A federal bankruptcy judge said a loan he tentatively approved during a hearing Tuesday would allow Freedom Industries to pay its employees and also pay to clean up a chemical leak into the Elk River earlier this month.

CHARLESTON, W.Va. --

A federal bankruptcy judge said a loan he tentatively approved during a hearing Tuesday would allow Freedom Industries to pay its employees and also pay to clean up a chemical leak into the Elk River earlier this month.

The coal-processing chemical known as Crude MCHM contaminated the West Virginia American Water system in Charleston and led officials to tell residents in nine counties not to drink, wash or cook with their water for days.

Freedom filed for Chapter 11 bankruptcy, which allows companies to reorganize under bankruptcy protection, on Friday. In Tuesday's hearing, U.S. Bankruptcy Judge Ronald Pearson called the case "one of the most unique Chapter 11 cases I've ever seen."

Freedom's president, Gary Southern, and chief financial officer, Terry Cline, testified at the hearing, which lasted a little more than six hours.

Southern told the judge, "Freedom Industries, from where I sit, is in a death spiral." Customers aren't buying from Freedom, he said, and suppliers aren't selling to them.

About 80 percent of Freedom's business is providing protection against freezing for coal, Southern testified Tuesday. The other 20 percent, which Southern called the chemistry business, includes the chemical that leaked into the Elk.

The company's busiest time is usually November through March, Southern said.

Cline said Freedom had already put $300,000 toward remediation of the spill, and told the judge the overall cost to the company might be $800,000. But Southern testified later that Freedom had already contributed $800,000 toward remediation costs.

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Freedom in death spiral, bankruptcy judge told