Z-Star Inc. (USA) has apparently run itself out of time and options in an effort to stay open, more than two years after mounting financial pressures put it in default on business development loans and lease on its Watertown, New York facility.
Z-Star is a joint venture of two bridge bearing producers, Z-Tech Industries Inc. (Quebec, Canada, a division of Les Industries Z-Tech Inc.) and TechStar Inc. (USA). It manufactures bridge bearings and expansion joints and currently has approximately 15 skilled trade employees in Watertown, including machinists, welders and Designers.
Located in the Jefferson County Industrial Park, Z-Star began operations in early 2002. At the time, it had in hand orders from the New York Department of Transportation for one-off bridge bearings and expansion joints intended for bridge repairs on Interstate 81. The company also had orders for projects in Florida, California, Missouri and Tennessee.
The company's pot design bearings are approved for use by a number of state transportation authorities for bridges and expansion joints.
In 2002, on the strength of its orders in hand, the Watertown Local Development Corporation (WLDC) loaned the company $373,000 for working capital, machinery and equipment. The loan was secured by Z-Star's building and real estate.
In April 2003, the Jefferson County Industrial Development Agency Revolving Loan Fund (RLF) approved a $25,000 loan to help Z-Star with working capital, machinery and equipment, at the rate of 10%. The loan was based on an investment project reportedly worth $250,000 and which would supposedly create six new jobs by 2006.
By early 2005, however, Z-Star was obviously in deep financial difficulty. Only a handful of payments were ever made on its loan packages, and no payment had been made for quite some time.
With the WLDC and Watertown Trust pushing hard for repayment or some type of arrangement, Z-Star then offered to sign over its building and real estate to the WLDC in a sale / leaseback arrangement.
For its business predicament, the company blamed high steel prices, uneven demand, and contracts which failed to materialize.
The WLDC and Watertown Trust initially rejected the leaseback arrangement as not being the way they handle economic development initiatives.
But by mid-2005, Z-Star had still made no more payments under its loan package, and in fact the WLDC later ended up paying Z-Star's property tax and property insurance bills -- reportedly running more than $50,000. With total debt fast approaching $500,000, the WLDC started foreclosure action to evict Z-Star.
In early 2006, the WLDC and Z-Star reached a tentative agreement. Z-Star signed over its real estate assets -- the 14,500 square foot building and land on Fisher Road in the Jefferson County Corporate Park -- to the WLDC and agreed to lease back the facility at a preferential rate. In turn, the WLDC credited Z-Star with more than $339,000 and suspended foreclosure action.
This left Z-Star approximately $120,000 in debt to the WLDC, plus whatever monthly rent was due, along with taxes and insurance.
However, Z-Star failed to make any payments under the new arrangement.
Yet another deal was reportedly set up in May 2006, where Z-Star's lease rate was set at just $2 per share foot, plus a small security deposit.
Z-Star management reportedly allowed the offer to expire without acting on it, triggering the Watertown Trust's decision to finally evict the company.
A bridge bearing manufacturer contacted by eBearing said they had never heard of Z-Star, but could not understand the difficulties, characterizing the bridge bearing segment as generally robust over the past several years.
No timetable has been set for Z-Star's eviction; the company could potentially keep operating if it were able to relocate and/or secure additional financing. Given the company's financial history, however, eviction and shutdown seems the most likely outcome.
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