AUGUSTA (AP) – Gov. John Baldacci announced a financial arrangement Monday involving the state and creditors aimed at keeping the idled Eastern Pulp and Paper Corp. mills in Lincoln and Brewer in good shape for a potential buyer.

Lincoln Pulp and Paper and Eastern Fine Paper mills employed 750 people before they shut down in mid-January. Owner Eastern Pulp has been under Chapter 11 bankruptcy protection from creditors since September 2000.

On Monday, the Finance Authority of Maine’s board approved a $1 million “debtor in possession” loan to keep the plants viable.

If coupled with an additional $2.7 million in financial backing from Eastern’s creditors, Baldacci says the Lincoln pulp mill, which accounts for about 500 of the two mills’ jobs, can remain in operation and Eastern Fine can be kept heated.

“The strategy here is a simple one,” Baldacci said. “The mills are worth more to a prospective buyer as a going concern. The alternative, a cold shutdown, would effectively terminate the viability of these properties.”

The financial package has been approved by one creditor, Congress Financial Corp., but still must be approved by the other two lenders in order to be finalized.

The package goes before a federal bankruptcy judge for ratification this week. Bankruptcy judges have broad powers to approve financial arrangements in such cases, said Kurt Adams, the governor’s chief counsel.

“This is a very positive development,” said Baldacci, who commended the FAME board for its quick action. “The action today will probably, hopefully, buy us about three months for a prospective buyer to come forward.”

In the meantime, Baldacci said his administration and FAME, along with members of the state’s congressional delegation, will work with creditors and prospective buyers to structure a more permanent deal to keep the two plants going.

Baldacci said there are two potential buyers now.

In January, Eastern’s lenders agreed to pay all of the expenses necessary to heat the mills through Saturday. If that had not been done, the mills would have been forced to shut down completely, said Commissioner Jack Cashman of the state Department of Economic and Community Development.

Skeleton crews have remained in the mills to maintain the machinery and prevent it from freezing.

AP-ES-02-02-04 1915EST