Veneer plant wants another loan

$5 million request is in addition to $7 million loan from Ketchikan borough

Posted: Tuesday, December 12, 2000

KETCHIKAN - Gateway Forest Products officials say they're short on cash for their new veneer operation.

The company is asking Ketchikan borough officials for a $5 million loan. That would be in addition to the $7 million loan the company received from the borough when it purchased Ketchikan Pulp Co.'s mill site at Ward Cove.

The Ketchikan Gateway Borough Assembly was to meet in a special session Monday to consider the company's request for a short-term bridge loan from the borough's economic development assistance program, said borough Clerk Susan Bethel.

Eight companies that performed construction work on Gateway's new veneer mill or delivered timber to its Ward Cove facilities have filed liens against the company. They are seeking a combined $2.1 million, according to the state Recorder's Office in Ketchikan.

Gateway spokesman Cliff Skillings told the Ketchikan Daily News that the loan request will be for $5 million, to be paid back in three years at standard market rates.

He said Gateway will offer industrial waterfront property worth 150 to 200 percent of the loan value as collateral.

The company talked to financial institutions before making the request to the borough, Skillings said.

"But what the banks have told us is that this is not the most appealing loan to them, collateral-wise," he said. "Hearing that coming back, we thought that a probable option for us was to go talk to the borough in light of the fact that they had an investment with us already, and that they were fully aware of what we were doing out the road, so that we're not bringing somebody up to speed that was new."

Allyn Hayes, Gateway vice president of industrial development, acknowledged that the company is late in making some payments, including payments to some companies that did not file liens.

Filing a lien does not mean the company and the vendor are not working together, he said, only that the vendor is preserving a legal right to take further action.

Skillings said $2.5 million of the proposed $5 million loan would be used to complete construction of the veneer mill. Another $1 million would be used as operating capital through the winter, he said, and $1.5 million for downturns in the market that the company experienced.

Asked about the liens, Hayes said some of the money would be used to pay debts.

If the borough does not provide a new loan, Skillings said, Gateway will seek to sell other assets more aggressively, including equipment it purchased from Ketchikan Pulp Co. He also said the company would pursue private financing.

He said he's confident Gateway will be able to pay back the loan once the veneer plant goes into production, scheduled for some time before the end of the year.

Gateway is several months behind its original start-up schedule.

The company formed in May 1999 when Louisiana Pacific Corp. announced it would sell Ketchikan Pulp Co. assets to three members of its management team, Hayes, Dick Leary and Jon Sportsman, and timber consultant Jim Erickson.

The four obtained financing and closed the deal in November 1999. One of the assets transferred to Gateway was the $7 million loan that had been negotiated between Leary, who was then Ketchikan Pulp manager, and the borough.

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