West Carthage Mill's Liabilities More Than Double Assets, Papers SayPosted: Updated:
In about a week's time, Carthage Specialty Paperboard went from nearly having sold the company to filing Chapter 11.
In papers supporting the company's Chapter 11 filing, Vice President of Finance Donald Schnackel blames two unexpected liens filed against the West Carthage mill for causing a cash flow crisis.
Schnackel says the company had assets of $14 million and liabilities of $31 million even before the $6.6 million in liens were discovered.
Schnackel explained that the original buyer pulled out of the deal "citing uncertainty about the Company's ability to convey clear title to its assets" because of the unexpected liens.
Schnackel said the company believes that the liens from the Pension Benefit Guaranty Corporation, a federal government agency, might be in connection with two pension plans by a former affiliate, "but for which the Company has little, if any funding liability."
He says the company isn't sure the liens are valid.
In the meantime, his papers say, CSP is continuing to look for a buyer.
"The company is ... doing everything in its power ... to ensure a successful sale through these Chapter 11 cases."
United Steelworkers Union representative Jack VanderBaan says the union, which represents many of the mill's 80 workers, expects to be part of the bankruptcy proceedings "to help protect their livelihoods, their pensions, and pay and benefits that they have."
VanderBaan says the union is also concerned with the pensions of former Climax Manufacturing employees. The Lowville plant closed abruptly in April of 2016. Both Climax and Carthage Specialty are connected to DeltaPoint Capital Management, a Rochester-based private equity investment firm.
"The pensions for the Climax hourly and salaried people along with the pension for the Carthage Specialty Paperboard people could all be potentially on the table in the bankruptcy proceedings," said VanderBaan.
Workers learned about the bankruptcy at a surprise meeting Wednesday afternoon.
The troubles began in 2014. Carthage Specialty Paper invested more than $3 million into its paper machine.
The improvements were supposed to significantly increase production, quality, and sales, but the effort was riddled with problems.
Court documents cite unforeseen engineering challenges and installation missteps, and the full benefits were never seen.
Two years later Carthage Specialty Paper lost one of its biggest clients, Climax Packaging in Lowville, a customer which accounted for at least 10 percent of the mill's annual revenue.
Jumping to last summer, Carthage Specialty Paper reworked financial terms with its largest creditor, Key Bank.
Under those terms, the bank forced management to put the mill up for sale, which it did.
Paperwork says the mill had 27 prospective buyers and financiers, several of those negotiated with the company, and at the end of January, a buyer was lined up.
Then the liens were discovered.
Management is hoping bankruptcy will allow company officials to renew the search for a buyer. If one isn't found, then, in their own words, workers will be terminated.
They remain hopeful that won't happen, that workers will be back at the mill by March 11 and that a buyer will be found.
CSP's official bankruptcy filing details the company's liabilities.