Aviza, a semiconductor equipment manufacturer in better economic times, was formed in 2003 by a venture group to purchase the former Watkins-Johnson operation in Scotts Valley near Skypark.
According to Aviza Executive Vice President and Chief Financial Officer Pat O’Connor, Aviza did well for several years, supplying equipment to companies such as Intel, Motorola and Texas Instruments. The company’s primary customer was Qimonda — a German manufacturer of dynamic random-access memory — which accounted for 60 percent of Aviza’s business.
“All things were going well until (Qimonda) went bankrupt in 2008,” O’Connor said. “The company was founded on debt, and when Qimonda went bankrupt, the company could no longer fund the debt.”
In 2009, O’Connor said, the decision was made to declare bankruptcy and sell off Aviza’s assets to pay off the company’s creditors and shareholders.
After the sale of the active manufacturing business, he said, “We kept the real estate, and we had a lot of fixed assets and inventory — furniture, fixtures — to liquidate for the benefit of the stakeholders.”
Now in its second year of bankruptcy, the company is cleaning house at its Scotts Valley site behind Skypark, selling what’s left of the inventory along with what O’Connor describes as “anything that’s not nailed down.”
“Our objective is to liquidate — at a fair price — all the remaining assets,” he said.
Those include manufacturing and testing equipment, along with hardware, cubicle dividers, office supplies and office furniture.
Every other Thursday, the public is invited to the site to peruse the items up for sale.
“We give special pricing to the schools, and we’ve donated a number of items to the schools — supplies, binders,” O’Connor said. “We have done some business with companies that have moved into the county, especially Scotts Valley.”
So far, O’Connor said, Aviza has paid off the banks to the tune of $35 million. His goal is to pay off the company’s unsecured creditors some time next year.
The company’s shareholders, he said, would likely be paid in the event of a sale of the property. The building — 200,000 square feet — sits on 42 acres.
“There’s a buyer that I’m working with right now. It’s in escrow,” O’Connor said. “They want to convert the property to residential.”
The property is currently zoned by the city as industrial and would need to be rezoned before any residential units could be built.
In addition to zoning issues is the property’s status as an Environmental Protection Agency Superfund site — the result of the industrial solvents and other toxic chemicals entering the soil and groundwater during the Watkins-Johnson era. The situation has been regulated and monitored by the agency since the early 1990s.
According to O’Connor, liability for the clean-up remains with TriQuint Semiconductor, the current incarnation of the Watkins-Johnson company.
The remediation company determined that the site has met the government’s criteria and the water is clean, O’Connor said, and it’s now up to the EPA to review the work and make a final determination.
“It’s a safe industrial site,” he said. “The question for my buyer — if they want to convert it to residential — is ‘Would there be some additional cleanup?’.”
Currently, the EPA conducts extensive analysis on the wells and pump systems in place on the site every five years, with the most recent study conducted in 2007. The next study is scheduled for 2012.
“I’m hopeful to sell the property, because that’s the biggest asset I have left,” O’Connor said.
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