Hard task of selling GNP mills begins $12.6 million finance deal complete

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BANGOR – Great Northern Paper Inc. was spared from falling into “a black hole of nothingness” when a federal bankruptcy judge approved a 12-week, $12.6 million financing plan Wednesday.

Three weeks of closed-door negotiations ended with Judge Louis H. Kornreich’s signature on a deal that was heavy with concessions but filled with optimism, according to attorneys who took part in the talks. From now through April 21, Great Northern’s two mills in Millinocket and East Millinocket will be heated, furloughed and active employees, along with retirees, will have some health care benefits, and a new owner should take over by the end of the 12 weeks.

“We believe we have a deal,” said Richard Mikels, an attorney for Great Northern’s newly installed management team, to Kornreich. “We believe we have no issues that remain. This has been, needless to say, a very difficult effort.”

Late Tuesday afternoon, at least 34 attorneys involved with the fate of the plants weren’t close to reaching an agreement before the midnight deadline.

At 4 p.m. Tuesday, as seconds rapidly ticked off a courtroom clock that Kornreich kept eyeing, the judge alerted the attorneys that “we have a situation that’s going to crater [fall apart].”

Mikels, on behalf of Great Northern, then issued a plea.

“We need the funds,” he said. “We’ve got good things to do with the funds.”

Fast talking and hurried-up deal making – all pushed by Kornreich – resulted in a compromise Tuesday evening. Boeing Capital Corp. and Congress Financial Corp., two of the paper company’s lenders, agreed to lend money to cover Great Northern’s expenses for another two days while attorneys agreed to meet overnight to work out final terms of a deal.

Kornreich gave everyone an 11 a.m. Wednesday deadline for him to have a plan to sign or else he would call them back into court to litigate the differences. That deadline was extended to 1 p.m. when attorneys informed the judge that all that was left to do was finish typing up the plan.

One by one, a pared gathering of attorneys approached a podium and outlined terms of the deal to Kornreich. By 4:30 p.m., this part of the effort to resurrect Great Northern’s mills from possible closure was over.

According to the attorneys, Wednesday’s presentation of a finance plan so early in a bankruptcy proceeding was a rarity. In less than three weeks, a compromise was reached to keep viable a paper company that on Jan. 9 didn’t have enough money to pay for one tanker of heating oil.

“The bottom line is what’s been accomplished here is incredible,” said Richard Bryant, an attorney for nine of Great Northern’s 14 unions.

And in another rarity in bankruptcy court, Kornreich stepped off the bench and shook hands with every attorney. “Good job,” he told each of them.

Jay Gellar, an attorney for Great Northern’s unsecured creditors’ committee, said Kornreich’s outward expression of praise was welcomed, but will be short-lived.

“Now we’ve got to get the hard part done and get somebody to buy it,” he said.

Health care plan set

According to the plan, Boeing will lend Great Northern $12.6 million to pay the wages of a skeleton crew of 80 workers and cover heating oil and other expenses. Plus, Boeing will lend the paper company at least $10 million to pay back the money it owes Congress Financial.

In exchange, Boeing, which already was owed more than $50 million before this deal, will receive “all of the assets” of the two mills as collateral.

But the financial deal could not be given to Kornreich on Tuesday because of several disputes concerning terms of a health care plan for Great Northern’s 1,130 workers and 677 retirees. The disagreements included whether active employees would participate in the new plan, how a new plan administrator would establish rules on coverage, and definitions of the type of health care that would be covered.

Also, Congress Financial informed Kornreich that it wanted $250,000 in loan termination fees and another $250,000 for its share of money that was contributed to a health care plan during the last month.

The unsecured creditors’ committee initially fought the health care plan, Gellar said, because under bankruptcy court rules only workers who provide a benefit to Great Northern are entitled to administrative expenses such as health care. A compromise to allow retirees to be covered, he said, “was an alteration of the priorities of the bankruptcy code.”

“From a human perspective, we understand,” Gellar said.

By Wednesday afternoon, the disagreements had been ironed out. All employees – active and furloughed – along with retirees would be covered under the health plan, the administrator was given parameters to set up rules, and definitions of care were provided by the state Bureau of Insurance. Those definitions are going to be sent out to individuals who choose to accept the health plan.

