BANGOR – Bankrupt Eastern Pulp and Paper Corp. ran out of cash this week while two of its lenders were arguing over how to structure a $1.5 million loan to fund the company’s operations until early February.

The lack of money to purchase supplies such as wood chips and chemicals forced Eastern Pulp to temporarily shut down its mills in Brewer and Lincoln on Friday evening, displacing most of the 750-person crew.

No start-up date has been set, but company chairman Joseph Torras issued a statement Friday saying the Lincoln shutdown is expected to “last less than a week; the coating operation at Brewer may be less than that, and the papermaking operation at Brewer will follow shortly.”

On Friday afternoon, one of the lenders, Congress Financial Corp., did decide to transfer $650,000 into Eastern Pulp’s bank account, but the money came too late to keep people on the job. Eastern Pulp now is using the money to keep the mills “warm and ready” to start up again on short notice, if it gets more money to actually produce paper again.

Eastern Pulp, which filed for Chapter 11 bankruptcy protection in September 2000, owns Eastern Fine Paper Co. in Brewer and Lincoln Pulp and Paper Co. in Lincoln.

Lee Umphrey, spokesman for Gov. John Baldacci, said Friday that the money would be used to “keep the heat on,” but his comment took on greater meaning than just pumping warmth into the facilities.

Baldacci, who was blindsided by the announcement of a shutdown, called Eastern Pulp’s managers and union officials, along with attorneys for the company and its lenders, on Friday morning and summoned them to his office for a meeting Tuesday morning.

The meeting will be held hours before the governor presents his State of the State Address.

According to Jack Cashman, commissioner of the Department of Economic and Community Development, the meeting will focus on just how much money Eastern Pulp actually needs, and under terms a lender would find acceptable. What also might be discussed is whether an interim management team should replace current management or whether a new company-turnaround specialist should be brought in, Cashman said.

George Marcus, a Portland lawyer representing Eastern Pulp, said he believes the meeting will center on funding and running the company long term “so we don’t continue to have questions day to day.”

Robert Keach, a Portland lawyer representing the official committee of unsecured creditors, said that Congress may be seeking loan guarantees from such groups as the Finance Authority of Maine.

“All the issues are on the table,” Keach said.

But what won’t be discussed is whether the temporary shutdown will become permanent, Cashman said.

“It’s premature to talk about these things,” he said.

Friday’s infusion of money from Congress Financial is only a portion of a $1.5 million loan that Eastern sought from the lender 10 days ago to keep the mills operating through early February. A federal bankruptcy judge denied the loan because of its terms, which would have given Congress Financial top loan-repayment status over another lender, Corsair Special Situations Fund LLP.

Last August, Corsair agreed to loan Eastern $2.5 million if it was given the top loan-repayment position, and Congress Financial, which was No. 1 at the time, said that would be OK in exchange for $25,000.

Congress Financial’s request to regain the top spot was denied by U.S. Bankruptcy Chief Judge James B. Haines on Jan. 7 because Corsair’s $2.5 million loan from last August already was spent by Eastern. Haines said it was too late to change the terms of an almost 5-month-old loan.

Since Jan. 7, negotiations between Eastern Pulp and Congress Financial to loan the $1.5 million have been tense and slow, according to people close to the loan talks. But while Eastern was fighting to get the money, two lenders also were at odds over how to set up terms of the loan.

Eastern tried to settle the lenders’ qualms, but eventually could only sit and watch from the sidelines.

Eastern has two separate loan agreements that include Congress Financial, according to a source close to the negotiations who asked not to be identified. One is a revolving line of credit fully funded by Congress Financial and the other is a term loan that is funded by a collection of lenders, including Congress Financial, and is secured by Eastern Pulp’s fixed assets.

According to the source, Congress Financial and ING Primary Trust Fund are having disagreements over how their portion of the money they loan will be protected.

“There’s disagreement among the lenders on how funding should occur,” the source said.

Jeffrey Jonas, a Boston lawyer representing Congress Financial, did not return a telephone call for comment Friday.

None of Eastern Pulp’s 750 workers officially have been laid off, Marcus said. But that has not stopped the Maine Department of Labor and the state’s congressional delegation from setting up meetings next week to inform the workers of unemployment benefits.

The Labor Department sent members of its Rapid Response team to Brewer and Lincoln to talk with company and town officials to find out whether the temporary shutdown was a result of foreign competition in the paper industry. If so, the department will pursue trade adjustment assistance benefits from the federal government to fund job retraining programs.

Rep. Michael Michaud’s staff will conduct worker support meetings from 9 a.m. to noon and from 1 p.m. to 3 p.m. on Wednesday in Lincoln and Thursday in Brewer. Sen. Susan Collins’ staff will be available from noon to 3 p.m. Thursday in the Lincoln Town Council Chambers at the Town Office.

“While negotiations continue to keep the company open, workers’ interests must be kept in mind and they must be kept informed so they are not left in a state of limbo without their paychecks,” Collins said in a statement. “I am disturbed that another 750 workers in Maine are being cut off from their jobs because of circumstances beyond their control.”

At Manna Ministries in Bangor, director Bill Rae said the nonprofit organization would assist workers with food and basic necessities. He said Manna, located at 180 Center St., will assist mill workers from 9 a.m. to 4 p.m. Monday through Friday.

For more information, call Rae at 990-2870.