Red Shield chapter ends
Red Shield Environmental LLC’s fidgety summer in and out of bankruptcy court has finally culminated in a sale to a private equity firm for $18.9 million — far less than the $48 million its owners said the mill was worth. Patriarch Partners of New York City won the Oct. 22 auction for the pulp and paper mill, outbidding Verso Paper Corp. of Memphis, Tenn., and Whitebox Advisors of Minneapolis, Minn.
Patriarch plans to reopen the plant as quickly as possible and to hire back some or all of the 160 employees laid off when the company and its subsidiary, RSE Pulp and Chemical LLC, filed for Chapter 11 bankruptcy and closed in June, according to Robert Keach, the attorney for Red Shield. “I don’t know what the long-term plan is, but the short-term plan is to run it as a pulp and paper mill” as it was under Red Shield, Keach told Mainebiz.
After Patriarch Partners closes the deal with Red Shield, the bankrupt company should have almost $19 million in cash that will be used to pay off its interest-accruing secured claims, Keach said. Those claims include about $8.3 million owed to the Minneapolis hedge fund Whitebox and about $900,000 owed to the Finance Authority of Maine.
Red Shield will then face between $7 million to $8 million in unsecured debts, which will not be repaid in their entirety. “There will be enough to pay 50 cents and maybe even 80 cents on the dollar,” Keach told the Bangor Daily News.
From the outset of its bankruptcy proceedings, Red Shield had planned to repay creditors and reopen, but the collapse of the credit market crushed that hope. “What changed was the state of the credit markets,” Keach said. “It’s extremely hard to get commercial financing at the moment.”
Red Shield, which bought the former Georgia-Pacific mill in November 2006, had lined up a $13.6 million loan from Woodside Capital Partners in Burlington, Mass., to restart the mill, but the bankruptcy hearing to approve the loan had to be postponed three times. Keach claims a participating lender in the agreement, which he would not name, pulled out of the deal. In light of the credit market, the company’s management decided the best way to maximize value for its shareholders was to auction the company.
Red Shield’s rise and fall
March 2006 — Georgia-Pacific shuts down the Old Town mill
Nov. 2006 — Red Shield Environmental, a group of investors, buys the mill for $1
June 5, 2008 — Red Shield shuts down, citing inability to fuel the mill’s biomass boiler
June 27 — Red Shield files for Chapter 11 bankruptcy, hobbled by the cost of wood chips, fuel and chemicals
July 17 — A U.S. bankruptcy court approves a $1.25 million loan from Chittenden Bank to help Red Shield pay its laid-off workers
July 29 — The bankruptcy court allows Red Shield to continue operating in idle mode and access $300,000 from a Pine Tree Zone rebate to keep it warm to allow a quick restart
Aug. 20 — A hearing at bankruptcy court to approve a $13.6 million loan from Woodside Capital Partners is delayed. Hearings set for Sept. 2 and Sept. 15 are also delayed.
Sept. 18 — Red Shield owners decide to sell mill at auction; bids start at $11.5 million
Oct. 22 — Patriarch Partners, a New York private equity firm, buys Red Shield for $18.9 million
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