BANGOR – Lincoln Pulp and Paper Co., which employs nearly 500 people, will resume operations later this week provided a tentative $3.7 million emergency loan to its parent company, bankrupt Eastern Pulp and Paper Corp., is approved.

Even if U.S. Bankruptcy Chief Judge James B. Haines approves the loan Wednesday morning, machinery at Eastern Fine Paper Co. in Brewer will be kept warm but will not return to full operation for at least 13 weeks, affecting 240 workers.

Eastern Pulp has been under Chapter 11 bankruptcy protection from creditors since September 2000, and its two mills have been shut down temporarily since Jan. 17.

The Finance Authority of Maine, a state-funded agency, agreed Monday afternoon to give a $1 million “economic recovery loan” to Eastern Pulp. The company’s primary lender, Congress Financial Corp. of New York City, added $2.7 million to keep the mills in what’s being called an attractive position to potential buyers.

At a press conference Monday evening, Gov. John Baldacci said at least two prospective buyers, which he would not identify, are interested in purchasing the Brewer and Lincoln mills as a package.

“The strategy to us is a simple one – the mills are worth more as a going concern. The alternative, a cold shutdown, would effectively terminate the viability of these properties,” Baldacci said.

The governor credited FAME for approving the loan at a hurriedly put-together meeting Monday.

“The action today [Monday] will probably, hopefully, buy us about three months for a prospective buyer to come forward,” Baldacci said.

Two of Eastern Pulp’s other secured lenders, Corsair Special Situations Fund and ING Group-Spring Street, still need to sign off on the conditions of the FAME-Congress loan before it is presented for approval from Haines on Wednesday.

Corsair is first in line in terms of collateral rights to Eastern Pulp’s equipment after lending the papermaker $2.5 million last summer. Congress Financial is second, with at least $27.5 million in loans, and ING Group-Spring Street is third with $27.7 in loans.

George Marcus, a Portland attorney representing Eastern Pulp, cautioned Monday evening that the loan still had not been approved by the lenders or the bankruptcy judge, and that the situation at both mills could change.

“It’s not 100 percent certain,” Marcus said. “The appearance of a potential buyer for Brewer may change things.”

When asked whether a buyer might publicly announce its intent to buy Eastern Pulp by Wednesday morning, Marcus responded, “Anything’s possible.”

U.S. Sen. Olympia Snowe, who had been negotiating with Eastern Pulp’s lenders to reach a loan agreement, said the loan arrangement announced Monday “is a step in the right direction.”

Charles Spies III, chief executive officer of FAME, said Monday he expects the economic recovery loan will be a secured one. An economic recovery loan is part of a high-risk debt program that is funded with voter-approved bond money. Loan repayments return to the bond fund and new loans can be drawn on the fund at any time.

The loan program’s default rate is 10 percent, Spies said.

Brewer suspected shutdown

In Brewer, Eastern Fine’s workers had some suspicion starting last Friday that the mill might not return to full operation. The Training and Development Corp. notified workers that it would conduct two informational meetings on job retraining and unemployment benefits on Friday. No meetings were scheduled at Lincoln.

Also, Labor Department officials at the end of last week personally called any of Eastern Pulp’s workers at both mills who recently applied for unemployment benefits to inform them that they were being given a work search waiver through the end of February.

Adam Fisher, spokesman for the Labor Department, said the Brewer millworkers still are covered under a federal trade adjustment assistance program from more than a year ago. Because the money is available, the Brewer meetings were set up to give the workers all of the information they need to proceed with a job search in case the mill did not reopen.

On Monday evening, Brewer workers and city officials had mixed emotions about the mill not returning to operation. The Brewer mill accounts for 50 percent of the operating budget of the city’s wastewater treatment facility, and the mill and its workers represent 5 percent of the city’s tax revenue, according to City Manager Steve Bost.

“That is not good news,” Bost said when informed about the mill’s shutdown. “We need more information at this point. Certainly this doesn’t appear to be terribly positive news, certainly not for the workers at the Brewer site.”

Last month, the city gave the paper company a shutdown notice after its past-due bill for use of the wastewater treatment facility exceeded $840,000. The balance is for usage and for its portion of upgrades to the facility. Eastern Pulp agreed to pay $10,000 every two weeks, and gave the city its first payment more than a week ago. The payments cover current use and don’t bring down the balance due, Bost said. As of Monday, the balance due was $863,000, he said.

Brewer’s tax bill also was due on Jan. 30 and still hasn’t been paid. The bill is $178,000 for personal property and $39,000 for real estate. With pre-bankruptcy debt, Eastern Pulp owes Brewer $1.3 million, Bost said.

Brewer millworkers upset

Manley DeBeck, a Brewer millworker and the city’s deputy mayor, said Monday evening that he’s startled that the mill is not returning to full operation. He said he was informed that Baldacci might have a press conference, but that he could not get any information about what the governor might say.

“That means I’m out of a job,” DeBeck said when he telephoned the Bangor Daily News. “At least now I know. Good news. Bad news. We should still know. The state’s not keeping us informed.”

DeBeck said that by not immediately returning the Brewer mill to full operation, Eastern Pulp’s creditors essentially are slowly killing the facility. During the next 13 weeks, the 240 workers will try to secure new jobs and “all that institutional knowledge will be gone,” he said.

“I think it’s a mistake,” DeBeck said. “That mill can make money but they don’t think it can. I’m glad for Lincoln. At least they’re going back to work. We’re of no value. At least that’s what they’re telling us.”

Peter Coppa, president of PACE Local No. 1-0403 in Brewer, remains positive that the mill will be restarted.

“We’ve got 13 weeks,” he said. “There’s still hope. If they’re going to keep it warm, there’s hope of reopening. If they weren’t going to keep it warm, there would be no hope.”

Lincoln mill ready to work

Lincoln Pulp workers are eager to head back into the mill, said Steve Corriveau, president of PACE Local No. 1-0396.

“We were just starting to make preparations for going from a temporary to a permanent shutdown,” he said. “I got the news just in the nick of time to stop that.”

Unlike Brewer, Eastern Pulp is current on its bills with the town of Lincoln, said Town Manager Glenn Aho. The mill restart, which could come by the end of the week if the judge approves the loan, reunites “a family,” he said.

“If you knew them like I do, you’d say, ‘Hey, this is a good thing,'” Aho said. “Lincoln Pulp and Paper has that niche market that a lot of mills don’t. You can’t help but look at all of their products and see that there’s a future at this mill.”

Assistance meetings set

. Today and Thursday, a representative from the state Department of Human Services will be at Ballard Hill Community Center in Lincoln from 9:30 a.m. to 3 p.m. to explain the MaineCare health care program.

. Wednesday, company officials will discuss alternative health insurance plans and other financial matters will be discussed at 9 a.m. and 1 p.m. at the Knights of Columbus Hall in Lincoln.

. Wednesday, PACE Local No. 1-0403 will meet at 6 p.m. at the Greater Bangor Area Labor Council hall at 20 Ayer St., Brewer.

. Thursday, company officials will discuss alternative health insurance plans and other financial matters will be discussed at 9 a.m. and 1 p.m. at Brewer Auditorium.

. Friday, job retraining and unemployment benefits will be discussed at 10 a.m. and at 1 p.m. at Jeff’s Catering in Brewer. Brewer millworkers whose last names start with A-M will attend the morning meeting, and workers whose last names start with N-Z will attend the afternoon session.