Deal may buy time for Eastern mills

BANGOR – A state official is confident that he has secured enough money to halt an abandonment of bankrupt Eastern Pulp and Paper Corp.’s mills on Wednesday.

Jack Cashman, commissioner of the Department of Economic and Community Development, said Monday that two of Eastern Pulp’s secured lenders as well as other sources have agreed to fund “warm stasis” operations for a short period of time beyond Wednesday, when money to keep the mills warm was supposed to run out.

He said that gives the state and Eastern Pulp’s bankruptcy trustee, Bangor attorney Gary Growe, more time to polish an interested buyer’s bid to purchase the mills in Lincoln and Brewer.

“We’ll be all right for a while after Wednesday,” Cashman said. “We feel we’ve identified some resources to keep the mills warm.”

Currently the mills are being maintained by a skeleton crew, and expenses such as heating oil, electricity and water, along with the crew’s wages, are being paid with $240,000 lent last week by three of Eastern Pulp’s secured lenders. That money was supposed to be enough to cover the bare-minimum amount of operations required to protect the mills and the equipment from breaking down until a federal bankruptcy hearing begins Wednesday morning.

Cashman said ING Group of Phoenix and Corsair Special Situations Fund LLP, along with “resources I can’t identify,” agreed late last Friday to lend “enough” money to continue the warm stasis operations beyond Wednesday.

Growe, along with his attorney, Fred W. Bopp III of Portland, said Monday that they have not been notified of any new funds.

“As of 3 p.m. [Monday], I’m unaware of any new developments,” Growe said.

Eastern Pulp’s bankrupt estate includes Lincoln Pulp and Paper Co. in Lincoln and Eastern Fine Paper Co. in Brewer. On Feb. 4, after more than three years under Chapter 11 bankruptcy protection, the company’s bankruptcy status was converted to Chapter 7, or liquidation, displacing 750 workers. Growe was appointed trustee – or put in charge – of the estate as it proceeds to either complete abandonment or a sale.

As a matter of procedure, Growe last week filed a notice to abandon the properties effective this Wednesday if no more money was available to keep the mills warm.

In the meantime, Growe, Cashman and others said they have been involved in serious negotiations with at least two interested buyers. One of them at some point should emerge as a “stalking horse bidder” for one or both mills. A stalking-horse bidder is an interested company that announces what it is willing to pay to purchase the mills. Then, other interested buyers have to be willing to beat those terms in order to become successful at a court-sponsored auction.

On Monday, Growe said he didn’t know whether a stalking-horse bid would be ready by Wednesday. If it weren’t, he said he didn’t know whether there would be any cash to keep the mills warm beyond the end of the court hearing. If neither can be worked out, “I’d have to pull the plug on both of these places.

“That’s the eternal dilemma,” he said.

The hearing begins at 11 a.m. Wednesday at U.S. Bankruptcy Court in Portland.