Katahdin mills deal to close Friday

A worker leaves his shift at Katahdin Paper Co. in 2008, shortly after the company announced it would be closing the mill. A plan by a New Hampshire investor to buy the mills will close by Friday, an investor told the Bangor Daily News on Thursday.
A worker leaves his shift at Katahdin Paper Co. in 2008, shortly after the company announced it would be closing the mill. A plan by a New Hampshire investor to buy the mills will close by Friday, an investor told the Bangor Daily News on Thursday.
Posted Sept. 15, 2011, at 11:42 a.m.
Last modified Sept. 16, 2011, at 1:09 a.m.

EAST MILLINOCKET, Maine — A New Hampshire-based investor will buy two shuttered paper mills for an undisclosed price sometime Friday, putting as many as 500 people back to work in what could spark an economic rebirth of northern Maine’s Katahdin region.

Richard Cyr, a senior vice president at Cate Street Capital of Portsmouth, N.H., announced that company officials would be closing the deal in escrow to buy the East Millinocket and Millinocket mills and start the new Great Northern Paper Co. LLC as soon as possible. A final closing is expected later this month, with the Millinocket mill’s restart dictated by market conditions months later.

“We have been working diligently on this and there is one remaining issue,” Cyr said late Thursday morning. “We have a long road, six weeks, ahead of us. I really need to ensure that the people who come to work understand that their success is tied to ours, and vice versa, and we need to fulfill orders by Oct. 30.”

Local, state and Cate Street leaders spent Thursday working late into the night on a myriad of details associated with the complex purchase. For Gov. Paul LePage, the deal likely would be his biggest single economic achievement since assuming office, though the effort began under Gov. John Baldacci.

By 11 p.m., completion of the deal appeared to be delayed until sometime Friday, said Adrienne Bennett, LePage’s spokeswoman. Maine Department of Economic and Community Development Commissioner George Gervais had said earlier in the afternoon that a delay was likely.

“There are two key people who cannot go into the room and sign what they need to sign until 9 a.m. tomorrow,” Gervais said of state officials who would need to sign off on environmental permit transfers from present mills owner Brookfield Asset Management to the new GNP.

The delay “isn’t a problem for anybody,” Gervais said. “In fact, both parties offered to make themselves available today but nobody felt it would delay the deal.”

“We have made tremendous strides today,” he added.

East Millinocket’s Board of Selectmen met at 4:30 p.m. Thursday in emergency session to secure a property tax arrangement with Cate Street and had adjourned at 7 p.m. without having their proposal countersigned by Cate Street, board Chairman Mark Scally said. The board considered a counter-offer from Cate Street to the tax proposal selectmen approved on Tuesday.

“I am only guessing that what we have done is OK, but I don’t know,” Scally said. “They sent us a draft; we signed it and sent it back with the understanding that it’s a draft, and nobody’s gotten back to us.”

“We are waiting. If we get a call, then by golly we will go in [to another meeting], but it may be them saying we are all set,” Scally added.

As Great Northern’s CEO, Cyr said he hopes to meet Friday with other company officials to determine how many workers will be hired — as many as 250 are possible, he said — to get the East Millinocket mill running as soon as possible to ship its first orders overseas. Company representatives also said they plan to invest $20 million to $25 million in the plant.

It was unclear whether the delay would affect Cyr’s plans.

“I will feel a lot better when we have paper on the water come Oct. 30. That is when I will be celebrating,” Cyr said. “From there on in, it will be business as usual.”

When Brookfield closed the East Millinocket mill in April, it employed as many as 450 workers. With Millinocket’s mill having closed in September 2008, idling another 150 people, the shutdown pushed the region’s unemployment rate to an astronomical 21 percent and marked the first time in a century that the region — once one of the nation’s paper capitals — had no paper manufacturing and no great odds favoring its resumption.

State officials’ one serious prospect for revitalizing the mills, San Francisco-based Meriturn Partners, walked away from a potential deal on April 8, and Brookfield twice extended its deadlines for scrapping the mills to allow state officials time to find another suitor.

Workers and local leaders have done their part to restart the mills once Cate Street’s negotiations with state and Brookfield officials became public. East Millinocket mill union workers voted overwhelmingly Wednesday night to accept a five-year contract paying them the same wages they received from Brookfield subsidiary Katahdin Paper Co. LLC, and East Millinocket and Millinocket town leaders voted Tuesday to tentatively approve property tax deals with Cate Street.

State legislators also helped the mills’ sale in June by voting to approve buying a contaminated mill landfill in the Dolby section of East Millinocket that was seen as a major obstacle to any purchase.

The largest remaining hurdle to the deal’s closure, Cyr said, is the mills’ environmental permits. By state law, changes in permits require 21 days’ notice, which would imperil Cate Street’s deadlines for orders. State and Cate Street officials see the public notice period as nothing more than an “administrative issue,” but the Maine Attorney General’s Office has resisted giving any sort of guarantee to Cate Street that the permitting process would end successfully.

Perhaps understandably, the AG doesn’t favor “giving [Cate Street] protection over somebody else’s environmental position,” Cyr said.

Cate Street and state officials thus have found what they believe will effectively work around the permitting process. Closing in escrow would allow the company to restart East Millinocket’s mill until the time period elapses and the deal can be closed fully.

“It’s a little bit of a risk for us, but it is a reasonable risk to take,” Cyr said. “If we don’t take the risk, we might as well” not bother.

But the environmental issues might not end there. Attorney Sean Mahoney, vice president and director of the Conservation Law Foundation of Maine, said Thursday that the most significant issue within the legal wrangling over the permits could be the disposition of the Dolby landfill.

The current owner of the mills, Katahdin Paper, he said, appears to need a waiver of liability associated with the landfill that would involve the state assuming a liability of more than $17 million in landfill closure costs before the deal will occur.

If Katahdin Paper does need a waiver, Mahoney said, then under the Maine Constitution, the state must get two-thirds approval from the Legislature and majority approval from the electorate for a bond covering the purchase costs before the state can legally assume ownership of the landfill. Both are likely impossible to achieve by Sept. 27, the Cate Street deal’s final closing date.

“As far as we can tell, nobody’s looking at this,” Mahoney said.

His group’s letters to the Maine Attorney General’s Office and the Legislature have gone largely unanswered, Mahoney said.

“That either means that the governor’s office doesn’t think our argument has any merit or that nobody’s thinking of this,” he said. “We just haven’t heard anything.”

Bennett and Cate Street spokesman Scott Tranchemontagne declined to comment on Mahoney’s concerns.

“We are doing due diligence to move this forward. We are not at the point yet where we have something to announce,” Bennett said.

A New England-based advocacy group founded in 1966, the Conservation Law Foundation advertises itself as having used the law, science, policymaking and the business market to find pragmatic, innovative solutions to New England’s toughest environmental problems, according to its website, clf.org.

Bennett had said Wednesday that LePage was optimistic that the sale would occur on Cate Street’s deadline.

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