EAST MILLINOCKET, Maine — Dan Johnston’s business in Lincoln supplied Great Northern Paper Co.’s mill with woven steel filters. Dave Collins’ Lewiston-based workers lined a GNP boiler with fire-resistant bricks. Phil Levesque sold GNP office furniture and supplies from his office in Madawaska.
The entrepreneurs are owed various amounts of money by the failed Cate Street Capital venture, but they share a common belief: They are all pretty sure that they aren’t going to see much if any payback when a federal court in Bangor resolves GNP’s Chapter 7 bankruptcy.
“I don’t think there’s going to be enough assets in this go-around to make everybody whole,” said Levesque, president and co-owner of Levesque Office Supply of Caribou and Madawaska.
“I think it is highly unlikely that we will see much of anything, just because of people I have talked with who have lost money on bankruptcy,” said Collins, who is president of Infab Refractories, Inc. of Lewiston.
“I don’t think the process works for anybody,” said Johnston, vice president of Johnston Dandy Co. of Lincoln. “It drags on forever. The attorneys’ and accounting bills just seem to pile up.”
An auction of the mill, which closed in late January and began filing for bankruptcy in September, is set for Dec. 2.
U.S. Bankruptcy Court Judge Louis Kornreich on Friday approved setting aside 30 percent of the mill’s sale price at auction to pay GNP’s unsecured creditors who have filed claims. Based on the number of claims filed, the unsecured creditors should receive 5 to 20 percent payback of the debts they are owed, said attorney Randy Creswell, who with attorney Jeremy Fischer represents bankruptcy trustee and attorney Pasquale “Pat” J. Perrino.
As of Friday, 100 creditors had filed claims out of more than 500 owed money by GNP. The 100 creditors are owed a total of about $11 million out of the $22.6 million in unsecured debts Great Northern revealed in its court filings, Creswell said.
In Collins’ case, Friday’s settlements would give him $764 to $3,057 of the $15,288 his company is owed by Great Northern, documents filed in bankruptcy court show.
“Nobody likes losing money, but I can’t say that it is crippling us,” Collins said of his loss. “It is an unfortunate part of doing business. Fortunately for us we try to screen our customers quite diligently so that we don’t run into this too often.”
Friends who had been involved in bankruptcies told him that his chance of collecting money was slim — not that he hasn’t had some experience himself, Collins said.
“This is probably the third bankruptcy that we have been part of but this is the biggest amount of money we ever had tied up in one,” he said.
A scan of the secured and unsecured creditors list illustrates why paper manufacturing jobs are so prized in Maine, with a ratio of five to eight workers indirectly employed through a mill for each direct papermaking job.
In East Millinocket’s case, the mill employed 256 workers manufacturing newspaper- and book-grade uncoated paper stocks. It contracted for services across a wide spectrum of Maine businesses. Health insurers from Bangor, a concrete manufacturer from Veazie, chemical suppliers from Houlton, freight haulers from Auburn, an optometrist in Old Town, a Millinocket florist and attorneys from Kennebunk are among the company’s creditors.
Amounts owed range from a few bucks to several million dollars. Companies from across the United States and deep into Canada are also listed.
“At the end of the day, it is an industry that has supported Maine businesses very well and as much as it hurts us, it is unfortunate, but we have to move on,” said Levesque, whose company is owed $16,879.
He called Great Northern’s bankruptcy “a sad chapter in the history of Maine because it was a huge participant in the Maine economy.”
Given the sharp decrease in the number of mills operating in Maine during the last 30 years, the entrepreneurs said they have learned not to rely too heavily on paper manufacturing for their incomes.
“It is not the largest write-off from bankruptcy that we have had but you don’t want to lose any of it because you could convert it to better benefits or money for workers,” said Joanna Bradeen, chief financial officer for Hartt Transportation Systems Inc. of Bangor. Hartt is a secured creditor owed $227,700.
Hartt began casting its business in southern Maine when the former Eastern Pulp & Paper Corp. closed its Brewer and Lincoln mills in January 2004. The company is building a $5.3 million truck terminal in Auburn that it plans to open in May, Bradeen said.
“Many of us in business in central Maine can’t rely on business in northern Maine. Much of our business is located in Auburn and south of that,” she said. “We have been a Maine-based carrier for 67 years and we have expanded from the Carolinas and into Kentucky.”
Diversification is key to Levesque’s success for a different reason.
“The reality of our little company is we had to live through the loss of Loring Air Force Base. That’s why we are in the Bangor marketplace now. We are very fortunate to be able to move like that,” Levesque said.
Bradeen and Johnston said that many Maine businesses had hopes that good times were here again when Great Northern restarted the East Millinocket mill in 2011, but were still wary of the mill’s failure.
“We took their freight knowing what conditions could or might be. It wasn’t like we went into it with closed eyes,” Bradeen said. “When a new venture opens in an old place, you watch it a lot more closely and you extend less credit.”
“In the beginning everybody was hopeful. It was a new start for Millinocket and East Millinocket. Everyone seemed positive,” Johnston said.
Johnston said he was frustrated that state officials threw so much support and so many tax breaks into the two Katahdin mills, only to see the money get swallowed up. East Millinocket’s mill reopened in 2011, while Millinocket’s closed in 2008 and was sold for scrap last summer.
Great Northern managers “would say they were going to do something, make a payment, and then they would back away from it. Just being able to reach them was very hard,” Johnston recalled. “We finally just ended up cutting them off. And they took advantage of the system. They are not even paying their town taxes. Those towns are probably the worst hurt because they depended so much on the funds.”
The state should withdraw its support from Cate Street’s proposed industrial wood-pellet mill in Millinocket in response to the bankruptcy, Johnston said.
“I am most upset that the state would entertain giving them money for further projects. I think that the state and me as a taxpayer would just be handing over our money. They have proven that they are unresponsive and don’t pay their bills. They are just trying to get more money,” he added.
Collins said he believes that the state should continue to support its large businesses, but that individual businesses should take care when dealing with new businesses or new business owners.
If a new buyer restarts the East Millinocket mill, “in the short term it would definitely be cash-only business with them,” he said.