PORTLAND, Maine — The California distressed asset investor Reich Brothers has agreed to place a $5 million starting bid on the machinery and equipment of the bankrupt Lincoln Paper and Tissue mill, a price that does not include the mill’s land and buildings.
Attorneys for the mill filed a request Thursday to approve procedures for an auction that could yield a buyer seeking to take on the mill as a going concern.
A judge on Friday will consider approval of those auction terms and whether the company can continue to draw on a $2.3 million credit line extended after its bankruptcy petition to continue operating through to an auction.
Keith Van Scotter, Lincoln Tissue and Paper’s CEO, said Thursday that the stalking horse sale agreement would have the California firm take over the machinery and equipment, and it includes an option to buy the land at a later time. If Reich wins the bid, Van Scotter said the plan would be for it to first try to market the mill and sell it to another operator.
“And if they can’t sell the buildings in place, then they will liquidate it,” Van Scotter said.
Reich Brothers could face competing bids both for higher prices and different terms, Van Scotter said. For instance, another bidder could make a specific offer on the land and buildings as well as the machinery and equipment on which Reich Brothers has agreed to bid.
Reich Brothers would get a breakup fee of $175,000 from the sale if it is not the winning bidder and could get compensation for fees and expenses of up to $200,000 for other expenses.
A Los Angeles-based company, Reich Brothers Holdings LLC said in a July news release that it “focuses on the acquisition and disposition of distressed and surplus industrial assets.”
“We offer a full range of capital asset solutions and specialize in the acquisition and disposition of distressed and surplus assets,” a company Web page detailing its services states. “We also provide a growing array of financial solutions for distressed businesses and properties that seek to continue operations or sell as a going concern.”
The company formed LP Acquisitions LLC to purchase the Lincoln mill, according to court documents.
The motion to approve bidding terms submitted to the court Thursday calls for an action to take place at 9 a.m. Tuesday, Nov. 10, in the offices of law firm Bernstein Shur at 100 Middle St. in Portland.
The bidding procedures call for bids to advance in increments of at least $50,000 from the $5 million starting price. The mill’s attorneys wrote in a court filing that the $50,000 increment “will not discourage competing bids at an auction, and in fact the Debtor believes will facilitate productive bidding at the auction.”
That timeline would call for a final closing of the sale on the mill no later than Nov. 12. The sale agreement with stalking horse bidder Reich excludes the collective bargaining contracts covering 132 of the mill’s approximately 179 employees.
A bankruptcy judge is scheduled to consider the mill’s motions at 11 a.m. Friday in Portland.