BANGOR – Bankrupt Great Northern Paper Inc. will regain ownership of a landfill and other properties in time to turn around and sell them – along with its two mills in Millinocket and East Millinocket – to Brascan Corp. of Toronto by next Monday.

An attempt by Katahdin Federal Credit Union in Millinocket to recover $3.2 million in mortgages it has on the properties from either Great Northern or its parent company, Inexcon Maine, before they are transferred to Great Northern failed Monday in U.S. Bankruptcy Court in Bangor.

Brascan, which made Great Northern’s reacquisition of the Dolby landfill in East Millinocket a condition of its $103 million purchase of the papermaker, now is putting the finishing touches on the sales agreement before a court-ordered closing date of April 21.

“We’re on track,” said Jacob Manheimer, a Portland attorney representing Brascan. “This deal’s going to close.”

Until Monday, the landfill and other properties were in the possession of Inexcon Maine and its owner, Lambert Bedard, which took control of them after a vote by Great Northern’s board of directors on June 1, 2001. Inexcon Maine and Bedard used the assets as collateral for more than $3.2 million in loans obtained from Katahdin Federal.

Payments on the mortgages were due in full late last year, just before Great Northern filed for bankruptcy on Jan. 9.

Under a compromise reached between Inexcon Maine and Great Northern, which was approved by U.S. Bankruptcy Judge Louis H. Kornreich on Monday, Katahdin Federal would be paid an undetermined amount on the balance of the mortgages at a later date. In about three months, a hearing would be conducted in federal bankruptcy court to determine the financial value of the properties, and Katahdin Federal would be paid the amount of that valuation up to a cap of $3.2 million.

The money would be paid out of a $3.4 million escrow account being set up by Great Northern’s primary lender, Boeing Capital Corp. of Long Beach, Calif. Boeing would be paid back the escrow amount from the proceeds of the sale of Great Northern assets not being purchased by Brascan.

Inexcon Maine and Bedard worked out a deal with Great Northern’s interim management team to transfer the properties back to Great Northern in exchange for some payment and a dismissal of a lawsuit against them that claimed alleged fraudulent transfer of properties and a breach of fiduciary duties. But Katahdin objected to the April 3 deal, which was awaiting Kornreich’s signature, because it did not provide sufficient repayment terms for the mortgages.

Dan Cummings, a Portland attorney representing Katahdin, on Monday argued that under one specific bankruptcy law, the credit union should be entitled to payment in full before the properties are transferred so that the properties are “free and clear of any liens.” He said a financial value should be assessed on the properties before they are transferred, and the mortgages paid based on that assessment.

But Kornreich, noting “the unique circumstances of this case,” said that under two other bankruptcy laws, Katahdin Federal could be compelled to turn over the properties without full payment if it were given adequate assurance that it would be paid some or all of the balance at a later date.

“It is under that basis that I approve the [transfer],” Kornreich said.

After the court proceeding, Cummings said it was premature to decide whether he would appeal Kornreich’s decision. He said that although it was argued in court Monday that the landfill is worthless right now because it is not being used, the property does have a significant financial value because it is needed to close the sale to Brascan.

“[The landfill’s] back in Great Northern’s hands now as a unified property,” Cummings said. “It strikes us that there’s significant value there. We still believe … that under bankruptcy code we’re entitled to receive the full payment.”