Open and shut: Smurfit-Stone ordered to reveal its finances to potential buyers

The glimmer of bright news means potential buyers may have a shot at purchasing the now-shuttered paper mill, although many more hurdles remain

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By Keila Szpaller -- The Missoulian
Photo: Kurt Wilson

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Smurfit-Stone Container Corp. must open the financial books on its Frenchtown plant to interested buyers, a bankruptcy judge concluded Friday.

The glimmer of bright news means potential buyers may have a shot at purchasing the now-shuttered paper mill, although many more hurdles remain. The news came after a hearing in Delaware on the bankruptcy of the corporation, which reportedly owes Montana creditors more than $22 million.

"We do think it was very positive for our attempt to obtain financial information, which has been the goal, and to commence the flow of communication," said lawyer Robbin Itkin of Steptoe & Johnson, who represented the Missoula Area Economic Development Corp. in court.

The MAEDC hired the California-based law firm to represent the states concerns in the Smurfit bankruptcy proceedings. Montana Attorney General Steve Bullock attended the hearing by telephone, noting the far-reaching effects of a dormant facility.

"It's good to let the court know this is more than just a local issue," Bullock said. "It's something that impacts all of us."

As the court convened in Delaware, the last local millworkers drained water lines and the Frenchtown plant moved to full shutdown. Counting Smurfit's 400-plus jobs and many more in related fields, the ripple effect could cost Missoula County 1,700 jobs altogether and spread across the state.

Steptoe & Johnson lawyer Katherine Piper, who listened to court proceedings by telephone, said the judge heard her colleague explain the far-reaching economic impact of the shuttering and job losses.

"She (Itkin) spoke for at least five minutes, and he really listened," Piper said. "One of the other things he said was, 'If there is the possibility of achieving something positive here, I want to provide parties with the opportunity to do so.' And I think that's what this is about -- the opportunity to get the information and see. Is there an alternative transaction here that can work with everyone?"

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After the hearing, Mayor John Engen convened by conference call and in person a group of state and local politicians and officials for a debriefing. Representatives from Sens. Max Baucus and Jon Tester attended. He summed up the news toward the end of the meeting.

"It sounds like the door is open a crack, and we can take that today," Engen said.

The MAEDC's Dick King said that in an expected move, the judge denied a request for disclosure. However, he then exercised discretionary powers to hold an immediate follow-up meeting on Smurfit-Stone plant closures in Montana and Michigan.

Before the hearing, the Board of County Commissioners rallied the community to send letters to the judge encouraging options other than a closure. And King said the letters helped Montana's cause.

"Those made a difference," King said.

He said the judges call for Smurfit-Stone to open its financials and offer up engineering and environmental information is significant. That's because companies that aren't willing sellers don't have a good reason to open their books.

Another piece of the puzzle is starting to come together as well. King said a group of investors is coalescing to form a corporation that might be able to make an offer on the plant.

He was not at liberty to name the potential investors. Any offer depends on how the Frenchtown financials look, but the group has money.

"Some of the entities were talking to have sufficient capital to do this," King said.

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Firing up the plant again as a paper mill could put some 400 people to work, but that scenario doesn't seem likely given the drop in global demand for linerboard. The mill also was a biomass plant, and that's another option.

Some Montana programs can help with a deal if the MAEDC can line up credible investors, King said. He mentioned the Montana Board of Investments as one possibility and said the nationally known firm AlixPartners will review financials.

"People are adamant that we've got to find some way to try to find those jobs," King said.

The Montana Department of Commerce already has contributed $25,000 to the endeavor. Evan Barrett, chief business officer for the governor, said the contribution is a gamble but a worthwhile one.

"It's risky money, but you've got to move ahead," said Barrett, who attended the mayor's briefing. "You've got to take that risk because it's just too important to the economy."

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Itkin said the courtroom was packed during Friday's bankruptcy hearing. Attorney General Bullock made a statement to the court by telephone, and Itkin read highlights of a letter Gov. Brian Schweitzer sent to Smurfit's chief executive officer.

A conference call with Smurfit-Stone officials is scheduled for Monday. The Montana creditors should know more after that call when the corporation will turn on the tap for information to flow.

"The best thing would be if we could get them to reopen it with some type of accommodation that we would make," Itkin said. "That's probably unlikely because they're set in having this plant closed."

She also said the judge didn't set firm deadlines but made it clear he expects Smurfit-Stone to play ball. The judge also made himself available by telephone if necessary. Itkin said the judge made this remark: "I would like and expect the debtors to cooperate."

In many ways, the hearing went like a typical bankruptcy hearing goes, Itkin said. But she noted ties to Montana that made her feel strongly about Friday's proceedings.

"What is so important to us here is we understand and are sensitive to the adverse impact on the people of Montana," Itkin said. "I have a home in Montana. My husband is a member of the bar in Montana. We have a lot of roots and relationships in Montana."

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Web Site: http://missoulian.com/news/local/article_1a85e4cc-0d66-11df-a523-001cc4c03286.html

Category: Forestry>Mill News

Region: Montana

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