PORTLAND, Maine — A group of asset liquidators on Friday won approval to buy the equipment of Lincoln Paper and Tissue for $5.95 million, a price reached after a six-hour auction Thursday that began at $5.3 million.
The results of the auction and sale make it unlikely that papermaking will continue in Lincoln, according to the mill’s attorney and a representative of the millworkers union.
“There are a lot of people who are going to have to change their career path, perhaps get some schooling, and completely change the life they have known,” Duane Lugdon of the Steelworkers Union said after a bankruptcy judge approved the sale Friday.
Lugdon said about 70 people are still working at the mill that had about 128 hourly workers at the time of the bankruptcy filing. He said that likely will drop to about 12 in the next week.
“After that, we don’t have an idea of what that’s going to look like,” he said.
The court approval allows the bankrupt mill’s owners to close the sale to a joint venture led by Boston-based Gordon Brothers Commercial & Industrial LLC. The other companies in the group are PPL Group LLC of Illinois, Rabin Worldwide of California and Capital Recovery Group LLC of Connecticut.
Keith Van Scotter, the mill’s CEO, said he expects the closing to be “fairly quick.”
Van Scotter said that he’s not decided what he’ll do after winding down the mill, which he and co-owner John Wissman bought from Eastern Pulp and Paper Co. out of bankruptcy, in 2004, for $23.7 million.
Over his 11½ years leading the company, they and other shareholders made about $80 million in capital investments, Van Scotter said.
“We pulled a rabbit out of a hat, but I don’t think I’m the guy to do it this time,” he said.
The final sale price Friday came in at about 11 percent of the $54 million valuation of its personal property.
“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 after the auction Thursday. “Particularly when you look at the amount of money that we’ve spent putting these assets in, it is quite a difference.”
He said it would be challenging to restart the mill, despite having a relatively specific market niche making specialty tissue for applications such as party goods, napkins, towels, table covers and other uses.
An explosion of a boiler that stymied the mill’s ability to make its own pulp and uncoated paper contributed to its ultimate downfall, reducing its revenue in 2014 to $70 million from $145.3 million the previous year.
In trying to market the mill to new operators, Van Scotter said that damage “was certainly a big issue, but it wasn’t the only issue.”
He cited costs of labor agreements, wintertime spikes in natural gas prices, a lawsuit from the Federal Energy Regulatory Commission and the pending startup of competing tissue machines at St. Croix Tissue in Baileyville as other headwinds to restarting the mill.
The written purchase agreement with Gordon Brothers had not been filed in the case as of Friday afternoon, but attorneys said it did not include buying the mill’s land or buildings.
The mill’s attorney, Sam Anderson, said the sale included a one-year lease on the properties, with an option to buy the real estate.
The pool of bidders had narrowed to four by the time of Thursday’s auction, after mill officials said they had marketed the property and its assets to 169 different companies.
The sale gained court approval over an objection Friday morning from the United Steelworkers union, which argued that the buyer should have to take on its collective bargaining agreement as part of the package.
Chief U.S. Bankruptcy Judge Peter Cary overruled that objection to the sale, saying his options were limited. None of the other bidders had the intention of operating the mill or continuing to employ any of the workers.
If they did, he said, he could consider whether the economic benefits of continuing to operate the mill made a lower bid an overall better offer.
“It would have been nice if a bidder came forward that had the potential to use those assets,” Lugdon said.
With the union contract still in the hands of the bankruptcy estate, Lugdon said the union will now file claims on behalf of its members regarding any remaining vacation time, holiday pay or unpaid severance.
Given the auction proceeds and creditors that are first in line, Lugdon said he’s not hopeful that there will be much left for the mill’s former employees.
“Employees typically end up at the end of the line with respect to proceeds from the sale,” Lugdon said, citing the latest bankruptcy of Great Northern Paper Co. as an example.
Lugdon said he and the employees he represent have been “disillusioned” by the auction, but knew the mill’s dismantling and sale were in the cards.
“We have obviously been on guard for some time about the assets in Lincoln,” Lugdon said. “We’ve known that they were troubled.”