Officials develop new funding plan to save Kent Inc. Congress must OK $1.2M in grants

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FORT KENT – Federal, state and town officials meeting here Friday morning may have found $1.2 million to help keep Kent Inc. open and save as many as 175 jobs.

Provided federal funding is approved by Congress, officials with the Northern Maine Development Commission committed $1 million from the Aroostook County Empowerment Zone, and representatives of the Maine Department of Economic and Community Development promised another $200,000 from the Community Development Block Grant Program.

That would leave Kent Inc. to find an additional $800,000 from private investors to reach the $2 million in equity the owners say they need to leverage another $2 million in loans to keep the children’s sleepwear manufacturer open and to make it profitable.

On Tuesday, Michael Gans, president of Kent Inc., told employees that the plant would close by mid-November unless $2 million was found from new investors and matched by another $2 million in loans.

“This is absolutely very positive,” Gans said when he left the meeting shortly before noon Friday. “You’ve watched government at work this morning. They’ve seen us keep this company alive for six years, and they are willing to help.”

He said he would relay the good news to employees at the plant that afternoon.

Friday morning’s meeting, coordinated by U.S. Sen. Olympia Snowe’s office, was attended by nearly 30 people from all walks of officialdom – representatives of the Small Business Administration, Maine’s congressional offices, the U.S. Department of Agriculture’s Rural Development office, Maine Department of Economic and Community Development, Finance Authority of Maine, state Department of Labor, and Northern Maine Development Commission. U.S. Rep. John Baldacci and several local state legislators, as well as municipal officials, also were on hand.

Gans told the group the company was “inadequately capitalized” from the outset in 1997 when the plant was resurrected after being closed the previous year by the former owner, Gerber Childrenswear, which decided to close down the facility and move operations to Texas.

The current owners secured financing and reopened within six months, but, Gans said, there have been hardships in securing credit ever since. He said the only grant the company received was from the USDA when Kent Inc. was created. All other money the company received was in the form of loans, which have been paid on time up until two months ago.

The biggest lender Kent is involved with is Sentry Business Credit Co. in New York, Gans said.

He told officials that two things hurt the company. The first was a no-compete clause with the former owners preventing Kent Inc. from manufacturing blanket sleepers for three years. The second was when the federal government relaxed flame retardant standards on children’s wear in 2000, opening the floodgates on foreign imports.

Gans said his company cannot compete anymore with foreign labor in making “sleep and play” children’s wear.

“Where we spend about $100 per day for an employee, they can do it overseas for $1 a day,” he said.

But he believes that with an infusion of capital and a new business plan for 2003 to produce only the more marketable blanket sleepers, Kent Inc. could become profitable and guarantee jobs. Blanket sleepers are one-piece, zip-up fleece pajamas designed to keep children warm at night even when they kick their blankets off while sleeping.

The problem with blanket sleepers, Gans said, has been that they are manufactured over a 12-month period, and shipped to customers during a four-month period. Since customers pay for the merchandise after it is received, the company requires “an inordinate amount of capital for 12 months,” he explained.

“We can sell our products, there is no question,” Gans said.

“We are now in a do-or-die position. Without proper equity, we don’t stand a snowball’s chance in hell,” Gans said. “We are prepared to give up our equity in the company to keep it going.”

“The only investors we have been able to interest in the company want us to take it overseas,” Mark Coburn, the chief financial officer of Kent Inc. said. “We don’t want to do that because we are committed to Fort Kent.”

Both men said, and several people around the table agreed, that private investors don’t like to invest in the apparel industry in the United States because they can make more money investing in overseas operations.

“If we get the equity we need, we are a profitable company,” Coburn told the group. “Our business plan would bring investors reasonable profits.”

Saying the equity capital has been a problem for Maine companies for 50 years, Robert Clark of NMDC said the newly formed Aroostook County Empowerment Zone might help the situation. Approved by the USDA in January, the Bush administration program could bring millions of economic development dollars to Aroostook County over the next decade to attract and sustain business and jobs, according to supporters. The Aroostook zone was one of just two selected this year from 55 applications around the country, primarily because of the large out-migration of people from Aroostook over the last decade. Between 1990 and 2000, the County lost about 13,000 people or about 15 percent of its population.

Fort Kent Town Manager Donald Guimond said the jobs at Kent Inc. represented 4 to 5 percent of the town’s labor market and their loss jeopardized other jobs in the area.

NMDC’s Clark said Friday that the empowerment zone would have $1.5 million available in five to six weeks if a budget bill is passed in Washington.

“It could be the quickest way to fund the needed equity,” he said. “We have to use non-traditional ways to solve this, and the zone is one of them.”

Baldacci told the group the money could be included in an omnibus bill in a continuing budget resolution that will go before Congress before the session concludes in the early days of October.

“We need to do whatever we can do, and I will, because the company is successful, and the employees are good and successful,” Baldacci said. “We can include it in the budget that we need for the Oct. 1 fiscal year.”

Clark said NMDC would use $1 million of the $1.5 million coming to empowerment zone to help save Kent Inc., if the development corporation is assured the money is coming from the federal government.

Town officials also said they could hold all regulatory hearings in time to get CDBG money through the DECD office.

“I am impressed with the creative spirit which all the stakeholders entered this meeting,” Snowe said in a prepared statement after the session. “By bringing together each of these agencies in one room, we were able to hear the different challenges facing Kent, and overcome obstacles that might otherwise have emerged.”

Other agencies at the session said they would work with Kent Inc. and with banks to find the additional funds needed for the company’s survival.

A Friday afternoon meeting that had been scheduled by state Sen. John L. Martin, D-Eagle Lake, with employees of Kent Inc. was postponed after it was learned they had to work. The plant is normally idle Friday afternoons. The session, which is meant to answer workers’ questions and inform them of efforts to keep the facility open, was rescheduled for 2 p.m. Sunday in the gymnasium at Fort Kent Community High School.