Debt of wholesale company threatens small village corporations

Posted: Friday, June 01, 2001

ANCHORAGE (AP) -- Nine small Native corporations in Western Alaska could face financial jeopardy stemming from a troubled investment in WAVE Wholesale Co., a grocery and transportation business that is reorganizing under Chapter 11 bankruptcy protection.

Western Alaska Village Enterprises, or WAVE, was formed in 1997 by Calista Corp., the regional Native corporation for the Yukon-Kuskokwim Delta region.

WAVE, which continues to operate, provides groceries and merchandise to village stores throughout much of Western Alaska. It also provides freight services to rural Alaska and owns a general store in Unalakleet and a craft shop at Anchorage's Alaska Native Heritage Center. WAVE has shut down several other businesses and downsized from 117 employees in January to 52 now, said general manager Jerry Dunn.

WAVE's biggest investors were Calista and NANA, the regional Native corporation for the Kotzebue area, with several smaller Native companies in the Yukon-Kuskokwim Delta.

After WAVE filed for Chapter 11 in January, several village corporations learned that they were solely responsible for $11 million in debt from a bank loan they guaranteed that helped launch WAVE. They also discovered that Calista and NANA were not liable for the debt because the regional corporations did not guarantee the Key Bank loan.

''It caught us totally by surprise,'' said Zack Ivon, general manager of Qemirtalek Coast Corp. ''We felt we were railroaded into it after we believed that they would sign.''

His company, based in Kongiganak, figured Calista and NANA were sharing the investment risk, Ivon said. Qemirtalek, is a tiny company with less than $700,000 in revenue, Ivon said. If forced to repay the debt, Qemirtalek would be ''financially floating with no kind of support.''

''We might have to rob banks in order to pay it off. We might have to act like Robin Hood and steal from the rich to give money to the poor,'' said Harley Sundown, chairman of Askinuk Corp., a village corporation based in Scammon Bay that also guaranteed the loan.

Like Ivon, Sundown said his board didn't realize the nine village corporations were solely liable for the debt and that the larger Calista and NANA corporations were not. When he found out, Sundown was shocked.

''I couldn't believe that such corporations that have so much more money than our dinky corporations would put us in such a situation,'' Sundown said.

Calista's president and chief executive, Matthew Nicolai, referred all questions about WAVE to Dunn, the general manager.

''I don't run WAVE,'' Nicolai said from his Anchorage office.

Dunn and Cabot Christianson, the Anchorage attorney handling the bankruptcy reorganization for WAVE, said they didn't know why Calista and NANA didn't guarantee the loan because neither man was involved in financing decisions made at the time the corporation was founded.

WAVE is expected to submit a reorganization plan in U.S. Bankruptcy Court that calls for Key Bank write down some of the debt to reduce the village corporations' exposure.

''I'm sure that if the bank pursues the guarantee aggressively, it could put some of the villages in a difficult situation,'' Christianson said. He noted that $4 million of the $11 million debt is secured by real estate. The corporations are liable for up to $7 million in unsecured debt.



CONTACT US

  • Switchboard: 907-283-7551
  • Circulation and Delivery: 907-283-3584
  • Newsroom Fax: 907-283-3299
  • Business Fax: 907-283-3299
  • Accounts Receivable: 907-335-1257
  • View the Staff Directory
  • or Send feedback

ADVERTISING

SUBSCRIBER SERVICES

SOCIAL NETWORKING

MORRIS ALASKA NEWS