A joint venture led by a Boston-based liquidator of industrial sites emerged as the winner of Thursday’s auction for the bankrupt Lincoln paper mill.
The winning bid was submitted by a group led by Gordon Brothers Group, according to Sam Anderson, the attorney for Lincoln Paper and Tissue, which filed for bankruptcy in late September. Four eligible bidders participated in the auction, but none of them were paper mill operators.
Anderson would not reveal the value of the sealed bid, saying it would be revealed at a court hearing Friday morning during which a federal bankrupcty judge will decide whether to approve the sale. After a six-hour auction, though, Anderson said it was safe to assume it was more than the opening bid of $5.3 million.
Other media outlets have reported the winning bid as $5.9 million, but Keith Van Scotter, CEO of Lincoln Paper and Tissue, who attended the closed auction, said Thursday night that that number is wrong.
“I don’t know where they got that number, but it’s not correct,” he said.
Van Scotter said he was disappointed by the auction’s outcome, including the fact the winning bid was less than he expected and that no paper operators participated. The four eligible bidders were all liquidators, he said.
He still holds out hope, however, that the new owner will seek to turn the mill around and seek a paper operator. Once the bankruptcy is complete, the mill will have shed its liabilities and will be in a better position to be profitable, Van Scotter said.
When asked if he’d be in a position to put together a management group that could lease the mill from the new owners, Van Scotter said he wasn’t in a position to answer the question, but said the possibility wasn’t off the table.
“Since we had to go down the asset-sale route, my focus has been from day one to maximize the value of the assets for the benefit of the creditors. That’s the responsibility I have and I’m doing the best I can,” Van Scotter said. “Secondly, I’d really like to see it continue as a going business after this and the jury is still out on that. If I can help make that happen, I will do it.”
Jeffrey Young, attorney for the United Steelworkers, which represents about 175 of the mill’s employees, does not have much hope. He believes the mill will be scrapped.
“It didn’t appear that any bidders were planning to operate the mill or flip the mill to someone who was planning to operate it,” Young said. “That’s still a sliver of a possibility, but that’s not my read on it; it’s not my client’s read on it. I think the mill is going to be dismantled, sold for scrap and around 175 workers are going to lose good paying jobs in a mill that has been operating in one form another in Lincoln for 80 years.”
Van Scotter has been CEO of the mill since he and a partner purchased it in 2004. The mill, which produced both uncoated white paper and tissue paper, had operated successfully for nearly a decade. But disaster struck in early November 2013 when a boiler exploded. No one was injured, but the resulting damage forced Van Scotter to shut down the mill’s pulp operation and its uncoated paper making operations, which accounted for roughly 40 percent of the mill’s revenue. While the tissue machines were quickly restarted, neither the pulp mill nor paper machines ever restarted.
As a result, the mill’s revenue fell from $145.3 million in 2013 to $70 million in 2014, according to court documents. Its revenue through mid-October of 2015 was $55.5 million.
The mill filed for Chapter 11 bankruptcy in late September with $6.7 million owed to four secured creditors and $9 million owed to dozens of unsecured creditors, according to court documents.
“It’s disappointing for me,” Van Scotter said. “It’s been a hard, long road and going through this process is no fun.”
The Gordon Brothers Group describes itself on its website as “a global advisory, restructuring and investment firm that helps growing, mature or distressed businesses manage through strategic change.” It conducts more than $70 billion worth of transactions and appraisals annually. It is headquartered in Boston, but maintains 25 offices worldwide, including a strong presence in Europe and Asia, its website claims.
The Gordon Brothers Group’s bid is for the mill’s personal property only, which includes the paper machines and all equipment, Anderson said. It does not include the real estate, including the mill buildings themselves. Gordon Brothers Group has a one-year option to purchase the land and buildings, Anderson said.
While Van Scotter hopes the company will find value in finding someone to make tissue paper at the mill, recent history does not provide much hope. Two Maine paper mills have been put up for sale within the past two years – the former Great Northern mill in East Millinocket and Verso’s former mill in Bucksport. In both cases the buyers were liquidators and scrap-metal recylcers – Hackman Capital Partners purchased the East Millinocket mill at a bankruptcy auction in December 2014, while AIM Development bought Verso’s Bucksport mill the same month. People had hoped the buyers would turn around and sell the mill to a party interested in making paper, but both were dismantled and liquidated.
One potential saving grace of the Lincoln mill, though, is that it makes tissue paper, as opposed to the newsprint and glossy paper produced at the East Millinocket and Bucksport mills. Demand for tissue is actually increasing slightly.
The sale hearing is scheduled to take place Friday morning at 10:30 a.m. at the U.S. Bankruptcy Court in Portland.