Last-Minute Deal Speeds Gulf Money Bankrupt Firm Almost Missed Payment For Retiree Medical Benefits

Bankrupt Gulf USA Corp. cut a last-minute deal with creditors Thursday to avoid a lapse in payments for its retirees’ medical benefits.

“There is a bit of an emergency here,” said Gulf lawyer Larry May at a bankruptcy hearing in Coeur d’Alene. “We need these funds in the next several days.”

Gulf has been under court order not to spend money set aside for environmental cleanup at the Bunker Hill Superfund site unless creditors approve. This week, the company’s coffers nearly ran dry, save for money earmarked for Bunker Hill.

Gulf operated the Bunker Hill mine and smelter site, a source of much of the lead and other pollution in the Coeur d’Alene River basin. Consequently, the company owes millions to the federal government to clean up the site, and additional millions to retirees and corporate bondholders.

At Thursday’s hearing, Gulf got approval to spend about $180,000. Retiree medical benefits cost the company about $45,000 per week. In exchange for the $180,000, the company gave EPA a lien on property near the Silver Mountain Ski Resort. The 150-acre East Ridge parcel is a prime development property atop the ski hill.

The 2,000 or so Gulf retirees in North Idaho and Spokane need not worry about having medical benefits paid over the next several weeks, their lawyer said. That’s because Gulf recently received $12.5 million from Lloyd’s of London in an environmental insurance settlement; creditors are expected to allow Gulf to tap that money to meet medical obligations to retirees.

Another hearing in the Gulf bankruptcy is scheduled in two weeks.

“We will agree (at that hearing) that the company can use the Lloyd’s money,” said Steve Berzon, a San Francisco lawyer for retirees who receive medical benefits from Gulf.

However, the long-term future of retiree medical benefits is less certain. Payments hinge on Gulf reorganizing its debts in a way that ensures continued medical coverage.

Two proposed reorganization plans, funded by investors, would result in medical benefit reductions. Both plans have rankled creditors, including the federal government, because they allow insiders to own Gulf’s primary asset - a 91 percent stake in a New Zealand real estate concern.

Retirees’ claims against Gulf for medical benefits alone are estimated at more than $50 million. Although the company’s chief executive officer has accused Berzon of inflating medical benefits claims, an examiner appointed in the Gulf case has disagreed.