WEST COAST SHIP AUCTION TURNS INTO ALL-DAY EVENT

WEST COAST SHIP AUCTION TURNS INTO ALL-DAY EVENT

The auction that resulted in the sale of three former United States Lines vessels to Sea-Land Service Inc. for $22.8 million was anything but routine. What should have taken 45 minutes to an hour ended up taking the better part of a day.

To begin with, bidders, attorneys and other interested parties had to pass through extensive security checks at the federal building here because of protests in recent days against President Reagan's decision to send U.S. troops to Honduras.With the auction scheduled to get under way at 9:30 a.m. Tuesday, it became clear that Malcom P. McLean, the former chairman of United States Lines and a surprise bidder, only had personal checks and didn't have a certified check in the amount of 10 percent, as required under the terms of the sale.

The group of about 25 people then trudged upstairs and waited over an hour before the judge appeared. All sides presented their case.

Sea-Land, which stood to get the three ships for the minimum of $2.4 million each if no competing bids surfaced, argued that Mr. McLean shouldn't be allowed to bid without the proper certified check.

Sea-Land's attorney argued that the sale had been advertised for weeks, Furthermore, Mr. McLean and his agent, William Mollard of Jacques Pierot & Sons, a ship brokerage firm, were well versed in the shipping industry and were used to the mechanics of ship auctions. We believe the court should enforce this order, he said.

The judge said he was sympathetic to this argument, which he termed the big-boy rule, but was willing to listen to other viewpoints.

Counsel for General Electric Credit Corp., a major creditor, argued that some leeway was required because additional bidders would help raise the sale price and bring more for the estate and the creditors.

Sea-Land, legally, is now trying to stop a bidding war, he said. We think these ships are woefully underpriced.

Prudential Insurance Company of America, a USL creditor to the tune of $93 million, said it was interested in security and didn't believe in personal checks but would listen if some safe alternative could be worked out.

Mr. McLean told the court he didn't have the funds in hand because he had only decided to bid on the ships two days earlier and the mechanics of transferring money took time. He said he expected the wired funds to be available by the end of the day.

We'd like to have an opportunity to bid, he said. I don't see how that will hurt anyone. If we're out of line on that I have no reason to expect any special favors.

After some consideration, the judge ruled the auction could proceed provided Mr. McLean produce a certified check by 3 p.m.

The group then worked its way back down to the lobby to begin the auction. Just as the federal marshal finished his lengthy reading of the auction notice, however, a new wrinkle developed.

What would happen if the winning bid went to Mr. McLean and he could not produce the funds by 3 p.m.? Would Sea-Land win the ships at the required minimum or at the last price it had bid - a difference of several million

dollars.

We'll be forced to bid against ourselves, Sea-Land's attorney said.

This required an additional hearing, and again the group moved upstairs. After more argument, the judge decided to settle this problem by holding the auction at 3 p.m. when it would be known whether the funds had arrived.

But when the group reconvened, Mr. Mollard and Mr. McLean were not in sight. As the marshal began reading the legal notice, all eyes were riveted to the door to see if they would arrive. At one point a representative told the marshal that Mr. McLean had just left the bank in a taxi, check in hand, and would soon arrive.

At 3:10, Mr. McLean and Mr. Mollard rushed in just as the bidding was set to begin. The first ship on the block was the Sea-Land Lark, and the sale took some time. There were 83 separate bids, most by the minimum allowed increment of $25,000, to move the price from $3.1 million to its sale to Sea-Land at $8 million. Each bid had to be repeated twice by the marshal.

Mr. Mollard, acting on behalf of Mr. McLean, followed a steady, persistent strategy. Every time Charles Raymond, Sea-Land's group vice president for the Americas division, raised his bid, Mr. Mollard would increase his offer by the minimum $25,000 increase.

Sea-Land, for its part, alternated between large jumps - as much as $875,000 at a time, and smaller increases of $25,000 and $50,000.

Mr. McLean, Mr. Mollard and Mr. Raymond all jotted numbers down on paper as they bid. As the bidding wore on, those watching shifted their weight from one leg to another, and one of the court officials joked that they should use some of the proceeds to buy chairs. Several tourists gathered to watch the spectacle.

Bidding for the second ship, the Sea-Land Legion, moved faster with a mere 47 bids. Once again, it became evident that $8 million was the magic number beyond which Mr. McLean would not go, and Sea-Land had two in the bag.

The third vessel, the American Liberty, reportedly not as shipshape as the other two, opened at $1 million. Michael J. Connally, acting on behalf of Eastern Overseas, a New York broker, dropped out at $1.5 million, leaving Mr.

Mollard and Mr. Raymond to continue their dance.

After 105 bids, Sea-Land won it with a bid of $6,775,000. By this time, many of the participants were tired and thinking about the next plane they could catch back to the East Coast.

Alex Vitalli, an attorney with Freehill, Hogan and Mahar, representing General Electric Credit Corp., said his company was pleased that the final combined price of $22.8 million was so much higher than the opening minimum of $7.2 million. It benefits all the creditors, secured and unsecured, he said.