Red Shield on the auction block
Red Shield Environmental has scrapped plans to restart its pulp mill in Old Town and instead will put itself up for auction.
The culprit is the poor credit market, Robert Keach, Red Shield's attorney, told Mainebiz this morning. Since June, when Red Shield and its subsidiary RSE Pulp and Chemical LLC filed for bankruptcy and laid off its 160 workers, CEO Edward Paslawski has maintained the company had merely stumbled because of cash flow problems and would reopen soon. So what changed? "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 been postponed three times, most recently on Monday. Keach said a participating lender in the agreement, who he would not name, pulled out of the deal. (Read about Red Shield's bankruptcy in the July Mainebiz story, "Pulp problem.")
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. The auction is scheduled to take place Oct. 22 with a starting bid of $11.5 million and the assumption of certain contracts, Keach said. The mill is valued at more than $48 million. Keach said a number of bidders have already expressed interest, and that he expects a "vigorous" auction. He also expects whoever buys the mill will reopen it. This story was first reported in the Bangor Daily News.
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