The potential sale of the Old Town mill cleared one major hurdle last week, but a another one looms just ahead.
Old Town Fuel and Fiber closed its doors in mid-August. At the time, mill officials blamed energy costs, foreign competition, and ongoing problems with its biomass problems as the reason for the closure. A skeleton crew of about 25 workers was left on the maintain the mill; about 180 more were thrown out of work.
After the mill was shuttered, creditors began going to court, fearing they would not get what they were owed, including the city, which is due $1 million in back taxes; all told, more than $4 million in claims were filed. In the midst of those claims, Patriarch announced it would holds a public sale of the mill. That was met with a claim by a group of four of the creditors to try and force a sale in US bankruptcy court.
Two weeks ago, however, Expera Specialty Solutions, a company that is a subsidiary of another New York investment firm, KPS, announced it had reached an agreement to buy the Old Town mill. Expera wants the estimated 200,000 tons of pulp that the Old Town mill can produce annually to help stabilize supply costs at its four mills in Wisconsin.
But before that sale can be finalized, it must be cleared by the courts. And still to be resolved is just what creditors – and Patriarch Partners – will get out of that deal.
Terms of the sale agreement had not been public announced, but according to published reports documents it was announced in US Bankruptcy Court in Portland that the proposed sale would be for $10.5 million – a bit more than half of the $19 million that Patriarch paid for the mill in 2008.
Documents in bankruptcy court also indicate that Red Shield Acquisition – the official name under which Patriarch operates the mill – is wallowing in debt, and that $4 million in claims filed previously was but a fraction of what it owes creditors in total. Those documents state that Red Shield has just $5.24 million in assets – about a tenth of the city’s assessment of its property and personal property, the latter of which Red shield claims is worth just $40,000 – and $42.46 million in liabilities, including roughly $32 million in secured claims, $819,000 in unsecured priority claims, and $9.63 million in unsecured non-priority claims.
A hearing was held this past week in Portland to allow Expera to continue to maintain the mill for another two weeks and to get ready to restart it if the sale goes through. That agreement calls for $1.5 million to be set aside for that purpose, with Expera to be reimbursed if the mill is purchased by another buyer; other offers must be entertained by the bankruptcy trustee handling the sale. Reportedly, several companies had looked at the mill before Expera.
That short-term agreement is a precursor to a hearing that will be held on Dec. 5 in bankruptcy court, one that could seal the fate of the sale, one way or the other. That hearing will deal with what may very well be the most contentious part of the sale – what unsecured creditors will be paid. According to a Bangor Daily News story, terms of the agreement – which does not include the mill’s biofinery and intellectual property associated with it, which in the long run arguably is its most valuable asset – the agreement calls for the $10.5 million Expera is paying to go to the back taxes owed the city, vacation time to idled mill workers, and secured and unsecured creditors.
Raising some hackles is the amount being proposed to a carve-out of the sale proceeds for unsecured creditors – $300,000, or about three cents on the dollar of the sale proceeds, with it proposed that Patriarch would be relieved of all additional debt; attorneys for some creditors already have raised objections to that amount, saying it would relieve Patriarch of all but the smallest fraction of its total debt. The bankruptcy trustee told the Bangor Daily News that he typically expects 10 to 20 percent of sale proceeds to go to such purposes. It is ultimately up to the bankruptcy judge to determine what the carve-out will be, however.
Should the carve-out be changed, it could possibly fracture the agreement, and Expera could look elsewhere. In fact, Expera took that step in October – right before it was revealed they were eying the Old Town mill – with an idled kraft mill in Ontario, where an agreement could not be reached on what constituted a reasonable cost for wood.

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