JAY – Verso Corporation said it is considering selling its Androscoggin Mill and bankruptcy as possible restructuring alternatives.
In an earnings statement released on Monday, the company said, “based on our liquidity position as of Sept. 30, 2015, and our projections of operating results and cash flows for the remainder of 2015 and 2016, we believe that there is substantial doubt about our ability to continue as a going concern for the next 12 months.”
On Aug. 20, Verso, headquartered in Memphis, Tenn., announced it was shutting down two machines and laying off 300 of its 863 workers at the Androscoggin Mill. Those employees have since been notified and most will be leaving their jobs in the next few weeks.
In Monday’s announcement Verso blamed “a perfect storm of external factors that negatively affect our liquidity and cash flows” that included a decrease in demand for coated paper products and competition from foreign imports.
“As a result of our cash flow and liquidity concerns, we have begun evaluating potential restructuring alternatives,” the company said. Among those alternatives could be selling some of their mills, including their mill in Jay and restructuring through bankruptcy.
We are “exploring opportunities to raise funds through potential sales of some of our mills and related facilities, which may include our Stevens Point, Androscoggin and Duluth mills, our recently idled Wickliffe Mill, and the hydroelectric generation facilities associated with our Androscoggin Mill,” Verso president and CEO, Dave Paterson said in a letter sent to employees on Monday.
“Our potential restructuring could occur in a consensual, out-of-court manner or through a court-supervised Chapter 11 bankruptcy proceeding. While Verso intends to actively pursue a potential restructuring and potential asset sales, there can be no assurance that any of these activities will occur on terms acceptable to us or at all,” Paterson wrote.
Shutting down the No. 1 pulp dryer and the No. 2 paper machine at the Jay mill reduced Verso’s production capacity by 150,000 tons of coated paper and 100,000 tons of dried market pulp in a bid the company said it needed to do to be more competitive.
Demand for North American coated paper declined by 4.7 percent in the first two quarters of 2015, following declines of 3.4 percent and 4.3 percent in 2014 and 2013, respectively.
“I know this news is unsettling, but be assured that Verso will continue to operate our business as usual as we explore a potential restructuring and potential asset sales. Today’s announcement will not affect your day-to-day work, your paycheck or your benefits,” Paterson told employees at the Jay mill.
Six days ago, the U.S. Department of Labor approved the Trade Adjustment Assistance for the workers to be laid off at Verso. The program provides a variety of re-employment services and benefits to help find new jobs.
Let’s first take a few moments to consider the impact on the employees, their families, and the communities that will be impacted by the loss of the mill…this is by far the worst result of this news.
Now having done that it is the time for our municipal, county, and state officials to take a realistic look at the future of this facility and start planning now for how to mitigate the economic impact on the employees and communities of the closure when it comes (and it will…if not this round then the next).
Also, now is the time for our municipal, county, and state officials to take a realistic look at the future of this facility and start planning what measures will be taken, and who will pay for them, concerning the site environmental impacts of the mill closure.
We have all heard about (and some people have made political hay from) the effect of taxes and energy on these facilities. Let’s put to rest once and for all the idea that these are what are putting the mill out of business (and the idea that our political system could do anything fast enough to seriously impact these issues), and start looking to the future.
And don’t forget about Rumford.
Taxes and a well above average wage for some menial mill jobs are definitely a small factor for Verso’s decision. But we are all guilty of the biggest issue; doing business online. Who needs a paper catalog anymore? I like getting my bills by email and paying them by EFT. So when that door closes, as Mainers have proven many times, open another one. If we all are going to shop online then demand for packaging should go up. Just one example, maybe sensible, maybe not, but we will survive. It’s what old Mainers do. But do understand why our brightest and most ambitious young have to look elsewhere. Maybe people will eventually see ‘free trade’ with foreign countries is certainly not free. Remember how Walmart killed Forster’s mill in Strong over the price of toothpicks? Does anyone actually shop toothpicks? If so I’m sure there must be help available…
Politicians? Realistic?
Funny how high energy costs are cited as a contributing factor to mills shutting down when Verso has its own hydroelectricity plant.
