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Management Side
Tissue Machine Sale 'a nail in the coffin' for Lincoln Paper and Tissue mill
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Portland, Maine, USA 24 February 2016 -- (From The Daily News) -- The new owner of much of the bankrupt Lincoln Paper and Tissue mill has sold one of three tissue machines in a move a group of former employees said could imperil an apparent last-ditch effort to keep the mill running.

Union leaders and creditors of the mill first learned of the sale of Tissue Machine No. 8 during a bankruptcy hearing Tuesday, after which much remained unknown, including the buyer of that paper machine and the plans for its use.

"We're obviously astounded to hear it," said Duane Lugdon, head of the United Steelworkers Union, which represented the mill's employees. "Generally, you kind of hear these things."

The news emerged during Tuesday's hearing in Portland about the sale of certain intellectual property associated with the mill's three tissue machines to the consortium of liquidators who bought the mill's assets for $5.95 million.

The attorney for the bankrupt mill had asked for quick review of that intellectual property sale with the understanding that Gordon Bros. had a willing buyer for the machine, but only if the related intellectual property came along with it.

That machine, known as TM8, makes commodity products such as tissues and napkins, according to a 2015 assessment of the mill by the paper manufacturer AstenJohnson.

On Monday, Gordon Bros. attorney Kevin Simard said that the buyer's requirements changed and the sale of TM8 closed on Feb. 11. The $75,000 sale of the mill's intellectual property to the consortium led by Gordon Bros. was held for a hearing on March 24.

More than 50 former employees last week filed objections to the sale of the intellectual property, seeing it as the first domino to fall leading to the sale of TM8, its removal from the mill in Lincoln and the loss of any chance the mill would be restarted.

The Rev. Jack Stewart of the Full Gospel Tabernacle in Lincoln and his son Tony Stewart, a 27-year employee at the mill, were among those filing objections, asking the court to give a group of potential investors more time to put forward an offer for all the mill's production equipment.

"That would just put the nail in the coffin if they were to sell," Jack Stewart said in a phone interview Monday.

Tony Stewart said among former employees there has been a groundswell of support for trying to keep the mill operating.

"One of the big things that we've seen is a real desire to keep all three machines here in Lincoln," Tony Stewart said in a phone interview Monday.

Those objectors identified the prospective buyer as the Canadian Kruger Paper, which took part in the bankruptcy auction for the mill. The company makes paper towels, bathroom tissue and similar products for consumers and "away from home" markets, such as hotels. Such products could be made using Lincoln's TM8.

A spokesman for Kruger was not immediately available for comment Tuesday afternoon.

Simard declined to identify the buyer of the tissue machine or the plans for that machine during Tuesday's hearing, in response to a question from the the union's attorney, Jeff Young.

Jay Gellar, the attorney representing unsecured creditors in the case, said in court Tuesday that he spoke last week with someone named Joe Nugent, who he said is trying to put together an investment proposal to buy the mill.

A man by the name Joe Nugent III started a Facebook page titled "Help Save Maine Manufacturing / Jobs" in November. He was not immediately available for comment Tuesday afternoon.

Nobody by that name has filed any objection to the intellectual property sale in the case.

Former employees filing objections to expedited review of the intellectual property sale did not identify the potential investor, but all used similar language in describing the possibility.

"I understand there is a group of investors who have a business plan and are putting together financing to purchase and operate the Lincoln Mill intact," Jack Stewart wrote.

Attorneys in the case Tuesday characterized the prospect of a restart as a long shot.

Gellar, United Steelworkers Union attorney Young and mill attorney Sam Anderson all said Tuesday that they did not object to that group having a little more time before the sale of the intellectual property to put together an offer for Gordon Bros.

That was before Simard shared the news that TM8 had already been sold.

Lugdon declined to speculate on the prospects for a restart without TM8 in the mix.

U.S. Bankruptcy Judge Peter Cary asked attorneys in the case whether it made sense to have the March 24 hearing on selling the mill's intellectual property in Bangor rather than Portland.

The Lincoln case and other paper mill bankruptcies have been handled in the Portland court because of conflict-of-interest rules. The recently appointed bankruptcy judge Michael Fagone worked for the Portland law firm Bernstein Shur, which handles some of the largest bankruptcies in the state.

That prior employment prevents Fagone from hearing cases argued by his former colleagues for three years, in cases in which there might be an appearance of bias.

Cary questioned Tuesday whether that's a problem for the mill bankruptcy process, making more distant decisions with relatively large economic consequences for the region.

Balancing the cost to the bankruptcy estate of having attorneys travel to Bangor with the challenge of having objecting parties participate, Cary ruled to provide new notice to the objecting parties of the hearing in Portland.

Those objectors, he said, have enough in common in their complaints to send one or two representatives to voice their concerns, setting a March 15 deadline for new objections in the case.


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