ANCHORAGE (AP) -- Ketchikan officials on Monday will consider how far they're willing to go to help bail out Gateway Forest Products, a financially ailing veneer plant that has already received a $7 million loan from a federal economic disaster fund.
The Ketchikan Gateway Borough Assembly will consider proposals to purchase up to $4 million in debt from Gateway's local creditors, and provide the company up to $2.5 million in interim financing as it works out a reorganization plan in U.S. Bankruptcy Court. That's in addition to another $5 million loan Gateway is seeking from the borough.
Gateway Forest Products filed for Chapter 11 bankruptcy in February within weeks of peeling its first log. The company, founded by former managers of a defunct Ketchikan pulp mill, intended to bring a value-added timber business to Southeast Alaska. The plan called for local trees to be peeled, chipped and glued into a building product known as veneer. But the plant suffered repeated setbacks including cost overruns, construction delays, depressed lumber prices and other problems.
When the company filed for Chapter 11 on Feb. 26, it reported $37 million in debt.
While the borough manager and some businessmen owed money by Gateway support giving the plant more money, others in Ketchikan are starting to wonder whether it's time for the borough to cut its losses.
''It's like throwing good money after bad. I don't see why the taxpayers should have to pay off Gateway's creditors,'' said Mike Lattin, a heavy equipment operator in Ketchikan. ''If it was a banker dealing with it, they wouldn't give them a dime.''
One of Gateway's chief critics, borough assembly member George Lybrand, said he will urge the panel to vote against giving the company any more public money.
Assembly member Maggie Sarber has put forward two proposals that would have the borough assume up to $4 million in debt incurred by Ketchikan businesses that supplied Gateway with everything from construction materials to food and lodging.
''We ought to take care of our local vendors,'' said Sarber.
One of them is South Coast Inc., a construction firm that built the veneer plant. Gateway owes the Ketchikan company $2 million, according to bankruptcy filings.
The borough manager and attorney both recommend that the assembly grant Gateway what's called ''debtor-in-possession'' financing of up to $2.5 million, according to documents provided by the borough.
Manager Georgianna Zimmerle also recommends that the assembly vote against assuming Gateway's debts until the bankruptcy proceedings resolve the value of the claims.
The money Ketchikan has loaned Gateway comes from a $25 million economic disaster fund the Southeast city received from a 1996 federal appropriation engineered by Sen. Ted Stevens, R-Alaska, to help offset job losses in the timber industry. Two large pulp mills and several saw mills closed in Southeast in the mid- to late-1990s.
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