Cash buys Eastern mills time Creditors give $50,000 to keep electricity on

AUGUSTA – The future of bankrupt Eastern Pulp and Paper Corp.’s two mills remained in limbo after 11 hours of negotiations Tuesday ended without a guarantee from lenders of an unspecified amount of money to minimally maintain the facilities until a buyer is announced, possibly as early as this weekend.

An infusion of $50,000 provided by one of Eastern’s creditors, however, is expected to keep the mills in Lincoln and Brewer warm at least through today and possibly through Thursday.

Loan talks are expected to continue today, but not in the same room next door to Gov. John Baldacci’s office where the negotiations occurred Tuesday. Today, talks will proceed over the telephone.

Baldacci, with an apparent sense of urgency in his voice, said Tuesday that “it was in everybody’s interest” to nail down more cash to fund the basic maintenance operations so prospective buyers can swiftly study whether the mills are worth buying, and then submit an offer.

The money could run out today, however, and the suitors could be sent packing.

“That’s the frustrating part,” said Baldacci, who mentioned that he has spoken to at least 10 or 11 individuals or companies that have expressed interest in buying the mills and might not be able to do so.

Baldacci said that by the end of the week, at least four of the suitors could give him “term [of sale] sheets,” and one or two of them could be announced in U.S. Bankruptcy Court early next week as the “stalking horse bidder.” The “stalking horse” is the company whose typically low-priced offer is the target other suitors are forced to beat in order to be successful during a bankruptcy court-sponsored auction.

“There could be two different buyers looking at two different options, one for Lincoln and one for Brewer,” Baldacci said. “There could be.”

But before the sales process can officially begin in bankruptcy court, the mills first must stay warm.

On Tuesday evening, while the loan talks still were taking place, Baldacci announced that an infusion of $50,000 was being given from lender Corsair Special Situations Fund LLP, one of Eastern’s creditors, to heat the facilities and keep the skeleton crew through today.

PACE union officials maintained a presence at Tuesday’s meeting, and, by the end of the day they were sharpening their pencils trying to find ways to cut costs and stretch the $50,000 over two days, according to PACE attorney Jonathan Beal of Portland.

The money, according to the governor, would bide time while negotiations with lenders continued today to secure another infusion of cash to warm the mills through next Tuesday when a possible buyer should be announced.

After that, according to Bruce Sleeper, a Portland attorney representing lender Corsair, additional funds from unidentified sources could be secured and used to keep the facilities warm for about 30 days, enough time to sell the mills under bankruptcy rules pertaining to emergency circumstances.

“In bankruptcy court, you can do wonderful things,” Sleeper said Tuesday night. “If it’s a true emergency, bankruptcy court is the place to be to sell a company.”

By 9 p.m., bankruptcy trustee Gary Growe still had not signed off on receiving the $50,000 loan from Corsair, but it was anticipated that he would give his nod this morning. Growe was unavailable for comment Tuesday night.

The mills in Brewer and Lincoln were close to being permanently closed at noon Tuesday because they were out of money to pay only the expenses necessary to heat the mills along with the wages of a skeleton crew that is maintaining the equipment.

But the call to lock them up never came. Growe could have ordered the shutdown, but he was at the State House being asked to let the loan talks continue past noon even though he didn’t know where the money was going to come from to cover the mills’ costs.

If Growe is forced to shut down the mills because of a lack of money, he would have no other option but to file papers for abandonment in bankruptcy court. If that occurs, the bankruptcy court is removed from the process, the assets at both mills are foreclosed, and Eastern’s four major lenders fight over them in a state court.

Eastern Pulp, with headquarters in Amherst, Mass., has been bankrupt since September 2000. Last week, a federal bankruptcy judge converted the company’s bankruptcy status from Chapter 11, or protection from creditors, to Chapter 7, or liquidation, and more than 750 people lost their jobs. The company known as Eastern Pulp ceased to exist, and Growe was appointed trustee to manage the estate.

On Tuesday, emotions ran the gamut – from frustration to surprise to utter disappointment – as the talks strained on. At 3 p.m., three of Eastern’s major lenders left the negotiations table, and one surprised-yet-angered person was heard in the hallway asking, “Do you know which airport they’re going to?”

Jack Cashman, commissioner of the state Department of Economic and Community Development, emerged from the room, and, with an agitated voice, laid out his frustrations and steps the state Department of Environmental Protection might take, such as liens on the mills’ properties, if the facilities are abandoned and the state is left cleaning up environmental waste.

Cashman said the lenders weren’t asked to give an exorbitant amount of money, just about $200,000.

“This is chump change to these people,” Cashman said. “One of the lenders just refused to participate at all and two of the other lenders followed the lead.”

A couple of hours later, Cashman joined Baldacci in stating that they remain optimistic the money will be lent to keep the mills warm through next week. Baldacci said a couple of interested buyers were supposed to be visiting the mills Tuesday evening, and another one was to go through today.

Baldacci believes the buyers are legitimate, with the financial resources to put together a solid plan to get the facilities operating again and soon.

“That’s our goal,” Baldacci said. “We don’t want the mills down. We want the mills up and running.”