April 22, 2019
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Old Town mill purchaser experienced in diversifying, industry experts say

Gabor Degre | BDN
Gabor Degre | BDN
Wisconsin firm Expera Specialty Solutions has entered into an agreement to purchase Old Town Fuel & Fiber, which shut down production in mid-August and declared bankruptcy.

OLD TOWN, Maine — The Wisconsin company looking to purchase Old Town Fuel & Fiber is a solid paper business with a focus on specialty products that bodes well for Maine, several forest products industry observers said Wednesday.

The company, Expera Specialty Solutions, announced Tuesday it entered into an agreement to buy the shuttered and bankrupt Old Town pulp mill from Patriarch Partners. The mill still could go to another buyer if higher bids are solicited through the bankruptcy process that is ongoing.

Expera is held entirely by the New York-based private equity firm KPS Capital Partners and Expera’s managers. In September, the company raised $270 million in financing through a $195 million loan and a $75 million revolving line of credit through numerous banks, led by Bank of America and GE Capital Markets Inc.

That cash and KPS’s track record as owner of four Wisconsin paper mills makes the company “solid to the core,” according to University of Maine professor Robert Rice, a faculty member at the university’s School of Forest Resources.

“I think in terms of a parent company this is probably about as good as we are going to get,” Rice said Wednesday. “I think that reopening that mill would be a win-win for everyone here. Its product is useful for many products made locally. They could also expand their horizons and buy a paper mill in Maine and become fully integrated in Maine.

“They are a specialty products company not subject to the same commodity market forces that we normally see in the printing and writing papers grades, and these guys know how to make paper,” Rice added. “They have been at it for years. These guys in Wisconsin are solid to the core. They will work well within the existing mill management in Old Town that know how to make pulp and paper.”

“I know personally the CEO of Expera. He is a standup guy,” Lincoln Paper and Tissue LLC co-owner Keith Van Scotter said Wednesday of Russ Wanke. “He’s a good Wisconsin guy with a good mill background. He is as good as they come.”

United Steelworkers Union representative Duane Lugdon said he believed Expera “will bring a very strong commitment” to the mill and its workers.

“We have had a great relationship with KPS elsewhere in the pulp and paper industry as well as others throughout the nation,” Lugdon said. “Our confidence in KPS and Expera is extremely high as a result of our past experience with them and the depth of commitment they make to the assets they own.”

Expera was formed in 2013, when it acquired the Wisconsin companies Wausau Specialty Paper, from Wausau Paper Corp., for about $110 million and Thilmany LLC, from Packaging Dynamics Corp. The purchase included two mills from Wausau Paper and another two from Packaging Dynamics that together employed about 1,800 people at the time of the purchase. Expera said at the time its target markets are for tape, industrial products and food packaging.

Expera plans to make pulp in Old Town for shipment to its mills out west, according to attorney Pasquale “Pat” J. Perrino Jr., the trustee appointed to represent creditors in the Old Town Fuel & Fiber bankruptcy case that is pending in U.S. District Court in Bangor.

Perrino said he thinks Expera has made “a good offer.”

“We should have everything teed up for the sale by Friday,” he said.

“I don’t know that much about the company, but I do know that it is a very large company with a lot of people and several mills throughout the midwest,” Perrino added.

The Old Town mill makes hardwood- and softwood-kraft pulp, according to Rosaire Pelletier, forest products industry liaison with the Maine Department of Economic and Community Development.

“It’s always good to get new investors in the state,” Pelletier said. “We are a business-friendly group, and what I know of them is that they are a good company.

“It is not a done deal yet, so I can’t say much more. We will have to wait until everything is signed,” Pelletier added.

Both Wausau Paper and Thilmany said at the time of their sale of mills to Expera they sought to divest of their specialty paper assets to focus on other segments of their business. Wausau Paper said it sought to narrow its focus to tissue paper, a segment of the industry that has bucked declines. Packaging Dynamics sought to focus on its fiber-based food and consumer packaging segments.

Old Town’s mill also could conceivably sell softwood pulp to other tissue producers in Maine, such as Lincoln Paper and Tissue LLC or Woodland Pulp’s $120 million two-machine tissue mill under construction in Baileyville. Softwood pulp typically is used in the production of tissue, labeling and other products where paper strength is important, Rice said.

“Are they making softwood-kraft or hardwood-kraft [pulp]? If they are making softwood kraft, they made a good decision [with the purchase plan]. If they are making hardwood, it will be a bit harder due to the price pressures that market is facing,” he added.

Hardwood pulp is typically used to make paper.

No one from Expera or its parent company has approached Lincoln Paper officials to sell pulp or to buy the company, according to Van Scotter, whose company has been looking for potential investment partners for several months.

Rice said it would also be interesting to see whether Expera has any interest in continuing the work Old Town Fuel & Fiber did developing wood-based ethanol or industrial plastics.

“The extraction technique is pretty much developed. It can move from one place to another,” Rice said. “The economics aren’t worked out satisfactorily yet, but the technology is developed to extract the feed stocks for a number or products.”

The Old Town mill had been at the forefront of research into turning wood pulp into sugars that could be refined into ethanol, through a $30 million grant won from the U.S. Department of Energy by previous owners Red Shield Environmental just two months before that company filed for bankruptcy in 2008.

Work under that grant continued under ownership by Patriarch Partners, the investment firm owned by Lynn Tilton, which bought the plant for $19 million later that year.

Hemant Pendse, director of the University of Maine’s Forest Bioproducts Institute, said in August the mill’s latest bankruptcy was “just a delay” in developing that technology, an effort with which his institute has helped.

Expera has no plans to pursue ethanol production at the facility, according to company spokeswoman Addie Teeters.

BDN staff writer Darren Fishell contributed to this report.

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