And the State of Maine is considering opening State owned forest land for harvesting (and probably won’t hire local woodsmen) to combat the high cost of wood fiber when the mills own forest land. Sounds like putting a bandaid on a broken arm.
With all the quality wood in this area, it seems that Maine could be the “plywood capital of the world”. It wouldn’t take much to re-machine the mills that keep closing down.
Are they going to do to Jay what they did to their Bucksport mill? Sell to a Canadian company to salvage it ?
Who didn’t see this coming?
@MaineBoy: Thank you for keeping Rumford in focus as well. Watching our beloved hometowns being brought to ruin is beyond painful for hardworking Mainers, and beyond frightening for all involved…families, other local businesses, neighbors, etc.
@Sledder: Your suggestion makes a great deal of sense. Converting existing facilities into alternative success stories would allow a comeback for many Americans, and a sensible alternative to foreign sources.
@amanda. The hydro stations only make about 1/5 of the electricity used at the Andro mill, but that is not where the energy cost come from. It takes an incredible amout of steam to make pulp, and dry the paper. Also I don’t think any of the paper companies have owed their own woodlands since the 90’s. People just don’t use the grades of paper that Maines mills produce anymore.
One can argue that there are other factors involved in these types of situations, but to say that taxes and energy costs aren’t a major factor is a bit naive. As sales plumet those factors become an even larger factor in making financial decisions. These companies have to make money, if they don’t investors leave, plants close and the labor force is let go.
Taxes and energy costs are a major cost consideration for any business, and it is humurous when folks say it is not. Labor costs, sales climate, environmental issues all play a part as well. It could be getting worse, I read in an article that within a few years 45% of the small cars sold in North America will be made in Mexico currently only 17% are, those jobs will probably be leaving the US.
Here in Maine we need a plan (tax incentives, energy incentives) to help businesses change course. The plywood idea mentioned could be one, along with alternative uses of wood. We have lost some products that we have traditionally made at places like Forsters, and we need to reinvigorate that. Small companies which rely on sutatinable resources are a key, but the wages to start are not going to be comparable to Verso and we have to realize that.
And on thing to always remember no one, and I mean no one, Democrat or Republican, liberal or conservative looks forward to paying taxes.
Did the CEO offer to take a pay cut? I’m gonna bet the answer is no. This is a story that happens over and over again here. A company from away comes in to save the day and ends up leaving a bigger hole than the one they came to fill. We need homegrown businesses, locally owned and operated, people who have skin in the game. That CEO in Memphis has no cares about the people of this region. It’s all money to him.
The same thing has happened in Old Town, Bucksport, Millinocket. Local ownership would encourage innovation and the wherewithal to look beyond dollars.
It is not naivety to say that ..”let’s put to rest once and for all the idea that these” (taxes and energy) “are what are putting the mill out of business” because it’s not. Energy costs and taxes are certainly major expenses that the mill (or any business) has to pay. In this case the mills are LOSING THEIR MARKETS – mills across the country with lower taxes and cheaper energy are closing for the same reason. And it is true that having out of state ownership will favor corporate mill closing decisions in states far from their home base (the Wausau Papers mill in Jay for example) all other things being equal.
To compound their problems, the owners of the Maine mills have not invested enough in programs to improve their product quality, operational efficiency (maintenance and reliability) and product development and improvement in order to offset any disadvantage in taxes and energy. It is not enough to simply invest in new equipment if you don’t have systems in place to get the most out of that equipment.
The last mills standing in this economy will be the ones that have the right markets, the best product performance to price ratio in those markets, are located closest to sources of raw materials (it takes more than just wood to make paper), and are served by effective transportation systems. Unfortunately, with the possible exception of the mills in Skowhegan and Westbrook, those mills are not in this state.
The best thing that could happen to Jay is for an investor group or another forest products corporation to buy it ,then temporarily shut it down and then retool it to make dissolved pulp, or flock (for diapers etc..) Out of all of the mills the mills that have recently shut down in Maine this is the only one that has any potential for something like this to occur. Its size, configuration and location make it a viable candidate for a possibility for something like this to occur. The downside is that it would require substantial capital investment ($ 200-500 million or more) at a time when the global economy is entering a major downturn.