Conn. firm near securing Eastern deal

BANGOR – A Connecticut investment banker who almost was hired last January to sell Eastern Pulp and Paper Corp. now may be close to presenting an offer from an unidentified buyer.

Fisher International of South Norwalk, Conn., confirmed Wednesday that it is near completion of a deal, but would not identify who the buyer is, specify how much the buyer is willing to spend or acknowledge whether one or both of Eastern Pulp’s two mills would return to operation. The mills in Lincoln and Brewer, which employed 750 people, have been shut down since January.

“We only need the easiest piece of financing and the deal should be done,” said John Wissman, a principal with Fisher, during a telephone interview. “We’re working with all of the required parties to get this done. We could have the mill up and running in two weeks.”

The “easiest piece,” he said, is a revolving line of credit to fund operations. That should be secured Wednesday night or Thursday, he said.

Wissman said his client wants to purchase the mills through U.S. Bankruptcy Court, and is working with state officials to figure out a way to ask Eastern Pulp’s trustee to convince a federal bankruptcy judge to overturn his abandonment ruling.

Last Friday, U.S. Bankruptcy Chief Judge James B. Haines ordered Eastern Pulp abandoned after a Massachusetts company withdrew its offer and the trustee said there was no money available to keep the mills protected from deterioration while another buyer was sought.

Gov. John Baldacci immediately declared an emergency at the mill sites, citing a potential risk to the environment and the public because of hazardous chemicals stored on the properties, and state police were placed around them. On Tuesday, the state replaced the police guard with a security firm.

Returning Eastern Pulp to bankruptcy court is considered to be a rare move. According to numerous bankruptcy attorneys, any offer for Eastern Pulp will have to financially satisfy the paper maker’s secured creditors plus cover any expenses that have accrued since the mills were converted to Chapter 7 in early February.

The conversion to Chapter 7 is something that Fisher International did not want. In January, Fisher completed an in-depth report on Eastern Pulp’s operations when the paper company’s secured creditors were insisting that previous owner, Joseph Torras Sr., sell the mills.

The report, which has been seen by very few people, apparently outlined up to three options for the mills, emphasizing that the tissue division at the Lincoln mill was profitable and the coated division at the Brewer mill was a moneymaker, said the sources who asked not to be identified.

On Feb. 4, Eastern Pulp tried to secure a $3.8 million loan to fund operations for 13 weeks while a buyer was sought. The loan had two conditions – that Fisher International be retained to sell the mills and that Realization Services Inc. of Bedford Hills, N.Y., be hired to manage the company until a sale was finalized.

According to court documents, Fisher International was to be paid $45,000 a month for three months plus expenses. Also, Fisher was to receive $200,000 and, as an incentive bonus, a percentage of net fair market value of the mills if specific sales dates were met.

The loan was not approved after numerous creditors questioned whether $3.8 million actually was enough, and Haines questioned whether the loan documents actually met federal bankruptcy requirements. Haines gave Eastern Pulp and its lenders more time to work out the loan details, but Eastern returned to court and asked that the properties be liquidated.

On Wednesday, Wissman said the liquidation essentially brought down the financial value of the mills. He said if the company hadn’t been ordered liquidated, “we would have brought in a buyer a long time ago.”

Under liquidation, the state, along with creditors and the trustee, produced an $8.5 million offer from Paper Acquisition Corp. of Topsfield, Mass. The offer set up a bankruptcy court-sponsored auction for Wednesday, but the auction was called off last week when PAC’s offer was withdrawn.

If the auction had taken place, Wissman said his client “would have been in a position to bid.”

In the meantime, the trustee’s attorney, the law firm of Perkins, Thompson, Hinckley & Keddy, filed its fee application a week ago totaling $71,800 plus $3,352 in expenses, in federal bankruptcy court. A hearing on whether the fees should be approved is scheduled for 11 a.m. on March 24 in U.S. Bankruptcy Court in Portland.

PACE, the mills’ union, is objecting to the application, stating in court documents filed Wednesday that at least $119,000 in unpaid wages are due the skeleton crew that kept the mills maintained through last Friday, and those should be paid first. PACE attorney Jonathan Beal stated that bankruptcy law requires that administrative expenses such as the costs and wages of preserving the estate should be given first priority.

On Wednesday, Beal said Laura Fortman, state labor commissioner, is reviewing whether the wages could be covered by the state by a little-used “wage assurance fund.”