Congress Financial also agreed to accept $125,000 instead of $500,000 for its fees.

“We were able to recognize that the retirees and the workers needed basic protection as a bridge between the circumstances now and the eventual sale,” said Gov. John E. Baldacci, who helped negotiate the deal. “This has been an issue because of the concern for the families and the workers and the retirees. This health piece has been a very important piece.”

According to terms of the health care plan, $1.9 million will be funneled into an account to fund a prescription drug benefit plan and urgent and emergency care. If the money runs out, health care providers and workers and retirees will be entitled to an administrative claim against Great Northern, but will not be given priority reimbursement status from proceeds of a sale.

Participating health care providers, including Eastern Maine Healthcare, Millinocket Regional Hospital and the Maine Health Alliance, agreed to charge 50 percent of their standard fees.

Boeing Capital will fund $1.2 million of the $1.8 million, but $600,000 of that will be advanced and subsequently paid back equally by the Finance Authority of Maine and the Maine Health Access Foundation.

Another $600,000 will be donated to the plan by the Libra Foundation and $100,000 will be contributed by Eastern Maine Medical Center.

“We really want to help the workers,” said Owen Wells, president of the Libra Foundation. “Obviously this is a tough time for them. The workers and the retirees need the benefits.”

“Our health care missions dictate that hospitals provide necessary patient care services to the people of our region regardless of each individual’s ability to pay,” said Norm Ledwin, president of Eastern Maine Healthcare. “We feel that we must be willing to help the Great Northern employees and retirees by providing services to help them keep their families and communities intact while the mill seeks to reopen.”

Health benefits defined

Under the health plan, workers and retirees will cover certain co-payments for urgent and emergency care and prescription drug benefits. The workers no longer have to pay the premium of up to $181 a week for a family health care plan.

For urgent and emergency care, plan participants will be required to pay 20 percent of allowable charges up to a maximum payment of $450 per individual or $900 per family, according to the plan.

For prescription drugs, workers will be required to make a $10 co-payment. If the prescription costs less than $68, all but the co-pay will be reimbursed. If the total costs of prescriptions for a month are between $69 and $1,000, the worker or retiree will have to pay up to $932 plus co-payments. For prescriptions that total more than $1,000 a month, participants will have to pay $932 monthly plus co-payments and the plan pays the rest.

“In no event shall an eligible plan participant be required to pay more than $932,” according to the plan.

The workers and retirees can choose not to participate in the plan. If workers do not accept the plan, they will be entitled to their severance and vacation pay if the new company does not hire them. Also workers who accept the plan and are not hired will be entitled to their severance and vacation pay.

But whether they receive that pay depends on how much money is left from the sale of the mills to cover it, Bryant said.

“[It] may or may not be paid,” he said. “You’re going to be looking at a payout that’s cents on the dollar if anything.”

Baldacci praised

After the court proceedings Wednesday, attorneys who took part in the three-weeks of negotiations volunteered praise for Baldacci and what they called his persistence in keeping them focused.

John Doyle Jr., an attorney for Boeing Capital, said that on Friday, when the governor expected to hear that the financial and health care plans had been completed, Baldacci was forceful in telling the attorneys that they needed to work harder and get the deals completed.

Doyle said that at least three times Friday during a conference call with the attorneys, Baldacci told them, “this is not acceptable to this governor or to this state.”

“He inspired everybody to give it their best efforts for the good of the state,” Doyle said.

John McVeigh, another attorney for Boeing, said Baldacci made sure that all the directors of state agencies were available for help or advice, even on the weekends.

“This was so obviously one of the highest priorities of the governor,” McVeigh said. “When critical things were needed to get over some caps, the state was there. We had access to whoever we needed.”

Wells, president of the Libra Foundation, said he appreciated that Baldacci called him for help.

“I’ve been hugely inspired by Governor Baldacci, his focus on the issue, and his desire to find a buyer for the mills,” Wells said. “The notion that this is a Millinocket problem is ridiculous. This is a Maine problem in spades.”