KETCHIKAN (AP) -- Ketchikan Gateway Borough officials sealed a last-minute deal to buy a defunct veneer mill bringing an abrupt end to an auction that was already underway.
The borough closed a deal with the mill's major creditor, Foothill Capital Corp., which had loaned the former Gateway Forest Products $14 million to operate the business.
Ketchikan officials had been working frantically along with state officials to avert an auction in hopes of continuing to operate the plant and preserving local jobs.
The borough agreed to pay $2 million for the mill and equipment and pay related expenses for the auction. It also will absorb $320,000 in back taxes on the property.
''It's what we think the auction would pay, said Foothill Senior Vice President William Shiao.
The final cost to the borough for the mill and associated expenses could top $2.6 million, said Steve Corporon, acting borough manager.
Borough officials swooped in to buy the mill after the Alaska Industrial Development and Export Authority was unable to negotiate a price with the creditor to avert the auction.
The state development agency hopes to form a three-way partnership with Sealaska Corp. and Timber Products Co. of Oregon, to supply and operate the mill.
Under AIDEA's plan, the state development agency would lease the mill to Timber Products and Sealaksa would supply wood for the production of veneer products.
The borough still intends to sell the facility to AIDEA in hopes that it can continue to operate the mill in an attempt to retain local jobs in a community hard hit by economic losses.
Bob Poe, AIDEA director, said there is no immediate agreement with the borough to purchase the mill but he is hopeful a deal can be reached.
The Ketchikan Gateway Borough paid for the mill from a $25 million economic disaster relief fund it received after the former pulp mill closed. It had $4 million left in the fund before the sale, Corporon said.
Gateway Forest Products opened the mill on the site of a failed pulp mill in 1999 but ran into financial difficulties a year later.
The company filed for bankruptcy protection in February 2001, claiming in court papers $45 million in debt including $15 million owed to the borough. Its request for Chapter 11 bankruptcy protection was dismissed and the property was to be liquidated.
Borough officials continued to meet with Foothill on Tuesday even as outside buyers were bidding on equipment being auctioned off.
The auction ended abruptly Tuesday as the two sides sealed a deal that included an agreement by the borough to pay travel expenses for bidders in the auction, Corporon said.
Bidders had traveled from as far as New Zealand and Australia to participate in the auction.
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