GNP creditors petition to move bankruptcy case to Maine, but trustee objects

Sept. 29--PORTLAND, Maine -- A group of Maine-based creditors have asked a Delaware court to move the bankruptcy case of Great Northern Paper Co. to Maine, where an attorney said 56 percent of the 1,159 creditors are located.

But the Delaware trustee now handling the case plans to oppose that measure, arguing that he has administered bankruptcies from all over the country. GNP is a holding company incorporated in Delaware, a state that offers some tax benefits to such corporations.

"I administer cases all over the country. Very few of [the bankrupt companies] are ever [physically located] in Delaware," said Charles Stanziale, the trustee appointed in the bankruptcy case for GNP.

That sets up a dispute with Portland-based attorney Jeremy Fischer, who represents three creditors and has been gathering support to bring the case to Maine from others with an interest in the the East Millinocket paper mill operator's bankruptcy.

Fischer filed a motion late Friday with the U.S. Bankruptcy Court in Delaware, stating that Maine's attorney general, the towns of East Millinocket and Millinocket and the employees' unions have indicated support for the change of venue before a scheduled meeting of creditors happens Oct. 15.

If the case proceeds under his watch, Stanziale said his first priority is finding a buyer that would keep the property in East Millinocket operating as a paper mill. The second possibility is a buyer who would auction off the personal property and equipment at the mill. The bankruptcy of GNP Maine Holdings does not include the real estate, which is owned by other corporate entities, Stanziale said.

"The game plan is to try -- and I emphasize the word try -- to get somebody to come in and run a paper mill here," Stanziale said. "It's not like it's never been done, but it has to be good timing and there has to be a need and it has to be the right price."

There are other factors, too, Stanziale said, many of which he hopes will be hashed out in the next 30 days. That process will be illuminated by completion of the company's bankruptcy filing, which did not include several required documents detailing specific accounting of its assets and debts. GNP has until Oct. 7 to file those documents.

Alexandra Ritchie, a spokesman for the private equity firm Cate Street Capital, which manages GNP, did not respond to an email seeking comment Monday.

Fischer, whose clients claim they are owed a collective $413,877 from GNP Maine Holdings, argued that the case should be moved because a majority of creditors are located in Maine, that most of the relevant witnesses live in Maine, that administrative costs will be higher if the case proceeds in Delaware and that groups like the AG's office representing the public interest are located here.

The motion filed Friday states that 652 of the 1,159 creditors listed in GNP's Chapter 7 bankruptcy filing are located in Maine and eight other Maine creditors have indicated support for moving the case to Maine. That group includes Affiliated Healthcare Systems and Cross Insurance, both based in Bangor, and Timberland Trucking Inc., Gerald Pelletier Inc., and Millinocket Fab & Machine Inc., of Millinocket.

The filing also indicated that roughly 20 other creditors have already obtained court judgments against GNP Maine Holdings and " were in various stages of enforcement and execution" as of last week.

A spokesman for Maine Attorney General Janet Mills was not immediately available Monday morning to discuss her office's stance or involvement in the bankruptcy proceeding.

One matter of public interest in the bankruptcy case is the company's management of a wastewater treatment plant on its property that processes waste for about 800 residences.

Angela Cote, an administrative assistant who works with the East Millinocket Water Department, said Monday that workers are still on-site at the water treatment plant.

"Things are still running smoothly at this point," she said.

The motion also states that the looming issue of winter heating should be decided in Maine, as improper care when temperatures drop could cause problems and a related drop in value for the paper machines on-site.

Stanziale said he hopes that a potential buyer could be identified in the next 30 days to take on that question and others. But if not, he said the building has been prepped for the winter and that he planned to speak Monday with Brookfield Renewable Power about arrangements to provide minimal heat to the building during cold weather. Brookfield owns a nearby dam and is obligated by state law to provide the mill discounted electricity.

The three creditors represented in the motion -- Hartt Transportation Systems of Bangor, Lynch Logistics and Lynco Inc. -- argue generally that the case should move to Maine based on a federal standard that calls for the venue to be determined by "in the interest of justice or for the convenience of the parties."

The Delaware judge now handling the case has not yet set a hearing to determine whether bankruptcy proceedings would continue in that state or move to Maine, according to Stanziale.

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