Apr. 5—MADISON — By the end of 2024, finances at TimberHP were in distress.
Millions over budget from initial construction, the wood fiber insulation manufacturer that revitalized Madison's former paper mill had raised only about half of the $60 million in equity it was seeking in 2023 and 2024 to complete its facility and launch its third product, the company wrote in court filings.
The company currently produces TimberBatt and TimberFill, two wood fiber insulation products.
While TimberHP sought new capital, the Somerset Economic Development Corp., a quasi-independent economic development agency associated with Somerset County, stepped in and provided a $2.99 million forgivable loan in December, according to bankruptcy court filings and SEDC's executive director, Christian Savage.
"Our hope with that was to extend their operations for them to raise that additional equity they needed," Savage said. "That didn't come to fruition."
The growing expenses and unsuccessful attempt to raise more equity ultimately led the parent company of TimberHP, GO Lab Inc., to file for Chapter 11 bankruptcy protection March 25.
Savage is among those who have supported the project, from the municipal level all the way to Washington, D.C., who are cautiously optimistic the Chapter 11 restructuring plan will get TimberHP back on track.
While they generally agreed the recent filing was unfortunate, most said they hope the restructuring will do what the company says it is intended to do: clean up millions in debt on its balance sheet, get its third — and they hope most profitable — product to market and reach its target of employing more than 100 people in Madison.
"We don't see it a ton in rural Maine, but (bankruptcy reorganization) isn't uncommon in some of these projects," Savage said. "Essentially, at some point in the infancy of a company, you know, sometimes there is the Chapter 11 restructuring. None of us like to see it, but long term, we think this will still pan out and provide a lot of resources and jobs and taxes to our local towns."
Tim Curtis, Madison's town manager from 2015 to 2023 and now the Somerset County administrator, has been a vocal supporter of TimberHP since its inception and considers himself a friend of its co-founders, Matthew O'Malia and Joshua Henry.
"I was saddened by it," Curtis said. "It's disappointing, but it's not surprising."
"Any business startup is difficult — whether you're trying to open a pizza place or you're trying to reestablish a manufacturing mill," he said. "There's always risk. It's always going to be difficult. And then you add to that doing something in a post-COVID economy."
As part of the prenegotiated Chapter 11 restructuring plan, the company said participating bondholders will invest $29 million to support the transition through bankruptcy and to provide capital for business growth, including the completion of its manufacturing line for the TimberBoard product.
"It's obviously disappointing, but the hopeful piece of it is that it wasn't a liquidation bankruptcy, it was a restructuring bankruptcy," Madison Town Manager Denise Ducharme said, "which means there is still hope for the company, for the employees and for the town."
Company representatives referred inquiries following the late March announcement i to their bankruptcy lawyer, Mark E. Felger of the international law firm Cozen O'Connor.
Through Felger, the company declined a request to tour the plant, saying staff and leadership are too busy working on the Chapter 11 process.
"We're in a good place," Felger said. "We're hopefully on track to complete a Chapter 11 (process) on an expedited basis. We hope to get through this in 90 days or less and come out the back side a much stronger and healthier company, with great prospects for the future."
A COMEBACK STORY
Before the bankruptcy filing, TimberHP's revitalization of the Madison paper mill had lent itself to be described as a comeback story.
Madison, the third largest town by population in Somerset County with about 4,700 people, was faced with a serious blow when Madison Paper Industries announced its closure in 2016.
The paper mill on Main Street had employed more than 200 people when it closed and was a large portion of the town's tax base. Its loss threatened the economic devastation that other Maine mill towns have experienced amid the collapse of the state's paper industry in the early 2000s.
Enter a chemist, Henry, and an architect, O'Malia, with an idea to repurpose the mill for manufacturing a wood fiber insulation product popular in Europe that would be first of its kind in North America.
The company was founded in 2017, bought the mill in 2019 and began manufacturing in 2023, according to court filings.
At an opening ceremony, TimberHP was hailed by local officials and politicians as a model for economic revitalization that would support jobs in the Madison area. Its political support was broad: Gov. Janet Mills and U.S. Rep. Jared Golden, both Democrats, and U.S. Sen. Susan Collins, a Republican, were among those who spoke at the ceremony.
