Latest suitor makes an offer for Eastern Governor refuses to reveal terms

BANGOR – An unidentified company wants to purchase abandoned Eastern Pulp and Paper Corp., but first it has to get a federal bankruptcy judge to consider the offer.

Gov. John Baldacci said Monday evening that he has received terms of a deal from the “potential buyers and a creditor,” but that he was not in a position to disclose their names or say exactly how much they were willing to spend for the mills in Lincoln and Brewer.

The offer, however, is greater than $10 million, he said.

“I would say it’s a serious proposal,” the governor said.

The offer has not been solidified yet because “two or three legal and statutory issues” need to be negotiated, Baldacci said. He added that he believes those will be worked out by midday today in time to request an emergency hearing for Wednesday in U.S. Bankruptcy Court.

According to court documents, the interested creditor is ING Group of Phoenix, which already is owed $27 million from Eastern Pulp but is fourth in line among secured creditors to collect any payment.

One individual no longer interested in the mills is Bangor native Don McCann, now a Memphis-based investor and entrepreneur. McCann said he was partnered with an unidentified company to pursue both mills, with McCann particularly interested in the coated-paper operations at Brewer, but on Friday, he ended his pursuit.

“The company I was working with decided against moving forward, and I decided that I could not do it alone,” said McCann, in a telephone interview Monday evening. “I’m sorry it’s not me.”

A Connecticut investment banker who was representing an unidentified buyer could not confirm Monday evening whether his client gave Baldacci the offer.

John Wissmann, managing director of Fisher International of South Norwalk, Conn., said he was participating in a trade conference all day Monday and was unaware of whether his client, whom he would not identify, had made a final offer.

“I cannot confirm that,” Wissmann said.

What awaits the state in the next couple of days is a judicial challenge to its attempts to sell Eastern Pulp through U.S. Bankruptcy Court – a place the company was pushed out of more than a week ago.

On March 12, U.S. Bankruptcy Chief Judge James B. Haines ordered that Eastern Pulp’s properties be abandoned after a prospective buyer, Paper Acquisition Corp. of Topsfield, Mass., withdrew its $8.5 million offer. He also ordered that the properties be returned to their previous owner, Joseph Torras Sr. of Amherst, Mass., although that hasn’t happened yet. The state has been maintaining the properties under a Baldacci-imposed state of emergency.

Before the abandonment, Eastern Pulp had been shut down since mid-January and had employed 750 people.

The state wants Haines to overturn his abandonment order because a return to the bankruptcy court process allows for a faster sale by tackling many of the liens on Eastern Pulp’s personal property and real estate at one time. The alternative is trying to purchase Eastern Pulp’s personal property and real estate through foreclosures by creditors in local district courts, but that can happen only if the creditors actually foreclose on the properties.

The March 12 order was to become final at midnight Monday unless a creditor or other interested party filed a request for Haines to reconsider it. ING Group filed a request for reconsideration at 5:45 p.m. Monday, stating that Haines should have allowed it more time on March 12 to come up with $340,000 to keep the mills maintained until a scheduled March 17 sales date.

Haines refused ING’s request, stating that its efforts were too late and that it hadn’t guaranteed that the money would be available, and then he ordered the abandonment.

In court documents filed Monday, ING did recognize Haines for keeping “the concept of revisiting the abandonment issue alive if the parties had a concrete chance for reproducing a sales scenario.”

According to bankruptcy attorneys, Haines will have to be shown a bona fide offer from a well-capitalized buyer who can close a sale almost immediately. The offer would have to satisfy Eastern Pulp’s secured creditors and include money to keep the mills maintained until the sale is closed.

ING Group believes it has a buyer, according to court documents, although it admits “there is no guarantee that a sale will actually come to fruition.”

“The ING Group would likely provide some funding to the new buyer,” according to the court documents. “ING Group believes that this prospective buyer is bona fide and that it is attempting to put together a real deal.”

In a separate court action Monday afternoon, the Attorney General’s Office, on behalf of the Department of Environmental Protection, filed an appeal of the abandonment order, stating that Haines may have erred in how he applied a precedent-setting court case on how bankrupt properties should be abandoned. The Attorney General’s Office wants a federal District Court to hear its appeal.

Assistant Attorney General Dennis Harnish said that Haines should not have abandoned the properties without first ordering that creditor Congress Financial Corp. remove all of the hazardous chemicals from the mill sites in accordance with state law.

“[The case] specifically says a judge cannot let a bankruptcy trustee abandon properties in violation of state law,” Harnish said. “There is a state law that says when you close a facility where hazardous waste has been stored, you have to remove the waste. That wasn’t done in this case.”

Haines, in a court proceeding earlier this month, countered Harnish, stating that the trustee could not keep the mills maintained in order to remove the chemicals if there was no money to pay for the maintenance costs.

If the mills aren’t sold, Harnish said, his appeal seeks an order “to protect public health and safety.”

“One thing we’d like to see is for Congress to take away all of the chemicals,” Harnish said.