KETCHIKAN - Ketchikan Gateway Borough officials sealed a last-minute deal to buy a defunct veneer mill, bringing an abrupt end to an auction in progress.
The borough closed a deal with the mill's major creditor, Foothill Capital Corp., which had loaned the former Gateway Forest Products $14 million to operate the business.
Ketchikan officials had been working frantically with state officials to avert an auction in hopes of continuing to operate the plant and preserving local jobs.
The borough agreed to pay $2 million for the mill and equipment and pay related expenses for the auction. It also will absorb $320,000 in back taxes on the property.
"It's what we think the auction would pay, said Foothill Senior Vice President William Shiao.
The final cost to the borough for the mill and associated expenses could top $2.6 million, said Steve Corporon, acting borough manager.
Borough officials swooped in to buy the mill after the Alaska Industrial Development and Export Authority was unable to negotiate a price with the creditor to avert the auction. The state development agency hoped to form a three-way partnership with Sealaska Corp. and Timber Products Co. of Oregon, to supply and operate the mill.
The borough still intends to sell the facility to AIDEA.
The Ketchikan Gateway Borough paid for the mill from a $25 million economic disaster relief fund it received after the former pulp mill closed.
It had $4 million left in the fund before the sale, Corporon said.
Gateway Forest Products opened the mill on the site of a failed pulp mill in 1999 but ran into financial difficulties a year later.
The company filed for bankruptcy protection in February 2001, claiming in court papers $45 million in debt including $15 million owed to the borough.
Its request for Chapter 11 bankruptcy protection was dismissed and the property was to be liquidated.
Juneau Empire ©2014. All Rights Reserved.