BANGOR – Four unidentified companies are interested in buying bankrupt Great Northern Paper Inc.
None yet have come up with a price creditors will accept, and the Feb. 4 deadline to invest cash in the two mills or have them turned over to the primary lender is quickly approaching.
One of the interested buyers, St. Mary’s Paper Ltd. of Sault Ste. Marie, Ontario, has taken part in closed-door discussions at the State House on reopening the mills. Ronald N. Stern, chief executive officer of St. Mary’s, had a role in the talks Tuesday, according to a source close to the negotiations.
“That would be a good guess,” said the individual, who did not want to be identified.
Last week, Stern told the Bangor Daily News he had “more than a passing interest” in Great Northern.
Lee Umphrey, communications director for Gov. John E. Baldacci, said Tuesday evening that the governor had spoken to “three or four interested buyers,” but he could not disclose their names.
In the meantime, BCC Equipment Leasing, which is owed more than $50 million by Great Northern, will ask a federal bankruptcy judge next Tuesday to void equipment leases it established with the paper company in March 2002 if the closed-door negotiations don’t produce results.
Great Northern has until Monday afternoon to respond to BCC’s request.
Great Northern filed for Chapter 11 bankruptcy protection on Jan. 9, and received emergency funding of up to $5 million to keep its two mills in Millinocket and East Millinocket heated. But that money, loaned to the paper company by Congress Financial Corp. and BCC Equipment Leasing, runs out on Feb. 4.
In March 2002, Great Northern sold a substantial portion of its equipment for slightly more than $50 million to BCC Equipment Leasing Corp., a subsidiary of Boeing Corp. In the same deal, BCC decided to give Great Northern a six-year lease on the same equipment and established monthly payments of almost $531,000.
Great Northern missed its Dec. 27 payment to BCC, according to court documents, and was not given court-approved emergency funding to make its Jan. 27 payment.
“In the event of termination of the BCC lease, the amount owed BCC would exceed $50 million,” according to papers filed in federal bankruptcy court by BCC’s attorneys.
The equipment now owned by BCC include paper machines, finishing machines, steam turbines, pumps and blowers used by Great Northern. The lease gave BCC “first priority” secured collateral rights to “among other things, the BCC equipment, the mills, all of Great Northern’s equipment located at the mills, and all rents and proceeds there from with the express exception of a certain recycling facility,” according to BCC’s court documents.
Cianbro Corp. of Pittsfield, which is owed more than $6.2 million by Great Northern, has collateral rights to the recycling facility.
Late Monday, BCC Equipment filed a request in federal bankruptcy court to void the leases it has with Great Northern, and subsequently for it to be allowed to go in and keep the mills heated while a buyer is sought.
“Great Northern will have absolutely no source of funding or financing in this case after Feb. 4, and the mill will go ‘cold,’ poisoning any future sale for any going concern value at all,” according to BCC’s court filing.
In the filing, BCC also asked the judge if it could be excused from an automatic stay that was placed on all of Great Northern’s creditors when the paper company filed for bankruptcy on Jan. 9.
Under the automatic stay rule, which an insider said is “very routine” in bankruptcy proceedings, all of the creditors immediately are halted from going after a company’s assets as payment for overdue bills once a business files for bankruptcy.
BCC’s more than 200-page filing included a note that stated its requests could become moot by the time court convenes at 9 a.m. on Feb. 4 if the closed-door discussions at the State House are productive.
BCC Equipment is an active participant in the negotiations, said attorney John McVeigh, and is “close, very close” to coming up with a deal for the judge to approve next week instead of reviewing the request to void the leases.
McVeigh stated that all of the participants in the closed-door meetings are striving to “replace Great Northern’s management with qualified persons, to establish a timeline for the sale of Great Northern’s assets, and to establish the terms of further financing by BCC to enable the sales process to occur.”
While the closed-door discussions are expected to continue today and are scheduled to run up until Tuesday’s court proceedings, McVeigh said BCC has grounds to terminate the lease if other financing arrangements can’t be worked out.
According to the court filing, BCC wants to ensure that the substantial assets it owns at the two mills are protected from cold weather, and the company has “substantial concerns over whether Great Northern has sufficient resources to maintain, preserve and protect the BCC equipment.”
Under terms of the lease, Great Northern is required to carry insurance on the equipment and to maintain and repair it.
“Because papermaking machinery employs water and other fluids throughout the paper-making process, freezing conditions will have the immediate effect of greatly diminishing the value of the assets or, at worst, render them worthless,” according to the court filing.
“Therefore, in order to protect the interests of creditors and other parties in this case, Great Northern’s assets must be sold quickly,” the court filing stated. “There is an overwhelming lack of confidence in Great Northern’s ability to effect such a sale or to preserve and protect any of the property in its possession, all of which is either the property or the collateral of creditors in this case.”
BCC claimed, in its court documents, that Great Northern had “commingled and wasted valuable estate assets” before and after it filed for bankruptcy protection. The creditor stated that Great Northern collected health insurance payments from its employees but “used the deducted monies elsewhere, consuming them entirely.”
Great Northern employed 1,130 people before it shut down operations in late December and currently maintains a skeleton crew of 80 people. All of the workers still make payments to the health insurance plans.
BCC stated that Great Northern had failed to set up a court-ordered reserve for future health insurance payments from the workers and failed to pay its electricity bill, also ordered by the court.
“Great Northern’s failure to pay for electricity has increased fears among BCC and other interested parties that Great Northern cannot preserve and protect its assets.”
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