The Saving Grace Of A Rescue Operation

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Lean and dark, almost strikingly handsome, Pierre Stanis looks like the guy who usually plays the riverboat gambler in a western. In fact, the 35-year-old Stanis, the grandson of a professional gambler, is the type of financier who looks out for risk -- as long as "the play" is big enough to suggest the prospect of big returns.

"I hate doing things the easy, secure way," Stanis admits, as he gulps down a greasy beef sandwich at an Arby's in Kokomo, Ind. "That's why I'm up here, trying to help save Continental. I like dealing with debt and desperate situations. When things are really bad, that's when there's a lot going on. And when you can save people's jobs, then it's really a hell of a nice way to make a few bucks."

Stanis, who quit his job at Philadelphia's Pennsylvania First Bank to start his own financial consulting firm in Florida, has developed a widespread reputation for saving situations others consider hopeless. He played an important role in the rescue of the bankrupt Food-Fair Inc. food-store chain on the East Coast in 1981. And he has persuaded some of New York's toughest bankers to finance modernization, pending the approval of a new union contract, of Continental Steel Corp., a steel company now posting losses of more than $1 million a month.

Joining Stanis in what, to many outsiders, may seem an act of fiscal lunacy is highly respected Trefoil Capital Corp., a New York-based asset-based lender. Trefoil account executive Mike Lerner, whose bank also participated in the multimillion-dollar loans behind Cliff Borland's takeover of Newport Steel Corp., explains that his company likes to do deals in the unfashionable steel industry because most steel companies have large amounts of valuable assets -- such as real estate, machinery, and steel stockpiles -- that can be used to assure the safety of Trefoil's loans.

"We understand these seem like risky loans, but we feel we have the commitments we need. They come to us with all their hard assets," Lerner says. "These steel deals are ideal for our kind of financing." Other asset-based lenders, he notes, have been competing for small steel company loans. Among the most active, say industry sources, have been Security Pacific Credit Corp. and Foothill Group.

Beyond the strong asset resources, "second wave" steel entrepreneurs such as Continental's Tom Sigler and Newport's Cliff Borland, in particular, win the confidence of Lerner and other asset-based lenders. "The key thing is the quality of the management," observes Steve Seiden, senior vice-president of Security Pacific Credit Corp., the lead bank behind Newport Steel. "In Cliff and the guys down there we have a management that's willing to do whatever they can to make it work. The people are all important -- for every deal that can work like this one, there are always four dogs."

Experience with entrepreneurs like Borland may also make it easier to put together other similar management buyouts in the future, believes Boston-based David Collins, Blyth Eastman Paine Webber Inc.'s premier expert in the field. Financiers are beginning to realize, Collins says, that not all steel companies are run like U.S. Steel Corp.

"I have been pleasantly surprised by the quality of the middle-level executives who want to take over these companies," Collins says. "Investment bankers usually deal only with the top people in corporations, but sometimes it's the middle-level guys, like Cliff, who are really the 'can do' types. They want to rescue a company as well as make investments."

Like Collins, Stanis believes there will be a lot more buyouts and other "action" in the basic industries, such as steel, in the coming years. Already, Stanis has at least two other steel-minimill deals waiting on his desk in Florida, projects he will consider taking on once Continental's fate is assured.

"You just can't beat the play on something like this," the financier maintains. "If you turn around a Continental -- get the new equipment they need -- you've got a chance to create a real profitable situation, like the company was in the past. To me, this is the entrepreneurial spirit meeting a problem and getting it to work. And the bennies go to everyone."