Portland and Specialty Transportation Services At a Crossroads

For the past 10 years, Specialty Transportation Services Inc. (STS), Portage, Ind., has moved nearly 750,000 annual tons of metropolitan Portland, Ore.'s trash from regional transfer stations to a landfill north of the city. But impending management changes at STS and financial troubles at STS' parent company have Portland's regional government, "Metro," re-thinking its contract.

In September 1999, New York-based Churchill Environmental & Industrial Equity Partners purchased a majority of stock in STS' parent company, Asche Transportation Services, Shannon, Ill. Then in July 2000, Churchill loaned STS another $7 million, which could be converted into more than 70 percent of STS stock. The possibility that Churchill might exercise its option to convert the loan triggered a contract clause that allows Metro to approve any STS ownership changes.

At the same time, Metro reportedly has become aware of financial difficulties at Asche, due in part to rising fuel prices.

But, "while circumstances of this sort can be serious," Metro Executive Officer Mike Burton says, "our contract with STS has several protections and backup plans for these kinds of situations."

Some of the protections were solidified in May 1999, after Metro paid STS a $6.6 million contract advance. In return for the advance, STS promised to reduce its charges by $1 per truckload during the remaining 10 years of the contract. STS also agreed to absorb trailer shuttling and parking costs.

Additionally, Asche gave Metro a $4.1 million corporate guarantee, as well as a contract amendment allowing Metro to use STS' trailers and other equipment in the case of a contract default.

Now, Metro must determine whether Churchill, if it decides to convert STS' loan, is capable of maintaining the high-quality services that STS has delivered since 1989, says Jan O'Dell, a spokeswoman for Metro's Regional Environmental Management Department.

"We have been considering STS' request [for approval], learning more about Churchill and requesting financial records from STS and Asche," she says.

Apparently, Metro is not the only one checking into Asche's financial records. Austin, Texas-based Hoovers Online reports that Asche's former Chairman Larry Asche and his wife, former Vice President Diane Asche, were terminated this summer for allegedly misappropriating $1 million from the company.

Despite its parent company's woes, STS has earned Metro's respect during the past decade, says Terry Petersen, director of Metro's Regional Environmental Management Department.

"They've provided outstanding service to us," he says. "STS has taken almost a quarter of a million truckloads of [Metro's] garbage to the landfill, and they've done that without spilling, and with no major accidents."

STS' record is even more impressive, Petersen adds, considering that the company transports the garbage through a sensitive national scenic area.

Churchill Principal John Quirk agrees that STS and Metro have worked well together.

"The Metro relationship has been outstanding over the past 11 years," he says, noting that Churchill's ownership would add to the stability of that relationship. "Churchill's is a $128 million fund," Quirk says. "It's a very positive change here."

By Dec. 15, 2000, Metro Council is expected to announce whether it will approve a change in STS management. If the Council says no, Churchill will not take ownership of STS by converting the loan, Quirk says.

"The Metro contract is very important for STS. Metro is roughly 7.5 percent of STS' annual business," he says.

Churchill is not willing to jeopardize that business, he adds.