GNP creditor offers $12M loan Health care benefits for displaced millworkers, retirees not included in deal

BANGOR – A major creditor of Great Northern Paper Inc. is willing to lend at least $12 million to keep the paper company’s two mills warm through April 21. The promise comes with two conditions: that a buyer takes over on April 21, and that the money is paid back, with interest, on that day.

Boeing Capital Corp. of Long Beach, Calif., will be owed more than $81 million by Great Northern if a federal bankruptcy judge today approves the new loan terms, which were filed with the court Monday.

As collateral, Great Northern puts up “all of its assets” to secure the loan, according to court documents.

Before Great Northern filed for Chapter 11 bankruptcy protection Jan. 9, it owed Boeing at least $50 million. Boeing, under the name BCC Equipment Leasing, had purchased most of Great Northern’s equipment and then immediately turned around and leased the machinery to the paper company under a six-year, $531,000-a-month deal.

Besides the $12 million loan to keep the mills heated, Boeing will lend Great Northern all the money it needs to pay back another major creditor, Congress Financial Corp. The balance includes roughly $14 million that was owed to Congress before Jan. 9, and another nearly $5 million that was borrowed from Congress in the past month. Attorneys’ fees and other expenses also will be paid.

The loan agreement was one of at least four documents filed with the bankruptcy court Monday, one day shy of what’s expected to be a lengthy court hearing today at the Margaret Chase Smith Federal Building in Bangor.

Great Northern’s owners, creditors, lenders and union representatives negotiated most of the agreements in closed-door sessions, and many of their meetings took place at the State House and included Gov. John Baldacci, members of his staff and others.

The other agreements filed with the court Monday included:

. A request to install a new management team at the paper company, along with attorneys with bankruptcy-related experience to support the group as it pursues a buyer.

. An agreement on how professional fees, such as those incurred by attorneys and accountants, amounting to at least $2 million, will be paid as the bankruptcy case continues to move through the court.

. A “stand-still” deal that will limit administrative expenses, including vacation pay and severance packages to Great Northern’s workers, until a buyer takes over operations.

But missing from the court documents Monday was a plan on how to pay health care benefits to Great Northern’s 1,130 workers and 677 retirees while the two mills continue to be shut down. Great Northern closed its mills in late December and pays a skeleton crew of 80 people to maintain the mills. Labor agreements call for health care payments during a shutdown.

On Jan. 15, Judge Louis H. Kornreich ordered Great Northern to pay health care premiums of up to $900,000 to cover medical expenses accrued between Jan. 9 and today. According to Great Northern’s attorneys at the time, its lenders did not want to pay for health care benefits, and Kornreich countered that Great Northern could not be selective in which administrative costs it chose to cover.

In the financing plan released Monday, Boeing stated that any health care coverage would be the responsibility of Great Northern.

On Monday afternoon, members of Great Northern’s 14 unions, along with retirees, gathered at Schenck High School in East Millinocket to find out about what kind of health care package they would have starting today.

Lee Umphrey, the governor’s spokesman, said Sunday that private donations, state and federal funds, and other loans would pay for the health care package that was being negotiated. He said that Baldacci was informed the deal would be completed and submitted to the court Monday.

Umphrey said the governor “remains optimistic” that the health care package will be final before the 9 a.m. court hearing today, but added “the governor had hoped to announce the plan before the unions’ hearing Monday.”

According to sources who asked not to be identified, negotiations on a health care plan stalled Monday evening when a number of unsecured creditors said that they were hesitant to give benefits to the workers and retirees. The creditors apparently are reluctant to put the workers and the retirees ahead of them in line for reimbursement of unpaid claims if there is any money left from the proceeds of a sale of the mills, the individual said.

Another individual said that under the health care plan, the workers and retirees would receive limited coverage, while area hospitals would take a financial risk to ensure that health services continue to be provided while the mills are sold.

Boeing, in its financial plan, outlines a timetable for sale of the mills and uses the dates as conditions of its loan.

“The provisions of the post-petition financing by [Boeing] are premised upon Great Northern achieving a sale of its assets in accordance with certain time parameters,” said court documents.

On Feb. 10, Great Northern is expected to file a “stalking horse” offer from a possible buyer with the court that would start an auction of the paper company. The stalking horse bid would be the least a company would pay for the mills, but could include terms that other bidders would have to meet or beat to be considered by the court.

On Feb. 18, the bankruptcy court should enter an order establishing the procedures for the auction, which should take place before March 21. The sale should be completed by April 21, according to the loan agreement.

“Great Northern’s ultimate goal is to consummate a sale of substantially all of its assets as soon as reasonably practicable,” the Boeing documents stated. “Such a sale would be in the best interest of Great Northern’s estate, creditors and its current and former employees in the belief that a sale in this Chapter 11 case will maximize the value of the assets and provide the best avenue for the workforce to obtain future employment.”