EAST MILLINOCKET, Maine — The fate of the local paper mill will be decided by auction or sale next month if a federal bankruptcy court judge approves a trustee’s motions on Friday.
The mill’s bankruptcy trustee is seeking to sell the former Great Northern Paper Co. mill to a stalking-horse bidder on Dec. 2 if no one else bids on the plant by Dec. 1, according to motions filed Wednesday and a six-page amended filing Thursday at U.S. Bankruptcy Court in Bangor.
Attorney Randy Creswell, who represents bankruptcy trustee Pasquale “Pat” J. Perrino Jr., said prospective buyers under the proposed process will need to submit a minimum bid of $2.9 million, a $1 million deposit and proof of ability to complete the transaction. A $2.9 million bid would beat the stalking-horse bid from GNP Acquisition LLC of approximately $2.6 million and a $350,000 option to purchase the land on which the mill sits after closing on the sale, according to the filing.
Creswell said he does not know whether GNP Acquisition intends to restart the mill or scrap it. GNP Acquisition is represented by attorneys Robert A. Bogohosian and F. Bruce Sleeper and first appeared in court documents on Nov. 7. An online search revealed that one of its principals who signed the asset-purchase agreement on behalf of GNP Acquisition, William Firestone, is president of Capital Recovery Group, an auction and appraisal firm, according to its website, crgauction.com.
Several investors who might enter competing bids have expressed interest in both options, Creswell said.
“I want as many people to participate in this auction as possible. If we can get an operator for the mill, that would be ideal,” Creswell said Thursday.
Sleeper and Bogohosian did not return telephone messages seeking comment. U.S. Bankruptcy Judge Louis Kornreich will also consider a motion that would allow payment of continued maintenance costs until the sale is finalized.
Stalking horse is the term for a bidder who is chosen before an actual auction to ensure there’s a starting bid and a willing buyer if no better bids are received.
GNP East Inc. owns the land and buildings at the shuttered mill. GNP Maine Holdings LLC owns the mill’s papermaking equipment. Both corporate entities filed for Chapter 7 since September.
According to documents filed Oct. 31, GNP East estimated the value of its mill holdings at $16.5 million. Secured creditors are owed nearly $2.038 million. The company listed no unsecured creditors.
GNP Maine Holdings owes $65 million to its creditors but has just $28.15 million in assets, according to documents filed Oct. 3 that outlined in detail its assets and liabilities. Among the creditors is the town, which is owed $886,691 in real estate and personal property taxes for the 2013-14 and 2014-15 fiscal years. The company is the town’s largest taxpayer.
The money owed to companies and individuals that have secured claims either through liens or court judgments against GNP Maine Holdings totals $42.34 million, including $20 million owed to Stonehenge Community Development of Baton Rouge, Louisiana, and $20 million to Enhanced Capital New Market Development Fund of New Orleans, Louisiana, which hold mortgages on the mill.
Both of those investors received about $15.9 million in tax credits from the state through the state-level New Markets Capital Investment program. Those tax credits are paid out over seven years and if the entities get portions of their investment back through the bankruptcy process they could be required to invest in another business that qualifies for the program to continue collecting those credits aimed to encourage investment in economically depressed areas.
Unsecured creditors are owed $22.6 million.
GNP East filed for bankruptcy in Maine three weeks ago. GNP Maine Holdings filed for bankruptcy in September.
The auction is due to be held at the bankruptcy court at 10 a.m. on Dec. 2.
BDN writers Judy Harrison and Darren Fishell contributed to this report.