"PORT TOWNSEND - Port Townsend Paper Corp. officially exited Chapter 11 bankruptcy protection on Monday as a private company under the control of its bondholders.
The paper mill, which employs about 310 people and is the largest private employer in Jefferson County, will follow a reorganization plan that calls for it to pay its unsecured creditors within five business days.
As a group, the 729 unsecured creditors will receive about 37 percent of the money they were owed - between $21 million and $22 million - when the company filed for bankruptcy protection in January.
But some of those creditors will receive as little as 5 percent of their claim.
The plan will pay 100 percent to those with claims amounting to $2,000 or less and give those with higher claims the option of accepting $2,000 or receiving 5 percent to 10 percent of their claim.
The unsecured creditors include individuals, businesses, government agencies and nonprofit organizations in Port Townsend, Port Angeles, Port Hadlock, Quilcene, Sequim, Carlsborg, Forks and Neah Bay.
'Significant event' "Obviously, this is a significant event for the company," John Begley, president and CEO, said in a prepared statement on Monday.
"We are excited about the future because of the new debt structure and the opportunities it presents us."
Judge Samuel J. Steiner of the U.S. Bankruptcy Court in Seattle signed off on the papermaker's reorganization plan on Aug. 14.
The Chapter 11 plan cuts $50 million in debt from the company's balance sheet in return for transferring control of Port Townsend Paper to its bondholders.
The company's Chapter 11 exit will be funded by $60 million loan, which is backstopped by hedge funds GoldenTree Asset Management and Thales Holding Ltd.
Proceeds from the exit loan are earmarked for bondholders that provided the company a $50 million loan for its Chapter 11 case.
An additional $7.6 million will go to vendors and unsecured creditors.
Port Townsend Paper has also said in court papers that it planned to obtain an additional $20 million loan.
The company and its owner, PT Holdings Co. Inc., filed for Chapter 11 protection on Jan. 29 after reaching a deal with holders of most of a $125 million bond debt.
Under that deal, Port Townsend bondholders forgave $50 million in debt in exchange for control of the company.
In October, Port Townsend missed an interest payment to bondholders, causing it to default on its bonds.
The missed payment also caused the papermaker to default on about $20 million in loans owed to lender CIT Group.
New chairman Begley will remain on the five-member board of PT Holdings.
The board has a new chairman, Michael Ranson, portfolio manager of New York-based GoldenTree.
Ranson will take the place of Don Tisdel of Northwest Capital Appreciation as chairman.
A variety of unbleached pulp and paper products are produced at the Port Townsend mill, including market pulp, converting paper and containerboard.
The company was founded in 1927.
Also part of the Port Townsend Paper Corp.'s family of companies are three Crown packaging plants, two BoxMaster plants and the Crown Creative Group, located in British Columbia and Alberta.
The Canadian units weren't part of the bankruptcy case."