Eastern Pulp loan talks to continue

BANGOR – Loan negotiations aimed at restarting bankrupt Eastern Pulp and Paper Co.’s two mills in Brewer and Lincoln ended Monday evening with no definitive date to put about 750 people back to work.

Instead, Eastern Pulp, the state and others were given conditions by the company’s major lender, Congress Financial Corp., that they must meet in order for Congress to process a $2.5 million loan that is supposed to be spent on returning the mills to operation.

George Marcus, Eastern Pulp’s attorney, said he could not get into any specifics about what must be resolved before Congress agrees to the loan.

“It’s a very complicated negotiation,” Marcus said. “It’s taking a long time.”

He said talks will continue whether over the phone or in person between now and Friday, and that Congress will keep lending money to keep the mills warm.

“The status quo will be maintained,” Marcus said.

In the meantime, a crew was being called Monday night to report to Eastern Pulp’s Brewer mill today to operate a paper coater, according to Peter Coppa, president of PACE Local No. 1-0403.

“The coating department needs to restart right away because customers need their products,” he said. “There’s orders in and they’ve been taking orders.”

Eastern Pulp has been under Chapter 11 bankruptcy protection from creditors since September 2000. It owns Eastern Fine Paper Co. in Brewer and Lincoln Pulp and Paper Co. in Lincoln.

The loan is based on an operating budget submitted by Eastern Pulp, and apparently calls for a restart at Lincoln and undisclosed limited operations at Brewer, according to sources close to the negotiations. No job layoffs for hourly workers have been planned, but some salary jobs could be cut.

The loan would have to be approved by U.S. Bankruptcy Chief Judge James B. Haines in Portland. No court date has been set.

The closed-door loan negotiations took place at Congress’ office in New York City, and started later than the 1 p.m. appointment time. Apparently Congress and its contingent of lending institutions were delayed because they were conducting an internal review of Eastern Pulp’s financial numbers.

Congress had two independent financial analysts at Eastern’s Amherst, Mass., headquarters during the last five days performing a review of the company’s books, and they were presenting their report beginning Monday morning.

“The consultants didn’t generate the numbers fast enough,” said Robert Keach, a Portland attorney representing the official committee of creditors. “That’s not the consultant’s fault. It’s a difficult job to get done in a hurry. We’re a day, day-and-a-half behind where we thought we would be.”

Keach, who attended the meeting, said even though Congress has not committed to the loan, he remains “cautiously optimistic” that the money eventually will be borrowed by Eastern Pulp.

“We understand their [Congress’] conditions and we expect to meet them,” Keach said. “They just need some more information than what they got. Nobody has said no yet. That’s the important thing. I’m hoping it will be resolved [today].”

Earlier this month, Eastern Pulp had received $650,000 from Congress Financial to keep the mills warm and to pay the wages of a skeleton crew. The lender also agreed to pay past-due payroll, and the workers received their checks last Thursday afternoon.

Eastern Pulp already has at least two forms of loans with Congress. One is a revolving line of credit while the other is a block loan that is funded by Congress and other lenders, but is listed under Congress’ name. Eastern Pulp now is trying to secure another block loan.

Throughout the day, Eastern Pulp’s 750 workers awaited word on whether they were going back on the job this week – the announced intent behind Monday’s meeting. Eastern shut down its two mills more than a week ago, and the closure prompted a hurriedly put together meeting last Tuesday at Gov. John Baldacci’s office.

After three hours at the State House, more than 30 company and state officials, union representatives, lenders and attorneys left with plans to perform the analysis of Eastern Pulp’s financial operations, meet Monday and, if all went well, to secure the $2.5 million loan and start up the mills this week.

Now the rest of the laid-off workers wait for a telephone call like the Brewer coating crew.

“It’s a lot of people’s lives,” Coppa said.

Congress is working with Fisher International in Connecticut to prepare a review of Eastern Pulp’s finances and its operations, and Fisher’s report would be provided to interested buyers. Among the likely conditions put on the loan by Congress are a sale of the mills, which could take up to four months in U.S. Bankruptcy Court, and installment of a chief restructuring officer to work alongside Eastern’s current management team. Joseph Torras Sr., owner of the company, may be asked to step aside, according to sources close to the negotiations.

Baldacci did not attend Monday’s meeting, and neither did Jack Cashman, commissioner of the state Department of Economic and Community Development. Cashman said they would be a phone call away if needed.

Lee Umphrey, the governor’s spokesman, said Baldacci was “very encouraged with how the discussions went.” Umphrey said he could not elaborate on what part of the discussions showed the most promise.

“They were good, productive conversations,” Umphrey said. “It’s not for us to say anything more than that. The governor will continue to monitor the talks with the goal to return the workers to work.”