Jones tries to avoid German parent trap

U.S. subsidiary claims it is strong despite parent’s insolvency
August 11, 2010

Charlotte , N.C. , contracting giant J.A. Jones Inc. may not be reeling from the March bankruptcy of German parent Philipp Holzmann AG, but it is certainly scrambling. While Jones actively searches for another well-heeled offshore parent, the firm has secured a $200 million loan, which it claims is unrelated to its parent’s insolvency.

Last month, Jones announced its closing of the syndicated, two-year renewal loan provided by an international banking consortium of Deutsche Bank, Bayerische Landesbank and DZ Bank. “The loan is exclusively for J.A. Jones and is not tied to Holzmann in any way,” says John Deem of Charlotte-based Luquire George Andrews, Jones’ public relations firm. “It’s a demonstration of the consortium’s confidence in the company. However, J.A. Jones always has had syndicated loans in place. The timing of the loan may appear that it was tied to the Holzmann situation, but it was not,” he says.

The loan essentially is a line of credit that allows the company to conduct its day-to-day business operations, Deem explains, adding that none of the privately held company’s projects would be delayed or affected because of Holzmann’s insolvency.

In March, a fter efforts to find merger partners and buyers did not meet the timetable of a bank consortium that provides its financing and holds the majority of its stock, the Frankfurt-based Holzmann declared bankruptcy, culminating years of economic uncertainty. A 150-year-old company, Holzmann first filed for bankruptcy protection in 1999, but an arrangement was brokered between the company, its creditors, institutional shareholders and the German government to enable it to continue operating.

“Over the past three years, measures have been put in place to insulate J.A. Jones from the possibility of a Philipp Holzmann insolvency,” Al Neffgen, Jones’ CEO, said in a statement. “These safeguards are proving to be effective and will allow us to carry on our business unabated, and deliver both the level and quality of service our customers have come to expect.”

Some local observers suspect Jones’ efforts to insulate itself in the event of a Holzmann insolvency created friction between the two companies, and the Jones will be fair better following the parent company’s dissolution of assets. “From a business perspective, there appears to be no significant impact on [Jones’] ability to maintain operations and secure work,” says Stephen P. Gennett, president and CEO of Charlotte-based Carolinas AGC, Inc. “They are continuing their effort to improve their profile in North Carolina, and they aren’t operating with any sense that their position as a significant contractor will be adversely impacted by this,” he says.

Known for building embassies, commercial construction, and for maintaining military bases, the 112-year-old Jones represented 60 percent of Holzmann’s revenues in 2001.

Deem says that Jones is unfazed by its parent’s collapse. “J.A. Jones is moving on with its projects as well as seeking new ones. Nothing has changed as far as the day-to-day business of the company,” he says.

In fact, Deem says that Jones, which claims to be a $3 billion company, is experiencing near record growth, having had its second-best year in 2001. “The company is finishing up one of its most successful years ever,” says Deem. The company claims it has a $4.5 billion backlog of projects and more than doubled profits between 2000 and 2001. In BD&C ’s own Design/Construction Top 300 last year, Jones was ranked eighth among contractors with $1.5 billion in revenues, and was number nine among construction managers with $795 million in revenues (See BD&C, 7/01, page 42). Lockwood Greene, one of nine companies owned by Jones, ranked 60th in the contractors category with revenues of $283 million, and fourth among engineers/architects with $205 million in revenues.

Mannheim, Germany-based contractor Bilfinger + Berger AG is considering acquiring parts of Holzmann, including Jones. Sascha Bamberger of Bilfinger + Berger’s corporate communications department says, “Bilfinger + Berger is currently looking into the taking over of individual parts of Phillip Holzmann. Before the backdrop of further internationalization, the activities of American affiliated companies of Philipp Holzmann can also be relevant. However, according to our information, at this time the present insolvency officer has taken no concrete steps for the disposal of the U.S. affiliates of Philipp Holzmann.”

Deem says that Jones has had no contact with Bilfinger or any other company interested in acquiring it. “I really can’t tell you where things are as far as acquisition of J.A. Jones by other companies,” says Deem. “You probably know as much about that as we do at this point. We end up reading it as much as anyone else,” he says.

In March, Jones was awarded a $59 million contract by the U.S. Department of State to build a new embassy in Abidjan, Ivory Coast, in West Africa. In the U.S., the contractor topped off the 700-room, 25-story Westin Charlotte hotel in Charlotte, N.C., in April, and is the lead firm constructing the $50 million World War II Memorial in Washington, D.C., with joint venture partner Grunley-Walsh, Rockville, Md.

         
 

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