Ship lovers Wednesday feared the SS Milwaukee Clipper would ride its last wave into a junk heap, sold for scrap. Instead, the 85-year-old landmark steamer is headed for a new dock.

At an auction in U.S. District Court, officials of Hammond, Ind.'s port authority outbid their only other competitor, buying the former grande dame of Great Lake ferries for $335,000.The SS Clipper had fallen on hard financial times, ousted first from Chicago's Navy Pier over a rent dispute, then from its mooring on the Chicago River. In recent times, it has languished at a dock on Lake Michigan in downtown Chicago.

Creditors were knocking on the door of its former owner, James Gillon. The 361-foot ship was subject to a maritime mortgage lien and, by mutual agreement of owner and creditors, was turned over to federal authorities in February for sale, said Alan Amos, attorney who helped in the auction.

Wednesday's auction, conducted by U.S. marshals, required a minimum of $100,000 for the ship, which has been designated a national historic landmark and boasts one of the few remaining quadruple expansion steam engines.

Six bidders submitted the required $25,000 deposit to take part in the auction. But only Hammond and one other group, Specialty Restaurants Inc. - which wanted to turn the ship into a floating nightclub - vied for the vessel.

Robert Kenney, chairman of the Hammond Port Authority, said the ship would anchor a new yacht harbor being developed in the northwestern Indiana city. Once transported from Chicago, the Clipper will be revamped to accommodate a restaurant and pavilion for the harbor, Mr. Kenney said.

The SS Clipper has made its home in the Great Lakes since its construction in 1905 in Cleveland.

The ship, which carried 900 passengers and 120 automobiles, was first used as an excursion liner between Buffalo, N.Y., and Duluth, Minn., said Thatcher Waller, collections manager at the Chicago Maritime Society, which runs a small maritime museum.

It was restored in 1940 and, during the summer, would carry passengers and their cars between different Lake Michigan destinations.

"This was a liner that went out for a crossing of six hours. It had state rooms on board, the whole bid," said Mr. Waller.

During winter, when tourist use slacked off, the ship was enlisted to carry new cars from Detroit to cities on Lake Michigan's southern shore, he said.

The ship was taken out of service in 1970 and moved to Chicago by its former owner, Mr. Gillon, who began a second restoration. Mr. Gillon hoped eventually to sail it again, said Mr. Waller, who worked on the restoration.

But the Coast Guard sought massive work before the ship could be declared ready to steam, and Mr. Gillon eventually settled for using the ship as a floating banquet hall before financial problems led it onto the auction block.

Several scrappers inquired about buying the Clipper for junk, but the steamer instead will soon be towed by another ship to Hammond, said Mr. Kenney.

"I don't think Chicago was really ever aware of the gem that it had," Mr. Waller said. "People need an awareness of their history."