C. Penney store in Forestville. Griffin noted that these contracts were awarded on a non-bond basis and said they represented a "gratifying indication" of construction industry regard for Ernst despite its financial difficulties.
The financing and bonding program was approved by creditors as well as the federal court in New York.
Griffin said these agreements, plus Ernst's demonstrated ability to procure sizable contracts on a non-bonded basis, are encouraging, but he noted that "many problems still remain." He credited "the cast majority of suppliers," labor unions and general contractors with enabling Ernst "to continue to operate while we sought to relieve our cash-flow difficulties . . "
Ernst posted a net loss of $5.8 million on revenues of $129 million in the year ended March 31, 1978, and reported a loss of another $7 million for the six months ended last Sept. 30. One difficulty faced by the firm was soaring costs for several long-term contracts.
More recent financial data is being audited, and the company had a backlog of contracts on May 31 of about $60 million, Griffin said yesterday.
In exchange for the bonding commitment, Travelers received a lien on all assets and an option to buy Ernst stock authorized but not outstanding or reserved at the time such an option is exercised, Griffin added.