April 21, 2015

Report: Most of GNP's $40M investment a 'mirage'

A Maine Sunday Telegram investigation found that most of a $40 million investment used to reinvigorate the now-closed Great Northern Paper mill in East Millinocket came in the form of a one-day loan that was used to maximize the amount of tax credits sent back to investors.

"The reality is most of that $40 million was a mirage," the newspaper wrote.

Among several findings, the newspaper reported that GNP's two out-of-state investors, Enhanced Community Development of New Orleans and Stonehenge Community Development of Baton Rouge, La., inflated the value of that investment through a $31.8 million one-day loan. That allowed the investors to maximize the amount of tax credits they received through the Maine New Markets Capital Investment program, totaling to nearly $16 million.

The Maine Sunday Telegram also found that none of the $40 million investment was actually used to improve the GNP mill. The aforementioned $31.8 million was loaned to a subsidiary of GNP's then-owner, New Hampshire-based Cate Street Capital, to buy mill equipment from another Cate Street subsidiary and then returned to the investors on the same day. The remaining amount was used to pay off debt and brokerage fees.

The East Millinocket mill shut down in January 2014, putting more than 200 people out of work the next month. Cate Street at first pledged to reopen the mill later that year, but the mill then in September filed for Chapter 7 bankruptcy, leading to a sale of the mill. Its currently not known what the new owner, California-based Hackman Capital Partners, plans to do with the mill.

Source: Maine Sunday Telegram

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Great Northern Paper files for Ch. 7 bankruptcy


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