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Florelle Tissue might get bailed out of financial crisis by larger paper mill

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BROWNVILLE — Florelle Tissue Corp., temporarily closed since Aug. 26 and unable to make interest-only payments on public loans for the past year, might merge with a larger paper company based in the Northeast to emerge from its financial crisis.

President Harry Minas said the deal to save the Brownville plant from bankruptcy could be approved with the undisclosed company in the next 60 to 90 days. That company would pay off about $630,000 in loans Florelle owes to Chase Bank; in return, it would own a 50 percent stake in Florelle. In May, Chase filed foreclosure action in state Supreme Court.

Mr. Minas said negotiations so far have been positive with the company, which is seeking to expand into Canada where Florelle has clients.

“From our initial conversation with the company, we’re putting a plan together to pay out the Chase loan in full,” Mr. Minas said. “They would come in place and bring enough money to the table to clear out Chase and bring the plant operational.”

Florelle, which produces napkins, bathroom tissue and paper towels, laid off 16 employees in August when a power transformer needed to operate papermaking machines failed. Mr. Minas originally predicted the plant would reopen in a month. But he has yet to make a $60,000 investment in used equipment to repair the transformer, which is needed to provide three-phase power for the plant’s eight papermaking machines.

“I’m putting together some of the funding that I need to complete the purchase,” he said, adding that he’s made a personal investment of about $1.2 million to launch the 94,000-square-foot plant, previously known as Brownville Specialty Paper Products Inc.

Public agencies that issued taxpayer-backed loans, meanwhile, have become anxious as they continue waiting for the plant’s revival without collecting payments. Florelle has failed to make interest-only payments for the past 12 months on loans of $350,000 and $250,000 from the Jefferson County Industrial Development Agency and Local Development Corp., respectively; the company owes the agency a total of $32,996 in uncollected monthly payments since December 2012.

The Development Authority of the North Country pitched in a $250,000 loan, but Florelle quit making monthly payments in April. It owes a collective $47,100 in uncollected payments over the past nine months, which includes one month of interest only and eight months of full principal and interest. Other public agencies that gave loans include the North Country Alliance, $125,000, and Adirondack Economic Development Corp., $200,000.

Florelle originally forecast it would have up to 75 employees hired by the end of 2012, which public agencies that made loans took into account.

“There was a significant amount of state and local resources committed to the project, and we still hope for job creation and the project to move forward,” said Michelle L. Capone, DANC’s director of regional development.

The JCIDA’s board of directors could decide to take legal action if Florelle doesn’t show any signs of life in the coming months, board President David J. Converse said.

“This isn’t going to go on indefinitely, and it’s going to come to a point where we’re going to have to call our loans,” Mr. Converse said. “The board is very concerned about it, and we are going to step up the information end of this so we can make some decisions. We know they’ve run into several situations with equipment that has broken and a transformer that blew.”

In the worst-case scenario, the company could be forced into Chapter 11 bankruptcy, Mr. Converse said.

“We’ve had other companies that ended up going into Chapter 11 bankruptcy and worked themselves out,” he said. “We need to protect the public’s money and have to do our duty.”

Michelle D. Pfaff, chairwoman of the agency’s loan review committee, said, “We’re going to have to make a decision on that before we wait too long. I think hopefully we’ll hear something next month about what’s going on, and negotiations with another company could keep things optimistic for us.”

Florelle also received a $250,000 grant from the state Office of Community Renewal’s Community Development Block Grant program and a $250,000 grant from the state’s Empire State Development Corp., which requires the company to have 75 employees after three years.

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