Plans to disassemble mills spark outrage in Katahdin region

Robert F. Bukaty | AP
Posted April 13, 2011, at 4:20 p.m.
Last modified April 13, 2011, at 10:35 p.m.

EAST MILLINOCKET, Maine — Anybody interested in reviving the Katahdin region’s two paper mills had better move fast.

East Millinocket Selectman Mark Scally said Gov. Paul LePage pledged to press the mills’ owner, Brookfield Asset Management, to keep the East Millinocket and Millinocket mills intact until a buyer is found, but mills manager Mike Reider expects to begin seeking proposals from scrap dealers in two weeks.

“I wouldn’t expect there to be any disassembly before June,” Reider said Wednesday. “I don’t know if that necessarily means there will be any [disassembly] in June, but that would be the earliest I would expect it. I think the process would take that long.”

Scally, chairman of the Board of Selectmen, and Millinocket Town Manager Eugene Conlogue said they were outraged that Toronto-based Brookfield would start the disassembly process when saving the mills is still a very real possibility. They called it an example of huge corporate indifference to workers who served the mills’ owners faithfully and well for decades.

“Why don’t they scrap Mike Reider?” Scally said in frustration.

“This would be the last huge disservice they [Brookfield] would do to this area if they were to disassemble these mills in the near future,” said Conlogue, who called on Brookfield to halt any such planning until state officials’ pursuit of a new owner for the mills concluded.

“The governor’s office talked to two prospective buyers yesterday, so all options are still on the table,” Scally said. “They [Brookfield] were probably in the process of doing this long before [now]. The state government is working to save this deal, and for him [Reider] to say that, I find highly irresponsible on his part.”

Options for the mills’ future might be ready for Brookfield’s review in a few weeks, Conlogue said.

“Instead of looking to disassemble the mills, they should be trying to repair their relationships with [the East Millinocket mill’s] lost customers to make the mills more attractive,” Conlogue said. “These two mills have been the livelihood of the Katahdin region for over 100 years. We need help in revitalizing them, not disassembling them. People live here and they work here and they need a place to go to work.”

Meriturn Partners of San Francisco tried to buy the East Millinocket and Millinocket mills from Brookfield for $1 by April 29 but withdrew from a potential deal last Friday. Meriturn’s representative cited an inability to meet conditions necessary for viable mill operations and the movement by some of the East Millinocket mill’s customers toward other suppliers because they feared an imminent closure.

The names of about a half-dozen paper manufacturers and other investors have surfaced since Patriarch Partners founder and CEO Lynn Tilton confirmed about a year ago her interest in buying the mills. Brookfield originally had said that it would close the East Millinocket mill on April 22. The Millinocket mill closed in 2008.

The East Millinocket mill employed about 450 workers, while the Millinocket mill had 150. The Millinocket mill’s revitalization would have created 80 to 120 jobs, officials said. Workers who began applying for unemployment and job retraining on Tuesday predicted a mass exodus from the region if the mills are not restarted.

East Millinocket millworkers were working Wednesday to power down and safeguard their mill’s machinery for shutdown and are likely to finish by April 22. Mill managers are assembling a schedule for selling off the mills’ raw materials — waste paper, chemicals and feed stock — and the lumber in the mill’s wood yard, Reider said.

Those sales will occur by or shortly after April 22, he said, but exact dates for the disassembly process haven’t been set yet.

“The folks within Brookfield haven’t set that timeline. I would suspect that over the next several weeks to a month there will be some things outlined,” Reider said.

The vetting of scrap dealers or others interested in mill machinery would probably take six to eight weeks, he said.

Scally wasn’t optimistic that LePage could help preserve the mills. LePage promised to help keep them intact when he met with Katahdin region leaders in Augusta on Monday, Scally said.

“He said he will make the call,” Scally said. “He meant that he will bring the pressure to bear, but he can’t guarantee anything.”

The governor’s press secretary, Adrienne Bennett, said LePage had no comment on the mills’ situation Wednesday.

East Millinocket could impose a lien on the paper mill for about $2 million in taxes town officials say the mill owes for the 2010-11 fiscal year, Scally said. That might keep the mills’ assets intact, but the lien probably couldn’t be filed in civil court until August.

Municipalities typically wait eight months from when tax bills are issued before imposing liens, and the town sets taxes in January, Scally said.

Reider said that any investor expressing interest in the mills would probably have to sign an intent-to buy agreement, as did Meriturn, and would have to “move forward with the financial piece and take things over pretty quickly. I don’t think there will be a period of time like there was.”

The mills were closed and kept intact for more than a year when a previous owner filed for bankruptcy several years ago.

“Brookfield is going to have to start putting its assets out [for sale] to get some revenue to pay off their bills,” Reider said.

Brookfield describes itself as a global asset manager focused on property, renewable power and infrastructure assets with more than $100 billion of assets under management. The company announced an operating cash flow of $1.5 billion for 2010, according to its website, brookfield.com.

“We completed investments in a number of world-class assets last year, which strengthens our ability to deliver sustainable long-term growth across our businesses,” Bruce Flatt, Brookfield’s CEO, said in a statement released in February. “Our operations and balance sheet are strong, and we are increasingly well-positioned to benefit as recovery in the developed markets fully takes hold.”

Reider said he was unsure how much Brookfield would get from the mills’ equipment. Many paper mills are idle or scrapped around the world, creating a surplus in papermaking machinery.

“I would expect some pieces are worth a fair amount of money and some others aren’t worth much more than scrap value,” Reider said, ‘“but that depends on what somebody needs, doesn’t it?”

Shutting down and possibly scrapping the mills brought no joy to Reider, he said.

“A lot of people worked very hard to make these things work,” he said sadly, “and now we have to do this.”

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