GNP not paying court-ordered bills

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BANGOR – Great Northern Paper Inc. was two days late as of Friday in paying at least two of the bills a federal bankruptcy court judge previously ordered the company to pay – $100,000 for employee wages and $75,000 for electricity.

The money was supposed to be available from Great Northern and its two lenders by Friday night, according to attorneys. But during an afternoon hearing, Judge Louis H. Kornreich questioned whether he should shut down the paper company’s two mills in Millinocket and East Millinocket or give operational control of the facilities to a U.S. trustee because his payment deadline had been missed.

Kornreich may not be left with many options because creditors soon may demand that someone else be put in charge of the mills’ operations and finances. Government officials and attorneys are joining creditors in developing plans to reopen the two mills and make the facilities attractive again to prospective buyers and customers.

Kornreich summed up the quick pace of Great Northern’s bankruptcy proceedings in one short remark to an attorney: “If you feel in the dark, think how I feel.”

Other developments Friday included:

. Kornreich allowed Great Northern to borrow at most another $1 million to keep the mills heated through Feb. 4.

. Union workers received word that their share of health care premiums would not go into Great Northern’s general budget, but into a separate account.

. Maine Health Alliance and Millinocket Regional Hospital convinced Kornreich not to void a health-services provider contract they have with Great Northern.

. The U.S. Trustee’s Office set up a committee of unsecured creditors that will represent people and businesses owed money by Great Northern through the bankruptcy proceedings.

. Gov. John E. Baldacci confirmed that an interim plan of action, which includes either financing packages, possible buyers or both, could be presented to the bankruptcy court next week.

. Sen. Olympia Snowe’s staff acknowledged that creditors, including Cianbro Inc., are developing a reorganization plan for the mills.

. Great Northern decided to issue employment termination notices some day soon to an undetermined number of furloughed workers.

. The Maine Department of Labor granted laid-off workers a reprieve from actively seeking work while collecting unemployment benefits for the next 30 days.

. The Finance Authority of Maine and the Maine Small Business Development Centers decided to hold an informational forum Tuesday about financing options for Katahdin-area businesses affected by Great Northern’s bankruptcy. The forum will be held from 10 a.m. to 3 p.m. at the Katahdin Regional Higher Education Center.

On Friday, Jacob Manheimer of Brascan Energy Marketing Inc. told Kornreich that Great Northern hadn’t paid his company its electric bill since the bankruptcy proceedings had been initiated and loans had been granted for that purpose.

Brascan has agreed to sell Great Northern electricity at a 50 percent discount while the company is shut down and actively seeking a lender. A bill for roughly $75,000 for electricity consumed between Jan. 9 and Jan. 15 had not been paid, Manheimer said. He said he did not think Brascan could sell Great Northern electricity through Feb. 4 if it was not going to be paid for what it sold them already.

“Great Northern is in default of its obligations, and the money is in the budget,” Manheimer said.

Great Northern’s attorney, Harold Murphy, said he was informed the payment had been made. If it hadn’t been received yet, it might be because of “funding and timing issues” between the paper company and its lenders.

The lenders, Congress Financial Corp. and BCC Equipment Leasing, said they weren’t aware that the bills hadn’t been paid.

But Kornreich, upon notification of the missed payments Friday afternoon, almost forced the company’s owners to turn off the lights at the mills and shut them down completely.

“Unless cured by this afternoon … [do I] need to take action to turn off the premises and change the debtor-in-possession status?” asked Kornreich about 2:15 p.m. If the status were changed, Great Northern no longer would be in charge of its finances or operations.

The judge told Manheimer that if Brascan did not receive payment by later Friday, he could “take whatever emergency steps are necessary” Tuesday to demand payment or ask for a trustee.

Manheimer did not return a telephone call Friday evening to indicate whether Brascan’s bill had been paid.

Another $1 million

Great Northern received approval Friday to secure an additional loan of up to $1 million from its two lenders to finance “bare necessities” at the two mills between Jan. 25 and Feb. 4.

But before Kornreich gave his OK, he listened as Great Northern’s attorney attempted to exclude health care benefits for almost 1,100 furloughed employees and 677 retirees from its expense budget for that time period.

This is the third time in less than two weeks Great Northern has asked not to pay its health care premiums, and the third time Kornreich has told them they had to do so anyway.

On Jan. 9, Kornreich approved a loan package of up to $1.3 million to get the company through to a hearing on Wednesday. And on Wednesday, he agreed to another package of up to $1.6 million through Jan. 24.

But with an itemized list of expenses in front of him, Kornreich on Wednesday asked Great Northern and its lenders why he couldn’t approve a third loan package to get the company through Feb. 4. He was told by Great Northern that on Jan. 24, the company wanted to present what he called “a preservation budget” to maintain a skeleton operation for 13 weeks while the company sought a buyer.

The judge said the company probably would need more time to do that, and mentioned that it seemed like a relatively simple process to get the loan extension to him, especially if Great Northern and its lenders followed the same loan conditions.

In court Friday, they didn’t, and lender Congress Financial requested that Great Northern supply it with a budget on how it was going to spend the money through the loan period from Jan. 25 to Feb. 4.

Kornreich asked why that was necessary at this time.

“Wouldn’t that budget be the same?” he asked. “You have the same number of security, the same number of firemen, the same number of mechanics, the same amount of oil and the same amount of electricity. What’s changing?”

But Murphy said Great Northern “did not include additional health care” for furloughed employees and retirees in the new loan arrangement. This time around, the paper company was seeking $600,000 to $625,000″ to operate during the loan period.

Kornreich disagreed.

“It was not my intention to reopen for discussion the conditions,” Kornreich said.

