PORTLAND – Representatives of the Toronto-based Brascan Corp. concluded the $103 million purchase of Great Northern Paper Inc. on Tuesday, providing a new beginning for northern Maine and an end to 97 days of hard-fought negotiations.
The bankruptcy sale was concluded only hours before health benefits were scheduled to expire for 1,116 of GNP’s former workers and its 677 retirees. No paper has been shipped from the company’s mills in Millinocket and East Millinocket since its previous owner, Inexcon Maine, shut down both plants in December. Great Northern then filed for bankruptcy in January.
Gov. John E. Baldacci, a key player in the negotiations to save the 102-year-old papermaking operations, joined company officials at the offices of the Pierce Atwood law firm in Portland where final details of the sale were concluded for the facilities, which will be operated under the new name Katahdin Paper Co. LLC.
Bert Martin, formerly of the Brascan subsidiary Nexfor Fraser Papers Inc., will serve as the paper company’s new president as it starts what he described as an “exciting new day.”
“We have acquired a pulp and paper facility that we believe can be extremely competitive to provide fantastic products for our customer base and solidify communities in which our employees live,” Martin said. “To us, that’s very important. We tend to be simplistic people: We’re from the north. And we’re in business to make money for our owners and we’re in business to provide products to customers that they can’t get anywhere else.”
The East Millinocket plant should be running by mid-June and will employ about 375 people, according to Richard Legault, an executive vice president for Brascan, who said his firm also wants the Millinocket mill reopened as soon as possible.
“Great Northern had a long and prestigious history,” said Legault, in explaining the name change to Katahdin Paper. “It’s not about having a name that we don’t want. It’s best to cut the ties with the past and start anew.”
Legault said Brascan’s goal is to turn the bankrupt paper company into a successful business by improving efficiencies and investing about $100 million to position the two northern Maine paper mills to run through the worst of economic times.
The transition won’t be painless as fewer than half of the employees who had jobs in December eventually might be rehired.
The paper mills in East Millinocket and Millinocket will be operated as one complex, and the mills’ infrastructure that once supported 17 paper machines will be reconfigured to support the remaining three.
“It will take time and commitment by a lot of people,” said Legault. “It’s just a matter of aligning the right resources and capital to make this the best possible business.”
The sale Tuesday was welcome news for Baldacci, who observed that despite the “difficulties” during the last four months, all parties came together to confront the potential crisis of a Katahdin region without a paper mill. Regional differences were cast aside as health care providers and insurers worked with the new administration to create a safety net for many of the GNP employees.
“It brought out a lot of the great qualities in the state,” he said. “People are going to be going back to work, making paper and accepting orders. Maine is open for business, and we want business, and we want businesses to grow.”
News of the completed sale also drew sighs of relief from people in the Katahdin region, whose existence has depended on the paper mills for more than a century.
“People are excited and they want to go back to work,” said Bruce Cox, a union president representing East Millinocket workers.
Gene Conlogue, Millinocket’s town manager, described Brascan and Nexfor Fraser Papers as top-shelf companies for decades. “We now have one more chance to make this really go here,” he said.
Conlogue said the only negative was the large number of people who would not be returning to work. He added, however, that the available work force could help attract new business to the area.
The four-month shutdown of Great Northern also had forced many other area businesses to reduce hours or cut back on help.
“Just the idea that the papers have been signed and the mills will reopen will make a big difference in people’s spending habits,” said Steve Campbell, president of the Katahdin Area Chamber of Commerce.
In a few weeks, up to 375 workers should be returning to the East Millinocket mill to begin producing directory paper. The Millinocket mill may not reopen for at least a year. Brascan has indicated that it wants to invest up to $60 million to install a new bleach chemi-thermo-mechanical-pulping operation there first to make supercalendered paper more efficiently. If all goes well, another 175 people would be hired to operate that mill.
Bill Manzer, Nexfor Fraser Papers’ vice president of operations, and Regal McLean, director of human resources, said a small group of about 50 people was scheduled to go on the payroll shortly after midnight Tuesday to provide essential services.
“We will bring people on in waves,” said Manzer.
McLean and Manzer said officials were about halfway through interviewing all former salaried personnel. Those offered a job will begin work between early May and June. Unionized workers will be offered a job based on what equipment is started in the mill, on their qualifications and on seniority. He also said workers must pass a drug test before being hired.
McLean said the company already has held two pre-employment orientation sessions and is holding another Wednesday.
The signing in Portland on Tuesday did not need to take place in U.S. Bankruptcy Court in Bangor because Judge Louis H. Kornreich already approved the sale last Friday, when Brascan amended its original asset purchase agreement that had been authorized by the judge on March 24.
Initially, the $103 million deal included about $12 million worth of property and other assets that were going to be left behind with Great Northern’s bankrupt estate. The rest of the purchase amount included loan assumptions and about $63 million in cash.
But last Friday, in federal bankruptcy court, Brascan amended its purchase agreement to buy two properties it at first did not want. The state had considered buying the two properties – a training center and an engineering facility – for about $950,000, according to Daniel Bleck, a Boston attorney representing Great Northern.
But it later was realized that one of the facilities was in the middle of a hard-hat area, and Brascan did not want to assume the liability if someone was hurt. Bleck said state officials also realized that they were going to spend “way over market value” for the buildings, and would be unable to sell them.
“The estate is not willing to purchase the two buildings and there’s no market for them,” said Bleck, in bankruptcy court last Friday. Brascan then agreed to take ownership of the two facilities for $375,000.
Under the deal signed Tuesday, Brascan paid $63.3 million in cash and assumed about $27 million in loans. About $51.5 million of the cash was to pay off a long-term equipment lease Great Northern had with Boeing. The remaining cash from the purchase price goes to Great Northern’s bankrupt estate.
Boeing is still owed about $11 million from the estate and will be vying with other creditors for the limited funds remaining as the bankruptcy process continues.
Legault said that the sale’s terms will not allow for compensation of some of the companies that were owed money by Great Northern’s previous owners.
“My understanding is that there’s not a whole lot left for unsecured creditors, unfortunately,” he said.
U.S. Rep. Michael Michaud of East Millinocket was in Washington Tuesday afternoon, but he forwarded his congratulations to all parties for the successful conclusion of the company’s acquisition.
“This is tremendous news for the Katahdin region and this is a step in the right direction to help get our workers back to work,” said Michaud, who worked in the Millinocket mill for nearly 30 years. “Northern Maine prides itself on the work ethic of its citizens and Brascan Corporation will certainly benefit from the abundance of qualified employees in our region.”