American Seafoods' purchase of Good Harbor Fillet has done more than put 110 people out of work — it has left the city holding the bag for a $145,000 balance on a loan from 2003.
Good Harbor Fillet owes the city that amount from a loan Gloucester extended to the company, said Jim Duggan, the city's chief administrative officer.
He added that the city will pursue that money, though the sudden job loss is the administration's biggest worry at the moment, he said.
American Seafoods Group LLC, a Seattle-based conglomerate bought Good Harbor Fillet on Jan. 16. But while a company release indicate only that the would "integrate" the Gloucester company into one of American's other subsidiaries, New Bedford-based American Pride Seafoods, city officials confirmed late last week that company will significantly shrink, if not close, Fillet's Gloucester location.
Founder Bill Stride moved the company to a new building in Blackburn Industrial Park in 2003. That's when city gave the fish processing company a $300,000 Section 108 loan.
A so-called 108 loan comes from the federal Department of Housing and Urban Development, the city administers it, and uses Community Development Block Grant funding as collateral.
Duggan said Thursday that those loans let the city support local economic development without tapping into block grant money. The city uses block grant funding for affordable housing, job training and like programs.
Stride did not return a call for comment Thursday, while Kerry Clift, spokesperson for American Pride Seafoods, did not return calls for comment on this story.
The 2003 loan extended to Good Harbor Fillet was the second extended by the city; prior to that, the company borrowed $300,000 in 1996, and paid it off ahead of schedule, Duggan said.
That didn't happen this time.
After its 2003 expansion and move to Blackburn Industrial Park, Good Harbor Fillet went bankrupt in 2006, and left the loan from the city with a $243,000 balance. After the default, the city paid off the $243,000 from the community development block grant funding.
"It has absolutely affected our budget," Duggan said.
Good Harbor Fillet restructured after Los Angeles-based investment bank Creo Capital Partners LLC acquired the company later that year. The company then got back up on its feet, hiring 65 employees and securing the rights to NutraPure, a protein coating process that prevents fish from absorbing fat when cooked. That development, perfected at the Blackburn site, made Good Harbor Fillet a major supplier of fish products for schools, military, and health services organizations.
After the restructuring, Good Harbor Fillet and the city hammered out a settlement, said Duggan. That settlement reduced the amount the company had to pay to $150,000 with $5,000 to be paid up front.
The company had to pay in six years, with an option to extend it for two more.
Despite Good Harbor Fillet's resurgence, however, the company opted for another two years' extension last November. When American Seafood purchased Good Harbor Fillet last week, the Gloucester company had not paid the city any of the $145,000 balance.
While the city will go after that money, Duggan said the administration will focus on keeping jobs in the city.
"If repaying that $150,000 will prohibit jobs from staying here, or in any way shape or form will keep another company from entering that space, that's more of our priority," said Duggan.
If Gloucester does see that money, Duggan said it would go back into the Community Development Block Grants.
Steven Fletcher may be contacted at 1-978-283-7000 x3455, or email@example.com. Follow him on Twitter at @stevengdt.