GNP Receives Bid

Belgravia Paper Co. Inc. has officially become the first suitor to pursue bankrupt Great Northern Paper Inc.

Earlier this week the company, headquartered in Vancouver, B.C., submitted a bid of $91 million, with several conditions, to purchase GNP's mills in Millinocket and East Millinocket, Maine.

Belgravia has ownership in four other paper companies, two in Canada and two in the United States. Together they employ more than 1,250 people and produce grades of paper similar to Great Northern's.

A bankruptcy judge will approve a stalking horse bid on Feb. 18, and an auction is tentatively set for March 21.

"The actual offer appears to be worth $91 million," said Jim Giffune, who last week was appointed by U.S. Bankruptcy Judge Louis Kornreich to lead a new management team at Great Northern.

"We are glad to have this sincere indication of willingness to participate," said Giffune. "It is a good place to start." Robert Keach, a Portland attorney who represents Belgravia, said the Canadian company is contacting everyone from Great Northern's power company to its unions to negotiate contracts as if it will become the successful buyer after the auction.

"Our expectations are that we will begin the difficult process of negotiations to satisfy the conditions of the letter of intent," Keach said. "We hope to start those negotiations soon and reach a successful conclusion. We are proceeding on the assumption that our bid is the winning bid." Keach said if other companies decide to top Belgravia's bid, "we will react to that when it happens." Belgravia's bid includes $20 million cash and assumes $71 million of Great Northern's debt, to be paid as follows:

--$50 million for Boeing, BCC Equipment Leasing Corp., Great Northern's top creditor.

--$5 million for Cianbro, which is only part of the $6.2 million Great Northern owes the Maine construction company. Cianbro won't receive the $5 million in one payment, but will be paid over a five-year period.

--$16 million to Brascan Energy Marketing Inc. and Carrier LLC for unpaid power bills. Great Northern has pledged 100 percent of its stock in Maine Timberlands Company, which owns and manages more than 300,000 acres of timberlands, to Brascan Energy Marketing Inc. and Carrier LLC as collateral for its unpaid power bills, according to court documents.

The offer includes $20 million cash, but $13.2 million of the cash has to be paid to Boeing for temporary funding it provided to keep the mills warm, leaving about $6.8 million for the remaining creditors. The bid essentially covers the secured debts owed by Great Northern. The $6.8 million balance won't cover all of the paper company's unsecured debts.

Belgravia's bid includes a provision called a "break out fee," which essentially asks that the Canadian company be paid $5 million by the successful bidder for its efforts should it lose out.

Belgravia also asks that each new bid be at least $2 million higher than any previous bid.

"I know there are other potential serious bidders out there and I want to encourage them to come forward," said Giffune.