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Magic City
Morning Star

GNP Trustee to Recall Preferential Payments

BANGOR -- The trustee appointed to oversee the bankrupt Great Northern Paper has the authority to ask businesses that received payment from GNP in the 90 day period before it filed for bankruptcy in January to return the money if it is believed that the payments were preferential.

More than $46.6 million worth of bills were paid by GNP during that period, according to financial statements submitted to the U.S. bankruptcy court in Bangor.

Trustee Gary Growe said that he estimates that an amount between $2 million and $4 million was paid preferentially to an unspecified number of GNP creditors during that period.

Any returned payments would be used to pay priority secured creditors and attorney fees before anything would be distributed to GNP’s unsecured creditors.

Priority secured claims include $6 million in unpaid wages and benefits earned by former Great Northern Paper employees before the bankruptcy filing.

It is unlikely that any funds will be available to pay unsecured debts.

Boeing Capital Corp., as Great Northern’s primary secured lender, would be at the top of the list to be paid, followed by payments owed to attorneys, accountants, and other professionals.

Brascan purchased the assets of Great Northern Paper Company in a deal that was valued at $103 million, but only about $60 million of that was actual cash paid out to creditors, with Brascan itself being a primary creditor.

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Brascan purchased the assets of Great Northern Paper Company in a deal that was valued at $103 million, but only about $60 million of that was actual cash paid out to creditors, with Brascan itself being a primary creditor.

Boeing received the greatest amount, nearly $51 million for what it was owed prior to the bankruptcy, but the company is still owed between $12 million and $15 million for loans made to keep the facilities heated while the bankruptcy case worked its way through the courts last winter.

Following the purchase of the majority of GNP’s assets by Brascan, Great Northern’s bankruptcy status was converted to Chapter 7, allowing for the liquidation of all remaining assets.

Brascan purchased most of the assets of Great Northern Paper Company, but not its operations or liabilities. The mills are being operated as Katahdin Paper Company. The East Millinocket mill has reopened, employing about 400 people, while the mill in Millinocket remains closed.

U.S. Bankruptcy Judge Kornreich approved a plan Tuesday that would establish an account to pay creditors, excluding Boeing, in order of priority.

Money returned from the “preference payment” recall, funds collected from the sale of GNP’s remaining assets, and that collected from a “headwater benefits plan” from businesses that use the water flowing below specified dams on the Penobscot River, would be split between Boeing and this account, the majority going to Boeing until that company is fully paid.

At least $600,000 from the account will be allocated to pay former GNP employees a portion of the more than $6 million in unpaid wages and benefits still owed by Great Northern. Employees who have not filed a claim will not be paid, according to Growe, and they may still not receive everything owed to them.

Growe has scheduled a meeting with creditors, including former GNP employees and retirees, to discuss how the payment process works, to be held at the U.S. District Court in Bangor at 9:00 a.m. on July 8, 2003. Creditor claims are due by October 6, 2003.

-- Ken Anderson 06/18/03