Sunday Showcase: Port Townsend Paper creditors await next move of federal Bankruptcy Court

PORT TOWNSEND – Unsecured creditors won’t know if they’ll get paid – or how much they might get paid – by Port Townsend Paper Corp. until an April 18 bankruptcy hearing in Seattle – at the earliest.

Port Townsend Paper Corp. filed for Chapter 11 bankruptcy protection for the Port Townsend kraft-paper producing mill – which employs 310 people – on Jan. 29.

The list of those who have filed a claim with the bankruptcy court includes more than 65 people, businesses, government agencies and nonprofits in Port Angeles, Port Townsend, Port Hadlock, Quilcene, Sequim, Carlsborg, Forks and Neah Bay.

“The short answer is it’s too early to say how creditors will be treated, said Mark Northrup of Graham & Dunn, based in Seattle, the attorney for the unsecured creditors committee.

“We’re waiting to negotiate with bondholders on treatment of unsecured creditors,” Northrup said.

Northrup said the “secured creditors” in this case are the ones funding the company: the CIT Group, primary lenders and a group of bondholders.

“Unsecured creditors” are everybody else.

If enough of the company’s assets are left over after the secured creditors are paid, then unsecured creditors are paid based upon the proportion of the claim relative to the total unsecured claims.

But it will be at least a couple of weeks before anyone will know what will happen.

“I wish I could say what the plan is going to say, but I can’t,” he said.

Timothy Leybold, chief financial officer for Port Townsend Paper, echoed that assessment.

“It’s really a function of the court process,” Leybold said.

“It’s moving at their pace.

“An initial reorganization plan was filed with a number of schedules and things are yet to be finalized,” he said

Leybold said the most significant item at the April 18 hearing would be going over the company’s reorganization plan.

“We’ll have a better idea what to expect at that time, if all stays on schedule,” he said.

Several key amendments to the reorganization will be filed at that time, including the plan for unsecured creditors, Leybold said.

The company and its affiliates just received a total of $50 million in debtor in possession financing, which is loaned to companies seeking bankruptcy protection to allow their continued operation.

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