Z-Star Joint Venture Faces Loan Foreclosure

Z-Star Inc. (USA), facing a financial crunch, has asked Watertown, New York development authorities for breathing room on its largest assistance package. To avoid foreclosure, the company is offering its building and real estate in exchange for a $373,000 business development loan it cannot repay. 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). The company manufactures bridge bearings and expansion joints and currently has approximately 15 skilled trades 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. Z-Star'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 is 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% on an investment project reportedly worth $250,000 and expected to create six new jobs by 2006. With the company now in deep financial difficulty and unable to service the loan packages, Z-Star has offered to voluntarily turn over its building and real estate to the WLDC, avoiding foreclosure. Z-Star is then proposing lease the property back from the WLDC as it continues operating. It is unclear what would happen with the RLF loan and another from the North Country Alliance if the WLDC took over the building and real estate.