Financial lenders to Missota Paper Co. have agreed to give the owners of the Brainerd paper mill more time to pay back its loans.
With the deadline on a forbearance agreement set to expire Sunday, senior lender Bremer Bank and its partners -- Minnesota Power, the Initiative Foundation and the Department of Employment and Economic Development -- met Thursday and agreed to extend the forbearance until late June or early July, Dan Alexander, Missota president and chief executive officer, said in a phone interview Friday.
"It's much easier to find an interested investor or partner if you're not in a bankruptcy proceeding," said Alexander. "We're quite pleased with the action they are taking and confident of going forward from here to get something accomplished." He said he expects to have the forbearance extension documents with Bremer to be signed by Tuesday.
Alexander said he hopes to make the same extension request to the Brainerd Economic Development Authority and the Brainerd City Council when he arrives in Brainerd Thursday.
Dan Vogt, Brainerd city administrator, said the city is still waiting to hear from the senior lenders about their decision. Missota has been set as an item on Tuesday's city council agenda. A possible meeting between Alexander, the council and the EDA could be set at that time, said Vogt.
The EDA acted as a conduit for $500,000 in loans between DEED and Missota. Missota in turn would repay up to $400,000 of that loan to the city of Brainerd. Aside from attorney's fees, no city money was invested in Missota.
In October, Missota defaulted on several loans and in November announced an extended shutdown. In December the EDA and other lenders signed the forbearance agreement, which was set to expire Sunday, after Missota received a $750,000 loan from another financing agency which allowed the paper mill to remain at "warm idle" while searching for business partners.
On Thursday, Missota sold 35 acres of land, located across the Mississippi River, to a private developer. The sale will allow the paper company to stay at "warm idle" through the forbearance extension, said Alexander. He declined to say what the purchase price for the land was, but that the proceeds would allow the company to look for a partner or investors -- or another owner -- for the mill.
Alexander said his focus has never been on Sunday's forbearance deadline, but on working with lenders to come to a solution. Even without the extension, he said Missota would continue trying to get the mill running again.
"What it amounts to is I'm working to do this regardless. I don't care (about the forbearance)," he said. "What I care about is seeing this plant run again, whether by Missota or by someone else, and that's it. This mill should run. These people are entitled to jobs. They're good people and it's a very good mill."
Missota bought the paper mill and related assets from Potlatch Corp. in February 2003 for $4.44 million in cash. Potlatch had closed the Brainerd mill in May 2002.
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