Chapter 11 a possibility for NewPage

RUMFORD — Local officials are expressing concern about the NewPage paper company's announcement this week that it may be forced to file for Chapter 11 protection if it can't refinance its debt or generate sufficient cash flow.

Eileen M. Adams/Sun Journal

Rumford's NewPage paper mill as seen from Granite Street in Mexico.

The company is North America's largest manufacturer of coated paper and employs about 750 people at its Rumford mill, and pays 46 percent of the property taxes in town.

Ron Hemingway, recording secretary for Local 900 of the United Steelworkers, said a corporate spokesperson told the union about a month ago that a Chapter 11 filing was a possibility.

“That is no surprise to us. We heard it might happen,” he said Tuesday afternoon from a United Steelworkers convention in Las Vegas.

“We're all very concerned but powerless to do anything about it,” he said.

“They are looking to find cheaper financing. We just hope for the best,” Hemingway said.

Rumford Town Manager Carlo Puiia said Tuesday that he has tried to contact mill management to discuss the financial situation but has so far been unsuccessful.

The mill's impact on the town and area is huge, he said, noting that 46 percent of the town's tax liability is paid by the local mill.

“We have great concern for their financial health, for the county and River Valley citizens,” he said.

Major changes in the mill would affect every storekeeper, waitress, truck driver in the area, Puiia said.

“It's very encompassing how it (the mill) affects everyone. Hopefully, their management will make the best decisions,” he said.

NewPage, which is owned by the private equity investment firm Cerberus, said in its second quarter financial report issued Monday that it has retained advisers to explore restructuring alternatives and is in discussions with various stakeholders to address capital needs.

“If unable to refinance debt or generate cash flow, we will be required to seek to restructure our existing debt or to voluntarily seek, or be forced to seek, protection under Chapter 11 of the U.S. Bankruptcy Code and applicable Canadian laws,” the document reads.

The quarterly report, which was filed with the U.S. Securities and Exchange Commission, noted the company has $2.5 billion in debt because of bonds that come due early next year, according to deadtreeedition.blogspot.com.

Second quarter losses were $132 million, and sales have dropped. Losses in the same quarter last year were $174 million, the report said.

Janet Hall, spokeswoman for the Rumford mill, referred requests for information to the company's headquarters in Miamisburg, Ohio. Repeated calls there for comment were not returned Tuesday.

Hemingway said the company has been looking at other assets that could be sold to raise capital.

One of those assets is the Cogeneration and Consolidated Water Power Co. at the Rumford mill. ReEnergy Holdings LLC of Latham, N.Y., had agreed to pay $61 million for the energy-producing plant; however, closure on the deal has been held up.

Jay Epstein, vice president and chief financial officer, said in the quarterly report that the closure date has stalled and the company is looking into options to address the unspecified conditions required to complete the sale.

NewPage also has mills in Kentucky, Maryland, Michigan, Minnesota and Wisconsin, and Nova Scotia.

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Comments

 's picture

There is so much missing

There is so much missing here. Who is or are the bank or banks holding the loans? Is or are these banks, institutions that took our famous TARP money? These banks would rather drive this company into bankruptcy than renegotiate? If there is a drop in coated paper, why is New Page dancing on the margins? Who evaluates their risk?

 's picture

another one bites the dust.

This can't come as a surprise to anyone can it?
We live in an increasingly paperless society, that and competing with foreign imports produced using sub human priced labor, the handwriting has been on the wall for years. I recall listening to then candidate LePage boasting about his plans to revitalize the paper industry in one of his many bogus promises to bring jobs to the state. The other promises were logging, fishing and agriculture. The leaders of our state need very very badly to first recognize that tourism and the beauty of our state is right now our biggest job creating asset, and second that high tech, green, alternative energy is the only future if we want to re-form the manufacturing base of the state. I keep hearing rumblings of the state throwing money at these mills to try to keep them running, how long before that is the equivalent of tossing money into a hole in the yard? Or is it already?

Mark Belanger's picture

This was one of the issues

This was one of the issues that I kept bringing up as a selectmen for the past six years. It was always brushed off by other board members and the Town Manager. We should have done more to bring our budgets in line so we could manage a crisis like this. If you thought the 21% tax increase was bad a few years ago watch what happens now!!!!

Yeah Mark

I've brought it up even longer Mark. No one believed it could happen because of their lack of insight. You know that old saying "You can lead a horse to water but can't make them drink".I tried for many years to make cuts that the town could afford but other board members couldn't see the writing on the wall. A town of less thann 6000 people with departments heads and unions dictating and controling this town has been happening for years. But the citizens didn't listen to us. What a shame! And this boad will do nothing to reclaim this town from this type of control. I've always maintained that employees of Rumford work for us. We don't work for them. Changes could have been made to save monies many times but past and present board members turned a deaf ear and will continue to do so. Isn't there a new ordinance for recall? If they are not working for the best interest of the town.

 's picture

Frank, you're right

I've been preaching the same sermon for years but the message has fallen on deaf ears. All I ever heard was "as long as there are trees, there will be paper". Nobody wanted to admit that progress always trumps everything else. Nobody wanted to hear that the paper mills were a dying species that were going to take whole communities down with them when they finally went.
I tried, last year, after the valuation downgrade and tax increase, to convince Carlo that major changes needed to be made to avoid this outcome but those pleas also fell on deaf ears. I contacted as many people as I could to throw out the budget in June and it wasn't enough.
If the paper mill goes into Chapter 11, they are no obligated to pay the municipality any taxes, nor can the municipality do anything but send them a bill. If they try to force payment, they will be fined for doing so and our burden will be even greater.
It seems to me that the board had better pass a wind ordinance in a hurry if they want to recoup anything from this debacle. They sure as hell weren't looking at the big picture or the future possibilities when they put forth the budget for FY 2011/2012.
Not only am I ashamed of them, I'm ashamed of the people of Rumford for allowing it to pass when everyone knew that we were living on a prayer.

Thanks Ed

Wish more people would have listened like you. I've been saying it long enough. The poop has finally hit the fan and it could have been prevented.

 's picture

Rumford residents

better get ready to have their A$$#$ handed to them on a plate pretty soon. I've said a number of times that we were too dependent on the paper mill and the tax revenue it generates, and now, that conveniently forgotten "other shoe" is about to drop.
All of you that voted for the abomination of a budget in June should be happy when the town is bankrupt and unable to meet the obligations outlined in it. Everyone with half a brain knew that this was inevitable but didn't want to make the hard choices. Now the choice is going to be taken away from you

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