February 20, 2019
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Documents show financial devastation from Lincoln mill boiler explosion

Nick Sambides Jr. | BDN
Nick Sambides Jr. | BDN
The Lincoln Paper and Tissue LLC mill as seen on Thursday, Dec. 12, 2013.

PORTLAND, Maine — The now-bankrupt Lincoln Paper and Tissue’s revenue was chopped in half in 2014, during a year when the mill struggled to recover from a boiler explosion that left it unable to produce its own wood pulp and ended its paper production.

Previous testimony to the bankruptcy court shed light on what drove the mill’s owners to file for Chapter 11 bankruptcy, stating that the explosion in November 2013 left the mill leaking cash.

Documents filed Monday put hard numbers to the impact on the privately held business, where gross revenue in 2014 dropped to $70 million from $145.3 million the previous year. Through Monday, Oct. 19, the company listed year-to-date revenue of $55.5 million.

Keith Van Scotter, the mill’s president, CEO and co-owner, said Wednesday the mill’s profitability dropped through 2014 as well.

“We made a lot of capital expenditures to retool the operation,” Van Scotter said. “We spent a lot of money and lost a lot of money.”

In an earlier statement to the court, Van Scotter wrote that the boiler explosion exposed the mill to market prices for pulp to supply its paper-making operations. At the same time, he wrote, the company lowered prices to try and gain a share of an increasingly crowded market for tissue paper.

The company targeted a niche in the tissue paper market, making specialty tissues for applications like party goods, napkins, towels and table covers.

The latest filings also give an assessment of the mill’s total assets, which it listed at about 3.5 times the value of its liabilities to both secured and unsecured creditors.

The bulk of its asset value comes from the book value for the company’s machinery, equipment and inventory, which it listed together at $49.1 million, including the value of construction in progress on certain machinery.

The mill listed its total asset value as $55.2 million, against $15.8 million in liabilities.

That valuation will be tested next month when the company’s machinery, inventory and perhaps its land goes up for auction Nov. 10, at a starting price of $5.3 million.

Van Scotter said in a previous interview he thinks “a smart strategic player could get a lot of value by investing in this business.”

He noted Wednesday that the final sale price may not relate to the book value of the mill’s assets, noting that many paper mills in the state have requested tax abatements on their paper-making machinery.

Any proceeds from the auction of the mill assets will be used to pay its liabilities, first satisfying the $6.6 million owed to creditors who hold secured interests in various mill assets.

That amount includes $4.2 million to the mill’s lender, Siena Lending Group LLC; $1.2 million to Hermon-based Sullivan and Merritt Constructors; $979,248 to the Finance Authority of Maine; and $336,999 owed to Lincoln-based mechanical contractor FASTCO.

The company’s largest unsecured creditors include its energy suppliers, shippers and pulp suppliers. The company listed in that unsecured debt a $1.9 million contract claim from natural gas supplier Xpress Natural Gas, which it said is subject to arbitration and against which the Lincoln mill has filed a $1.1 million counterclaim.

It listed a total of $9.1 million owed to its unsecured creditors.

 



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