Prime Tanning auction in the works
January 08, 2011
HARTLAND — As the town’s landmark tannery continued through federal bankruptcy proceedings on Friday, Prime Tanning’s president said the company could be put on sale at auction next month.
Although not final, the pending auction may involve the sale of some or much of the company’s assets.
“There’s the potential, though not finalized yet, for an initial bidder to be named,” Paul Larochelle, president of Prime Tanning, said Friday. “There’s a time frame associated with a potential auction, some time frames have been talked about, but it’s not set yet.”
Still, Larochelle said an auction could take place “by the beginning of February.”
The town of Hartland is owed more than $300,000 in late tax payments and other debts by the leather-making company. In its bankruptcy filing, Prime Tanning names dozens of creditors and lists its liabilities totaling up to $10 million.
The next key step in the bankruptcy process, Larochelle said, is for the tannery to get what’s known as a stalking-horse bidder.
Under that arrangement, a bankrupt company’s assets are available to a pool of bidders, and the stalking horse is the one that’s selected to make the initial bid. The stalking-horse bidder sets the bar for a purchase price, thereby protecting against low bids for the company’s assets.
The auction, if approved by the bankruptcy judge, would happen under what’s known as a “363 sale” of Chapter 11 bankruptcy proceedings. Referring to sub-section 363 of federal bankruptcy law, it allows assets of a company to be sold, such as equipment or real estate, perhaps in a matter of weeks or months.
Larochelle said a general time frame for the auction could be set next week.
Prime Tanning has still operated during the bankruptcy proceedings, Larochelle said.
“Everybody is working ... and all employees are doing a fabulous job keeping this going,” he said.
Nathan J. Martell, a lawyer with the firm Eaton Peabody of Bangor, is representing the town of Hartland during the bankruptcy proceedings. Martell on Friday declined to comment, except to confirm the case’s status.
“Now, the main issue is stalking-horse bidder procedures are in place to sell the mill, or parts of it, but nothing has been finalized by the court yet,” Martell said.
Prime Tanning, which has recently had about 180 employees in Hartland, announced Nov. 16 it had filed for bankruptcy protection to reorganize its debt and finances. The tannery has twice before filed for bankruptcy in the last decade.
Through Chapter 11 protection, the company is seeking to revive itself through a court-approved reorganization plan, freeing it from the threat of creditor’s lawsuits while restructuring its finances.
In its original statement announcing the bankruptcy filing, Prime Tanning blamed its financial woes on “legacy liabilities” from unprofitable operations at a now-closed facility in Berwick and at a now-sold operation in Missouri. It also pointed to pending, expensive litigation in Missouri, where residents are suing Prime Tanning for allegedly selling to farmers fertilizer containing a cancer-causing chemical.
Also known as Irving Tanning Co., the company said it intends to emerge from bankruptcy protection “as a lean and profitable stand-alone company.”
To remain operating during the bankruptcy proceedings, the tannery has received court-approved lifelines: a $550,000 loan from the Maine Rural Development Authority and a $4 million credit line through the firm Porter Capital.
On Friday, the bankruptcy court approved an order that consolidates all of Prime Tanning’s various cases into one, according to court records. In addition, motions remained pending on granting Prime
Tanning utility relief, using cash collateral and relief from stay involving creditors, according to the court’s records.
The next bankruptcy court hearing is scheduled for Jan. 27.
Courtesy of the Morning Sentinel
Scott Monroe — 861-9239
smonroe@centralmaine.com
