Town officials say paper machine auction appears to settle Millinocket financial woes

A participant said that only about 20 bidders came to a Millinocket mill site to bid on a No. 11 paper machine and other equipment on Thursday, June 19, 2014.
Nick Sambides Jr. | BDN
A participant said that only about 20 bidders came to a Millinocket mill site to bid on a No. 11 paper machine and other equipment on Thursday, June 19, 2014. Buy Photo
By Nick Sambides Jr., BDN Staff
Posted June 19, 2014, at 12:20 p.m.

MILLINOCKET, Maine — The auction of Great Northern Paper Co.’s No. 11 paper machine from its defunct mill appears to have settled a $2.24 million property tax dispute with the town, officials said Thursday.

Millinocket Town Manager Peggy Daigle said she observed the auction on Internet and had counted $1.08 million in gross bids awarded on as many as 368 pieces of equipment sold at auction’s end. That, and a report from Town Councilor John Raymond that the No. 11 machine sold for $2.5 million, leaves her feeling pretty comfortable that the town would get its property-tax money, she said.

Daigle said that according to the agreement among GNP, the town and the auctioneer, Koster Industries, the Internal Revenue Service would get 15 percent of all sales and Koster would get 10 percent. That should leave, she said, about $2.68 million, enough to pay the debt.

“Like I said, I just want to get the taxes paid so that we can continue to operate,” Daigle said Thursday. “It’s a relief to know that they have the ability to pay us. It will be an absolute relief once we get the money into our account.”

Koster Industries officials who held the auction declined to comment on its results. The auctioneer is managing the escrow account from which the town would be paid.

According to a 2004 BDN article, the No. 11 machine had been refurbished for an estimated $125 million a few years earlier.

Daigle had been monitoring the auction, she said, out of “desperation.”

“I don’t think people understand how desperate the need to get this payment in actually is,” said Daigle, who estimated that town government had about $1 million in reserve. That and the proceeds town government normally earns would last until mid-July, she said. She plans to apply for a Tax Anticipation Note to cover shortfalls, she said.

If the funding falls short, the town’s lien will go back on the property, Town Council Chairman Richard Angotti said. It was removed at the town’s request Wednesday, Daigle said, and “could be put back on again just as easily.”

Alexandra Ritchie, spokeswoman for a group of companies that includes GNP’s Millinocket holdings, issued a statement late Thursday that auction proceeds “will in part be utilized to satisfy the outstanding property taxes.”

According to a copy of the agreement between town and GNP officials distributed at a council meeting June 13, the town will receive “payment and satisfaction of the full amount due” — $2.17 million, plus interest and legal and filing expenses.

The IRS filed liens in April totaling $2.49 million against GNP companies in Millinocket and East Millinocket for nonpayment of corporate income taxes. The Millinocket-based GNP IRS lien is for $1.43 million.

One bidder at the auction, Jim Stanley Jr. of Medway, said about 20 businesses and individuals bid on the mill hardware during the nearly six-hour sale.

Stanley said he was standing next to a bidder who offered the high bid for the machine, which sold as one piece of equipment. Ritchie said earlier the price of the No. 11 machine or its components would not be disclosed “for confidentiality reasons associated with those bidding.”

Auction company officials told the bidders that they would agree to whatever made the most money, individual bids on equipment or bids on lots, Stanley said.

Revenues from the auction were intended to help revitalize GNP’s East Millinocket paper mill, pay creditors, and help clear the way for a $140 million pellet mill planned for Millinocket, said Ritchie, spokeswoman for Cate Street Capital, which manages GNP and Thermogen Industries.

Cate Street bought the two Katahdin region paper mills for $1 in 2011 and formed Great Northern Paper Co. LLC and, later, Thermogen to oversee the revitalization of the East Millinocket facility and to launch the pellet mill at the Millinocket site on Katahdin Avenue.

Millinocket leaders had hoped they would receive a check for the amount owed Thursday, but the bidding was time-consuming. It started at 10:30 a.m.

GNP confirmed on May 20 that the No. 11 machine, which had been idle since 2008, would be auctioned to help the company restart its East Millinocket mill and pay GNP debts. The East Millinocket facility stopped production in January and laid off 212 of 256 workers on Feb. 6.

The No. 11 is the last papermaking machine on the Katahdin Avenue site, which in its heyday employed more than 4,000 workers as part of a company formed in 1897 that opened in 1900 under the direction of Garrett Schenck. The machine began producing specialty papers for magazines, newspaper supplements, paperbacks and catalogs in the 1950s, according to a history compiled by the University of Maine.

The auction was streamed live from kosterindustries.com. Members of the media were not allowed to attend.

Auction items ranged in size from file cabinets to an entire electrical substation or a 2-ton crane. A portable floor fan, such as a contractor might use, sold for $50. A baler sold for $10,000.

No one leaving the mill site through the main gate late Thursday afternoon appeared to be carrying any equipment. Daigle said that the town would not allow the No. 11 machine or its parts to leave the site until the town’s tax issues with GNP were resolved.

The resolution would allow the town to close its books on the 2013-14 fiscal year, which ends June 30. The agreement does not address the status of GNP’s tax debt in East Millinocket, which amounts to $657,900. East Millinocket selectmen voted 5-0 at a meeting June 12 to fully support the mill.

Records show GNP companies managed by Cate Street are at least $6.81 million in debt to the federal government, East Millinocket and Millinocket, and several vendors who have sued or filed liens since February 2013.

http://bangordailynews.com/2014/06/19/news/penobscot/gnp-paper-machine-auction-proceeding-millinocket-hopes-to-recover-overdue-taxes/ printed on July 22, 2014