TimberHP's story has since garnered significant media attention. It was featured in a documentary film called "The Comeback Mill." A 2023 Down East magazine article took a slightly more cautious angle, asking: "Where There's a Mill, Is There a Way?"
Bankruptcy court filings, though, tell a less rosy story about what was going on with the company's balance sheet.
Initial funding for the startup included approximately $40 million in equity used to buy used manufacturing equipment and buy the 600,000-sqaure-foot former mill building.
Subsequent financing included $85 million in bond-backed funding from the Finance Authority of Maine, a quasi-independent state agency, along with other loans totaling millions from several private entities and other quasi-public sources.
But cost overruns during construction exceeded $30 million and prevented the completion of equipment for TimberBoard.
Two contractors, Cianbro Corp. and Gilman Electrical Supply, also recorded more than $15 million in mechanic's liens, .
In 2023 and 2024, the company raised $31 million of its $60 million equity goal . The company received interest from a potential purchaser in September 2024, but that deal fell through by February of this year.
WAS IT WORTH THE RISK?
As part of the prenegotiated plan filed in the U.S. Bankruptcy Court for the District of Delaware, TimberHP will still be obligated to pay some of its debts.
For example, the bondholders who do not participate in the exit financing plan will recapture a small percentage of their claims, as will SEDC and some other lenders, court filings show. TimberHP also arranged agreements with the two contractors with mechanic's liens to make partial payments to them.
Millions in other debt, including loans from the town of Madison and various economic development groups, is to be canceled, assuming the prepackaged restructuring plan is approved.
The town of Madison, for example, loaned TimberHP $400,000 in 2021. While $300,000 was from a grant, $100,000 came from tax increment financing, according to Ducharme, the town manager.
"It's not outside of the realm of possibility that this was going to happen," Ducharme said. "We, as the town, wanted to do whatever we could to help this business become successful because it was good for the community, it was good for the town, it was good for the tax base."
Somerset County also partnered with SEDC on a $400,000 loan, Curtis said, though the county's portion came from community benefit funds from wind power developments, rather than property taxes.
Curtis said many entities participating in public-private partnerships were part of a group TimberHP leaders cobbled together in 2019 to finance the startup at a very early stage.
At the time, those involved knew they were making high-risk investments and were using funds set aside specifically for economic development projects, Curtis said. While those loans will be wiped out as part of the restructuring, Curtis said they have already made an impact.
The valuation of the mill site dropped to just about $2 million after the paper company closed. With TimberHP in business, the property was last assessed in 2024 at just under $10 million, tax records show. Curtis estimates the property's value is closer to $40 million, when counting the value of machinery that falls under Maine's Business Equipment Tax Exemption Program, commonly known as BETE.
TimberHP was current on its property taxes until recently, Ducharme said. The company has told the town it intends to pay its most recent bill, which was due March 15 for about $76,000 for the second half of 2024-25. Ducharme expects it will not be paid until after the Chapter 11 process is complete.
"The investment that has happened there that was spawned by all this little giving, it has been a hundred-fold what these little loans all add up to," Curtis said of the bounce back in property value. "These little loans are a drop in the bucket to redevelop that site."
Along with those early supporters, TimberHP still has the political will behind it from those who touted the business when it opened.
Golden, who represents Maine's 2nd District and invited Henry, one of TimberHP's co-founders, as his guest to the 2024 State to the Union, said in a written statement issued through a spokesperson: "I was glad to learn that jobs at TimberHP won't be affected by this process, and I will continue to do what I can to support good jobs like these. Businesses have their ups and downs, but I've got a lot of faith in our state's potential for innovation, skilled labor and manufacturing."
Mills, the governor, praised TimberHP's products as "exciting" and its goals "ambitious" in a written statement issued through a spokesperson.
"I remain optimistic about its future and will continue to root for its success," she said.
Staffers for Collins, the Republican senator, did not respond by press deadline.
Savage, the SEDC director, said it was that support at all levels of government and across the state that got TimberHP off the ground and has paved the way for new projects in the pipeline now.
"Anyone you can think of in the state that might be able to help, did," Savage said.
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