Murphy subsequently added $300,000 for health care premiums, and changed the loan amount to almost $1 million.

Health care benefits

The amount of Great Northern’s contributions to health care premiums between Jan. 9 and Feb. 4 will total $900,000, and Kornreich reminded the paper company’s workers that once that money is gone, it’s gone.

The money is to be used for services provided during the almost monthlong period, and not for bills needing to be processed for services given before Jan. 9. Great Northern was instructed to put that money into a separate escrow account.

Jeffrey Sternklar, an attorney for Maine Health Alliance, which contracted with area health-service providers on behalf of Great Northern, wanted assurances that the money actually was going to be deposited into the separate account and not co-mingled with the paper company’s general budget.

“If you can send them a deposit slip, I’m sure you’ll make them very happy,” said Kornreich to Murphy, the GNP attorney.

Furloughed workers and retirees, who also pay a share of the health care premiums, were told to make their payments because they no longer have a paycheck from which it is automatically withdrawn. The majority of workers pay about $181 each week for a family health plan.

Attorneys for the unions wanted Kornreich to set up another account for collection of employees’ health care payments. In the past, that money has gone into the paper company’s general budget, and union attorney Richard Bryant said Great Northern currently is refusing to accept the employees’ payments.

“[The payments] won’t be co-mingled with oil or electricity,” Kornreich said. “I am the judge, not the guardian ad litem. I expect the parties to behave as adults. If not, you can come in and readdress.”

Union representatives told their members to send the checks in care of Great Northern Paper, and to make a note on the check that it is to go into the employee health fund.

Health services providers

Maine Health Alliance and Millinocket Regional Hospital decided Friday to keep its contract with Great Northern to provide health services to employees, retirees and their dependents, even though all providers must share $900,000 for the month.

Great Northern was seeking to reject the contract, but Maine Health Alliance wanted a decision on that postponed as long as the paper company continued to make court-ordered health care premiums.

Attorney Tim Norton, representing the hospital, said it was worth the financial risk to continue with the contract even though all health care providers might not get all of their money.

Maine Health Alliance currently is owed up to $2.5 million, for November and December, by Great Northern.

“We want to keep these services in place, just like you’ve always had them,” Norton said.

Sternklar, Maine Health’s attorney, told union representatives, “this is a big problem, bigger than Great Northern. How do you finance this kind of health care? Great Northern does not want to pay for it. The government does not want to pay for it, and you certainly can’t afford it. It’s about whether a hospital stays open at the end of the month.”

Marie Vienneau, chief executive officer of Millinocket Regional Hospital, said she was notified that a Great Northern worker had canceled bowel cancer surgery because he didn’t think he could afford it if the paper company was not paying its premiums. She said she’s trying to reschedule his surgery.

“Please tell your members not to cancel surgery,” said Vienneau, especially if it’s life-threatening. “We’re trying to tell him, ‘Don’t worry about the bill. We’ll take care of it later.'”

‘Drawing parties together’

Late Friday afternoon, Baldacci still was conferring with labor representatives and members of the state’s congressional delegation to determine what kind of financial resources are available to assist the Millinocket area.

In an interview, the governor made several references to “drawing all parties together” in an attempt to present an interim plan of action next week. Later, he confirmed some of the “parties” include potential buyers for GNP.

“There are people who are interested, but it’s a legal process that must continue through the bankruptcy proceeding,” he said. “The state is committed to making sure that this mill is back up and running. We’ve got 1,130 workers out of work. They need to be able to take care of their families.”

Baldacci said he could not elaborate on the details of the administration’s proposals. But he confirmed that tax deferments or tax-incentive programs are likely to be raised in the coming week as the governor and his staff attempt to find ways to encourage a new buyer to reopen the sprawling papermaking complex.

“There are orders – we’re talking about a mill that has orders that have to be complied with because we don’t want to lose those customers,” he said. “Once they go somewhere else, it’s going to be harder to get them back.”

Organizational plan

In Washington, D.C., the communications director for Snowe acknowledged that a team of creditors and attorneys were working with the senator and the governor on financial incentives as they put an organizational plan together.

David Lackey said Snowe expected the plan to be presented to Kornreich on Friday, and was surprised that it wasn’t.

“Sen. Snowe has spoken with a number of the creditors, from Cianbro to BCC Leasing, and virtually all of them are communicating to come up with an organizational plan,” Lackey said. “They recognized that they are their best opportunity to see that their investments [in Great Northern] are protected.”

In South Portland, Peter Vigue, president of Cianbro, said he was trying to encourage creditors, employees and the Millinocket and East Millinocket communities to work as a team to fight a prolonged shutdown of the mills.

On Wednesday, Great Northern told a packed courtroom that because of a “change of circumstances,” it was not going to reopen the mills to produce paper, but actively seek a buyer.

Among the options are requesting that Kornreich turn over the mills for reorganization to Great Northern’s major creditors or appoint a trustee to oversee operations, both permitted under bankruptcy law.

“The go-forward plan does not currently exist,” Vigue said. “But if the plan means one of those actions has to take place, so be it.”

Brian Stetson, spokesman for Great Northern, did not return a telephone call for comment.

Termination notices

Great Northern workers, already without a paycheck for a month but hopeful the entire time that they soon would be called back, are starting to receive termination notices, according to the Maine Department of Labor.

“It’s my understanding that if they haven’t received termination notices, they will be receiving termination notices in the near future,” said Adam Fisher, an assistant to the labor commissioner. “I don’t know the reasoning behind it, but I understand [Great Northern] will be issuing termination notices.”

Political reporter A.J. Higgins contributed to this report.