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Great Northern Paper Mill Auctioned to Los Angeles Investment Firm

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BANGOR, Maine - A major piece of Maine's paper-making story may have come to an official end this morning inside a Bangor courtroom.

That's where a Los Angeles, California-based investment firm successfully bid $5.4 million at public auction to acquire the idle mill in East Millinocket. Hackman Capital Partners says it's not sure what it will do with the mill, but did note that finding a new operator is a possibility. Proceeds from the auction will go to the many creditors owed money by Great Northern Paper, which has declared Chapter 7 bankruptcy.

For years, the mill was a living, breathing thing, it's future shaped to some degree by men in work clothes. They carried hard hats and lunch pails. They showed up on time. They put in their hours. And they left, through the main gate, at shift change. They made paper.

But now, the mill's fate no longer rests with the paper-makers or their corporate bosses. It's controlled, instead, by investors and lawyers - men in suits trying to salvage some value from the mill that gave birth to a town along the Penobscot River.

"I have consulted with my attorneys. They have burned my ear. I've listened to all the arguments, both ways," says Pat Perrino Jr., the trustee in Great Northern Paper's bankruptcy proceeding. This morning, five bidders tried to outdo each other, with Perrino Jr. playing the role of auctioneer. The prize: the East Millinocket mill, including all the machinery, equipment and buildings on site.

The public auction began with a so-called "stalking horse" - a bid of $2.6 million, to get things going. Ninety minutes later, Perrino Jr. disappeared behind closed doors with his team of lawyers to consider two bids: a $5.4 million offer from Hackman Capital Partners, and a bid of just over $5 million from GNP Acquisition LLC. "And I am going to accept, pending final court resolution at 1 o'clock, Hackman Capital at $5.4 million," he said.

A short time later, a U.S. bankruptcy judge signed off on the deal. Hackman, based in Los Angeles, owns 25 million square feet of mostly industrial property across the nation. The company also buys and sells large-scale, industrial equipment. Sharon Kopman is the firm's vice president for legal and business affairs. "We're a good-faith buyer here," she says. "We're going to be working with all the local constituents to make this process as smooth as possible."

Reporters asked Kopman about Hackman Capital's plans for the mill: Would the firm consider finding a buyer that could come in and resume making paper in East Millinocket? Kopman didn't say yes. But she didn't say no either.

"All options are open," she said. "Honestly, we don't know what's going to happen at this point in time."

In the coming days, Kopman says the firm will be assessing the mill and working with Perrino Jr. to close the deal. The bankruptcy trustee says proceeds from the auction will go towards paying off Great Northern Paper's more than $60 million in debt.

"Some of this money, obviously, goes to the secured creditors. And the carve out will go to the unsecured," Kopman said. "They'll be a determination, when we see all the dollars in, as to what the carve out, and the money to go to the unsecureds is."

Great Northern owes just over $40 million to its secured creditors and has just under $23 million in unsecured debt.

"There are a lot of tears being shed. And not just by people that worked in the mill," says Mark Scally. Scally sat on a bench outside the courtroom, post auction, a look of resignation on his face. Scally, who chairs the East Millinocket Select Board, still hopes a buyer will come in and make an offer to resume making paper at the mill. He worries about the potential blow to his community's collective psyche, if the mill is disassembled, machine by machine, building by building, smokestack by smokestack.

"That was their mill and they took pride in that mill," Scally says. "They worked hard. When every single day you look out and you see those stacks, and all of a sudden they disappear, that hits hard." More than 200 workers were laid off when the mill officially closed its doors earlier this year.

Meantime, East Millinocket has another mill-related challenge to deal with: The town's wastewater treatment plant is on grounds of the plant. In the short term, it will be run by the bankruptcy trustee. After six months, though, the state and the town will need to take over operations, and Scally says East Millinocket may have to pay between $25,000 to $50,000 more, per year, to run the water treatment plant.