84 Lumber closed a deal Monday that uses federal and private loans to pay off the final $40 million of a $195 million, 18% interest loan that has hobbled the LBM giant's operations, the company confirmed today.

"The loans both [from] HUD and a private lender were all closed yesterday and Cerberus has been paid off," Jeff Nobers, 84's vice president for marketing and public relations, wrote this morning in an e-mail to ProSales.

Today's announcement ends a six-month process by which 84, America's fifth-biggest LBM operation, raised eyebrows within the building supply community by seeking $20 million worth of federal loans to help it get through the housing recession. Other dealers have complained that 84's federal funding resembles the kind of "too big to fail" bailout that auto companies and banks received from Washington.

The refinancing process also forced Eighty Four, Pa.-based 84 Lumber to reveal money challenges over the past few years that, in essence, have forced it to rely heavily on bank and other loans for its day-to-day cash while it sold dozens of facilities to pay down its debts and get costs under control.

Today's action extinguishes a $195 million loan that 84 secured in April 2008 from Cerberus Capital Management. Along with having to pay 18% interest, the loan's terms had barred 84 from using any money it got from property sales to pay daily expenses; rather, proceeds had to be used to pay Cerberus.

By last summer, 84 said it had $55 million left on the Cerberus loan. That's when it asked commissioners of two local counties to seek, on 84's behalf, a total of $20 million under the Department of Housing and Urban Development (HUD) Section 108 loan guarantee program. The Section 108 program enables state and local governments to borrow money to promote economic development, stimulate job growth, and improve public facilities. In contrast with the Cerberus loan, the federal loans require interest-only payments during the first two years and the principal will be amortized over the next 15 years.

When HUD granted the loans late last year, it hailed the $20 million as a jobs-saver. "This funding is expected to enable [84] to create and retain at least 422 jobs over the next three years in the Commonwealth" of Pennsylvania, HUD's announcement said. It also quoted Pennsylvania Gov. Edward Rendell as saying the grants "should help ensure that the company is a viable employer—and job-creator—in the commonwealth for years to come.

Securing those grants was a necessary first step to the next part of 84's refinancing plan: a new private loan. Officials from 84 have said previously that they were working on a $20 million bank loan deal led by Wells Fargo that was contingent on the HUD grant. On top of that money was to come between $10 million and $15 million in property sales late last year and this year, plus up to $5 million from 84 president Maggie Hardy Magerko.

Nobers said today that roughly $15 million was raised through real estate sales since last summer, cutting the amount paid off to Cerberus on Monday to about $40 million. "We have, through the process we earlier described in securing the HUD loans and private bank loan, paid Cerberus in full," he wrote.

"84's $1.35 billion in sales last year put it sixth on the latest ProSales 100 list of top LBM operations. A merger higher up the list has since moved it to fifth place. (See updated list.) At the start of 2010 it had just over 300 locations and 4,000 employees; it now has about 280 locations.