Case Study | A Turnaround Against All Odds

Saving a Maine tradition. Saving jobs. Our experts in business restructuring and refinancing made it work. For our clients—and our community.

Bernstein Shur was asked to lend a hand not long ago when another Maine paper mill found itself on the verge of closing down for good.

The mill had been a mainstay of the local economy and an institution in the region for more than 120 years. Unfortunately, economic forces and bad timing had conspired against the operation, forcing it to file for reorganization under Chapter 11 of the Bankruptcy Code.

After languishing in Chapter 11 for years, it appeared that the mill’s efforts to reorganize would be unsuccessful. The case was converted to a Chapter 7 liquidation case, and the hundreds of jobs and other economic benefits that the mill had provided seemed all but lost.

Restarting the mill turned into a dramatic statewide campaign. When the bankruptcy trustee abandoned the property – and any effort to find a buyer – Maine Governor John Baldacci ordered state troopers to guard it in case creditors sought to remove equipment. A private Maine foundation advanced funds to heat the plant, keeping equipment warm and functional in the dead of winter. Laid-off mill workers even suggested innovative ways to keep key chemicals in the building from freezing.

A call for reinforcements
Finally, the state approached a group of entrepreneurs in a last-ditch effort to save the manufacturing jobs. Recognizing the substantial hurdles facing them, the investors called on the expertise and experience of two Bernstein Shur practice groups: Business Restructuring and Insolvency, and Business Law.

Our clients, experts in the paper industry, believed the mill was worth saving. It was well integrated, with key technology in place, a strong product niche in the industry, and a good customer base. But Maine’s paper industry as a whole is often seen as contracting. The mill’s earlier unsuccessful efforts in Chapter 11 made a difficult situation even worse.

Success—against all odds
Against all odds, the campaign paid off in the end and everyone’s efforts were rewarded. Bernstein Shur devised an innovative approach to the acquisition of the bankrupt facility and, working with a determined client, negotiated successfully with key creditors. A short time later, the client restructured the equity of the ownership entity and refinanced the debt assembled to facilitate the acquisition, leading to a remarkable $35 million expansion. This initiative included the construction of a new tissue machine – Maine’s first new paper machine in nearly twenty years – which doubled one of the plant’s key outputs.

A bright future
Today, the mill is busy and profitable. It provides good employment opportunities to over 350 people, and to another 2,000 individuals who work at supporting businesses. Instead of selling its excess pulp as a relatively low-value commodity, the mill will use its new machine to expand a line of value-added products. The owners, who are considering further expansion, expect that the mill will be producing at record capacity in five years.

Bernstein Shur is pleased to have had the opportunity to work with its client to develop business opportunities in support of Maine communities.

Business Law Practice Group
Business Restructuring and Bankruptcy Law