BANGOR – Bankrupt Great Northern Paper Inc.’s unions and the U.S. trustee oppose a request by Belgravia Paper Co. that it be paid $5 million if it is not successful in buying GNP’s two mills.

Belgravia of Vancouver, British Columbia, earlier this week submitted a $91 million “stalking horse bid” to purchase Great Northern, but the offer is the starting point in a possible auction of the two mills. In its bid, Belgravia outlined conditions that other suitors must meet or beat to topple it as the successful buyer.

Those conditions include that competing bids must exceed Belgravia’s offer by $2 million and that Belgravia would receive $5 million in what’s called a “breakup fee” if it is not the eventual buyer. Plus, the Canadian company wants up to $750,000 in reimbursement for expenses related to pursuing Great Northern if it is not the buyer.

Belgravia also wants the money if it has to withdraw its offer because of an unsatisfactory renegotiation of any of Great Northern’s energy supply contracts, according to court documents.

A federal bankruptcy judge will hear arguments starting Tuesday morning on whether Belgravia’s conditions should be approved or modified, including lowering the amount of the fees.

Great Northern’s unions and the U.S. Trustee’s Office believe the fees are excessive, and if other interested buyers are forced to pay them, they might not bid on the paper company. Great Northern’s unsecured creditors also are expected to fight the fees.

“Belgravia’s $5 million breakup fee and $2 million overbid protection are unreasonable and will chill counter-bids,” wrote the U.S. trustee in court documents filed Friday afternoon. “The $7 million combined breakup fee and overbid requirement are not reasonable in relation to Belgravia’s probable costs as a stalking horse bidder for the assets.”

In the documents, the trustee’s office stated that a breakup fee typically covers reimbursement of out-of-pocket expenses related to a company’s attempt to buy a bankrupt business, plus compensation for time, efforts, resources and lost-opportunity costs.

The trustee’s office pointed out that in Belgravia’s offer, it agreed to be paid as much as $750,000 for expenses.

Belgravia’s attorney, Robert Keach of Portland, said the conditions in the Canadian company’s offer are “typical and reasonable,” and that in just about every bankruptcy case in U.S. courts, unions and the trustee’s office have tried to oppose buyers being paid breakup fees.

He said the $5 million fee and $750,000 expense reimbursement are “fair” given the amount of work that needs to be done in less than three months to successfully purchase Great Northern.

On Tuesday, Keach will say Belgravia will not be lowering its fee requirements.

“We are not prepared to make concessions on the breakup fee,” he said. “We think it should be included in bids.”

Belgravia Paper owns four paper companies in Canada and the United States, including St. Marys Paper in Sault Ste. Marie, Ontario, and West Linn Paper Co. in West Linn, Ore. Belgravia Paper is a subsidiary of Belgravia Investments Ltd., which has an office in Vancouver but is registered in the Bahamas.

All of the mills produce grades of groundwood paper similar to that manufactured at GNP, including specialties and supercalendered grades used in catalogs and newspaper inserts.