Judge: Eastern OK to borrow $500,000

BANGOR – Eastern Pulp and Paper Co. received permission Monday from a U.S. Bankruptcy Court judge to borrow $500,000 from one of its primary lenders.

The money is an additional installment on loans already secured by the paper company through Congress Financial Corp. and will help cover expenses through Oct. 31.

In the meantime, Eastern officials are in discussions with several financial institutions to develop a plan to emerge from Chapter 11 bankruptcy protection, said Douglas Walsh, executive vice president of operations, on Monday. The company wants to file its reorganization plan in the near future with the bankruptcy court and come out of bankruptcy in the fall, he said.

Before that can happen, Eastern has to cross one hurdle. One of its creditors, Northborough Capital Corp., has asked the bankruptcy judge to order the paper company to pay its mortgage on its Amherst, Mass., headquarters. If the judge says no, then Northborough has asked the judge to move the company from Chapter 11 bankruptcy protection, which affords it protection from creditors, to Chapter 7 or liquidation.

A hearing on Northborough’s request is set for 11 a.m. Wednesday at U.S. Bankruptcy Court in Portland.

Eastern remains in discussions with its union to cut 19 jobs at one of its mills, Lincoln Pulp and Paper Co. In mid-June, the company announced that it needed to lay off 25 people at its mill in Lincoln.

At the end of May, 125 people were laid off at the company’s other mill, Eastern Fine Paper Co. in Brewer.

Walsh said Monday he does not think any further layoffs would occur in the near future. He said at this time, he could not confirm whether layoffs would be required under the plan to emerge from bankruptcy. The decision would be based on market conditions and how the business is restructured under the plan.

“We have to leave our options open,” he said.