Holding company Valhi Inc. apparently kept former subsidiary Waste Control Specialists financially afloat with money borrowed from one of its other subsidiaries, according to the holding company’s 10-K document filed Thursday.
The same filing with the U.S. Securities Exchange Commission also said Valhi believes it will be in better financial shape following its sale of WCS to private equity firm J.F. Lehman for a publicly undisclosed amount.
Waste Control Specialists primarily operates a complex in Andrews County, Texas, for disposal of low-level radioactive waste and other hazardous waste forms from government and commercial clients. The company has “historically struggled to generate sufficient recurring disposal volumes to generate positive operating results or cash flows. We believe the sale will enable us to focus more effort on continuing to develop our remaining segments which we believe have greater opportunity for higher returns,” Valhi’s 10-K filing said.
The filing said an unnamed Valhi subsidiary loaned $19 million in 2015 and $22.7 million in 2016 to WCS, which “has borrowed substantial amounts from us over the years,” the filing said. Since then, WCS paid back $6 million.
As part of the sale announced in January, Lehman assumed all of WCS’s debts, liabilities, and financial assurance obligations. The waste management company had $1.071 billion in long-term debt, according to a January SEC filing.
In its Thursday SEC filing, Valhi said it expects to record a pre-tax gain of roughly $57 million in the first quarter of 2018 “because the carrying value of the liabilities of the business assumed by the purchaser exceeded the carrying value of the assets sold at the time of sale.”
That was largely connected to a $170.6 million long-lived asset impairment triggered when a federal judge last June blocked Waste Control Specialists’ previous proposed sale, on antitrust grounds, to rival low-level radioactive waste disposal provider EnergySolutions, of Salt Lake City.
