Eastern awaits lenders’ decision, hopes to reopen

loading...

AUGUSTA – Bankrupt Eastern Pulp and Paper Corp. has given prospective lenders a copy of its proposed operating budget of $2.5 million for the next three months, but in turn was given no commitment to fund the budget, only a promise to consider it.

If the money eventually is lent to Eastern Pulp, it would be used to restart the company’s two mills in Brewer and Lincoln, possibly under a new interim management team, while a buyer for both facilities is sought.

“All parties agreed that we have to move this to a sale,” Jack Cashman, commissioner of the Department of Economic and Community Development, said after a meeting of interested parties Tuesday at the State House.

Under the proposed plan, not all of Eastern Pulp’s 750 employees who were temporarily laid off last Friday would be returning to their jobs. How many positions would be eliminated is not known.

“I don’t know the answer, but I think it would be a mistake to assume that there won’t be some job cuts,” said George Marcus, an attorney representing Eastern Pulp.

Jonathan Beal, a Portland attorney representing the mills’ PACE union, said he did not hear in the meeting about hourly job losses, only “management job cuts.”

Eastern Pulp, which has been under Chapter 11 bankruptcy protection from creditors for more than three years, owns Eastern Fine Paper Co. in Brewer and Lincoln Pulp and Paper Co. in Lincoln.

Eastern gave its lenders the budget during a three-hour meeting Tuesday. The meeting was hurriedly put together last Friday by Gov. John Baldacci after he learned that Eastern Pulp had shut down its mills in Lincoln and Brewer, displacing most of its employees.

More than 30 people attended Tuesday’s closed-door meeting, and some left disappointed that the company could not secure at least $2.5 million from one or more of the lenders in the room. The hope was that Eastern Pulp, which had been trying for weeks to borrow at least $1.5 million to fund operations through early February, would walk away from the talks with the promise that the money was going to be transferred into its account by the end of the day.

According to one person at the meeting, who asked not to be identified, “Little concrete was achieved today [Tuesday].

“The governor tried and did not get a commitment,” the source said. “The lenders were just making noise in front of him.”

Marcus, Eastern’s Portland attorney, said he was more optimistic about what occurred at the meeting. He said the lenders were going to review the budget by week’s end, and another meeting to possibly wrap up financing would take place Friday or Monday. The goal is to restart operations sometime next week. Any loan agreement would have to be approved first by a federal bankruptcy judge.

“I have a reasonable degree of confidence,” Marcus said, “but until it actually happens, I can’t say for sure.”

Also left unresolved Tuesday was how lenders were going to be lined up in terms of repayment on the millions of dollars they have lent to Eastern Pulp. Each of at least three lenders is jockeying to be paid before the others, an argument that has been continuing for weeks and one of the reasons the mills were shut down.

Marcus said the lenders did agree Tuesday to cover accrued payroll for the millworkers.

The budget as it is written right now includes enough money to pay suppliers who had threatened to cut off shipments until their past-due balances were made current. The lack of money to pay for raw materials and chemicals also was given as a reason for last Friday’s shutdown.

“The company will have to pay for products that are going to be shipped in,” Marcus said. “We recognize that reality.”

The meeting started with Baldacci telling his audience that “liquidation was not an option,” and ended with Joseph Torras Sr., owner of Eastern Pulp, addressing the room even though efforts are under way to replace him as top manager of the small, independent company he has owned for decades.

“It’s a difficult thing to have to do,” said Torras after the meeting. “The people – our customers, employees, suppliers – all of them have been superb. We’ve tried very, very hard to live up to the expectations they’ve had.”

The thought of stepping down does not bother him, Torras said.

“I’ve been there a long time,” he said. “Let somebody else do it, anyhow. We’ve got excellent help in our company providing all the leadership it needs.”

Cashman said a decision on whether to replace Torras likely would be made at the next meeting.

“We are very thankful for his [Torras’] cooperation,” Cashman said. “Joe Torras has been an asset to the company for a long time. He was very cooperative today [Tuesday]. In the end, if that means he steps aside, Joe Torrras will do what’s in the best interest of his employees.”

One person discussed Tuesday as a possible interim manager was James Giffune, a retired paper company executive who worked for dozens of years at the former Great Northern Paper Inc. in Millinocket. Giffune came out of retirement to replace Great Northern owner Lambert Bedard a year ago this month, and without pay moved the company toward a sale.

“We actually did talk about Jim Giffune, but I can’t believe we’ll ever be able to get Jim to do it again,” Cashman said.

Giffune, reached at his home in New Gloucester, said Tuesday he had not been contacted about becoming an interim manager, and, if asked, he would have to give it some thought.

“I’m not in a position to say yes or no,” he said.

Although it was discussed Tuesday that the company should be sold, the names of any prospective buyers was not brought up. Marcus said he has not met with any, and Baldacci said, “It’s just in the early stages.”

“Somebody else buying is a possibility, but it’s not going to happen by next week,” Marcus said.

The next meeting, whether it’s on Friday or Monday, will not be held at the State House, but in Portland. Baldacci will not be attending, but Cashman will, the governor said.

“I don’t want to let this one get away from us,” Baldacci said.

Added Cashman, “We can’t afford to do anything except everything in our power to keep these mills going. We don’t have an alternative. These are good jobs, and we damn well don’t want to lose them.”