PORTLAND, Maine — The Lincoln Paper and Tissue mill’s Chapter 11 bankruptcy auction drew a top bid of $5.95 million from a consortium of companies that would seek to sell the mill to a papermaker or sell it off in pieces, the mill’s attorney said Thursday.
Sam Anderson, the attorney for the bankrupt tissue mill, said top bidder Gordon Brothers is a liquidator but could resell the mill to a company seeking to make tissue paper.
The bid proposal, which does not include mill-owned land, will go before a bankruptcy judge Friday morning for final approval in a hearing that could include objections from various parties, including the United Steelworkers union and state environmental regulators.
“We’re waiting to hear what the intended use is, and tomorrow we’ll be back in the courtroom,” said Duane Lugdon, spokesman for the United Steelworkers, after the auction Thursday afternoon at the offices of the Lincoln mill’s law firm, Bernstein Shur. “What position we may or may not take then at that point and time, I can’t venture a guess.”
None of the bidders Thursday, Lugdon said, appeared interested in continuing mill operations.
Lincoln town officials will contact Gordon Brothers within several days to see what its intentions are, Town Manager Ron Weatherbee said.
“I don’t know what Gordon Brothers is,” Weatherbee said Thursday. “Do they plan on scrapping it or operating it? Hopefully they are looking to operate it or have some investors join them and operate it.”
“From what I read about the company, I will not be that optimistic, but we will have to wait and see what the overall picture is, not just this one piece. I imagine somebody will also bid on the land,” Lincoln Town Council Chairman Steve Clay said.
According to its website, Gordon Brothers is a Boston-based “global advisory, restructuring and investment firm that helps growing, mature or distressed businesses manage through strategic change.”
The pool of bidders had whittled down to four by the time of the auction, after mill officials said they had marketed the property and its assets to 169 different companies.
Keith Van Scotter, the mill’s co-owner, said in September that he hoped the mill could find a new operator, targeting Lincoln’s specific niche for tissue paper.
The mill has continued to operate through the bankruptcy case but has laid off workers. Lugdon said the union has about 70 members working at the mill, down from 128 hourly workers at the time of the bankruptcy filing.
The mill sought Chapter 11 protection in late September, a move driven by a series of expected and unexpected challenges to its business.
Documents filed in the bankruptcy showed the mill’s revenue in 2014 dropped to $70 million from $145.3 million the previous year, primarily as a result of a boiler explosion that eliminated the mill’s ability to make its own wood pulp and took out some of its power generation capacity.
The company’s profitability fell, too, during that time, according to Van Scotter. Through Monday, Oct. 19, the company had posted revenue of $55.5 million for 2015.
The high bid for the mill was about 10 percent of that revenue and about 11 percent of the valuation of its personal property, which is about $54 million. The final bid was about $650,000 higher than the starting bid of $5.3 million, from stalking horse bidder LP Acquisitions, a subsidiary of the Los Angeles-based industrial real estate investor Reich Brothers.
“You always hope the assets are sold for more in order to maximize the value for creditors of the company,” Anderson, the mill’s attorney, said. “Overall, we’re glad we had an active auction, and my expectations were that the numbers could have been a little bit higher.”
Van Scotter said the price received reflects some challenges mills face with high tax valuations, an issue industry officials raised earlier this week during a summit hosted by the Maine Pulp and Paper Association.
“Chalk it up to a poor economy or excess capacity or whatever, it’s just that these assets really don’t have the value that they used to have,” Van Scotter said Thursday. “Particularly when you look at the amount of money that we’ve spent putting these assets in, it is quite a difference.”
Van Scotter and John Wissman bought the mill in 2004 from Eastern Pulp and Paper Co. for $23.7 million. Since then, they invested millions in equipment.
Van Scotter said there’s no clear conclusion for the mill’s remaining employees out of Thursday’s auction.
“If I were an employee, I would hope for the best and prepare for something less than the best,” Van Scotter said.
Ultimately, 36 entities signed nondisclosure agreements in order to review confidential information about the mill’s operations in advance of the stalking horse bid.
Reich Brothers and Kruger Products were among the lower bidders for the mill Thursday. The fourth bidder was not immediately known.
Clay said he believed that Lincoln leaders have done a good job preparing for this moment.
West Broadway, one of the town’s main financial arteries, will be widened next year. Plans to run water and sewer service to River Road, which leads to Interstate 95, are in advanced stages, and Bangor Natural Gas Co. is piping its product into West Broadway businesses. The town also has cut its property tax rate for three straight years in anticipation of the mill’s closure, launched an advertising campaign and speeded the development of its sole industrial park.
“It is not an ‘if’ moment, it’s a ‘when’ moment, so you have to prepare for it,” Clay said.
Councilors and town officials will have to await hearing from the eventual owners of the land the mill occupies to determine how to fit the mill parcel into the town’s development plans, Clay said.
Lincoln Lakes region residents should be grateful to Van Scotter and Wissman, Clay said.
“If it closes, that will be terrible for the community, but that could have happened 11 years ago,” Clay said. “I know that they tried. They tried to make it go, and when the boiler exploded, that was just too much to overcome.”