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Management Side
Ex-Lincoln tissue company worker, mill owner dispute purchase offer

BANGOR, Maine (From The Bangor Daily News) -- The former sales director at Lincoln Paper and Tissue LLC said he could have restarted the mill and brought back about 100 jobs if the owners of the mill's assets had accepted his offer rather than focus on making a quick buck during an auction this week.

One of the owners of the shuttered mill denied the claim, saying that while John McMahon seemed passionate and well-intentioned, he never actually bid for the mill's tissue machines or demonstrated that he had the funds to buy them.

Representing a group of about 100 millworkers, McMahon claimed that on Monday -- the day before the auction -- he delivered an "official written offer of $2.25 million" to the consortium that owns the mill. Besides the $2.25 million acquisition cost, McMahon's group had commitments for an additional $7.5 million to pay for $1 million in needed mill repairs, $3 million in acquiring raw materials and the balance to fund working capital as well as long needed mill improvements, he said in an email on Wednesday.

But the consortium that owns the former Lincoln Paper and Tissue LLC and Expera Specialty Solution's Old Town facilities -- including Gordon Brothers, Capital Recovery Group, PPL Group and Rabin Worldwide -- rejected the offer during Tuesday's auction session, McMahon said.

The mill owners told McMahon "that they stood to make more money by selling and removing all the assets, then making an additional $1 [million]-$2 million on the wires and pipes throughout the mill, once all the machines were gone. That was what it came down to. Scrap vs. 100 people's jobs and the ability to earn a decent wage and pay taxes," he said in the email.

On Thursday, in another email, McMahon softened his criticism of the mill's owners, saying, "In the end, the liquidators could not cancel the auction. They have a certain way of doing business which is not the traditional way of buying an ongoing business. I understand now. We were all out of time. ... They are not the bad guys."

Robert Maroney, president of Gordon Brothers Commercial and Industrial, a division of Gordon Brothers Group, disputed McMahon's account. He said that the offer made on Monday did not constitute a bid in Tuesday's auction. Instead, the owners sold mill equipment with a competitive bidding process that typically increased sale prices and were paid after the conclusion of individual bids.

"He had a really passionate idea for the mill and he was trying to get interest in it any way he could, but every time we asked for his financial wherewithal, we got a different song and dance," Maroney said on Thursday.

McMahon responded by saying that the mill owners "knew that we had the money behind us."

"It was simply that our backer wanted to keep his name out of it," McMahon said in the Thursday email, adding that he put his backer on the phone with auctioneer Bill Firestone of Capital Recovery Group to demonstrate his financial bona fides.

"He put us on the phone with his behind-the-scenes partner the morning of the auction, and to this point we had never seen any indication that he had funds lined up," Maroney said. "His silent partner wasn't prepared to fund it."

McMahon on Thursday declined to identify his backer or where his investor's money was coming from.

A previous potential backer, a textile mill liquidator, told the mill's owners on Monday he had never been in the Lincoln mill, provoking doubt from the owners, according to Maroney. In the end, McMahon didn't bid on the equipment on Tuesday, and the owners had no confidence that he had funding, Maroney said.

"They tried to work it their way, and when it didn't happen their way, it became no way," McMahon said.

Perry Videx of Hainesport, New Jersey, a company that refurbishes and sells industrial equipment around the world, bought the No. 7 tissue machine and associated components for $450,000. A second tissue machine, No. 6, was sold to an online bidder for $270,000. The name of the online bidder was not disclosed. The sale of the mill's No. 8 tissue machine officially closed last week, completing a deal the mill's new owners reached earlier this year, officials said.

The prices of the associated equipment sold during the auction that would have been purchased as part of McMahon's offer could not immediately be determined.

The mill's owners have made a good-faith effort to keep the Lincoln paper mill operational, Maroney said. He said it behooved them to sell the mill as a whole as a restart and not a liquidation.

A restart, he said, is the quickest way to recoup an investment, while liquidation often takes months and could involve thorny environmental issues, among other problems, that could cost the owners more money.

A former banker, Maroney doesn't call himself a liquidator, saying instead that he and his partners often help restart businesses and that the equipment they sell often goes to business restarts. He said he himself had restarted four businesses and that his partners have restarted twice that many around the U.S. in the last few years.

The owners spent about $1.5 million to keep the mill heated since December 2015, worked with state economic development officials closely and tried to close a deal with the mill's former owners to restart it before meeting with McMahon. They delayed for as long as possible the sale of the mill's copper wiring -- the easiest portion of the mill to scrap -- to improve the chances of selling the mill to a restarter, Maroney said.

Maroney said he worked closely on a potential restart with Lincoln Paper and Tissue LLC owners Keith Van Scotter and John Wissman for several months. He was impressed, he said, with their dedication and knowledge of the business, but felt in the end that the state's high cost of electricity, and the boiler explosion that occurred at the mill about two years ago, made an investment too difficult.

McMahon has said he hopes to acquire tissue machines from the successful bidders and said Thursday that he felt worst for the approximately 100 millworkers that might have gotten jobs from his venture.

Maroney said the sale and removal of equipment from the Lincoln mill site will take several weeks.


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