Vaagen Brothers has set aside C$1M, will step in if efforts to raise C$800,000 fail, says investor; funds must be available by Aug. 31 to complete purchase of Midway Forest Products, British Columbia
VANCOUVER, British Columbia
August 11, 2011
(The Vancouver Province)
– As the clock ticks down on chances for a tiny B.C. town to retain ownership of its own sawmill, locals have raised $60,000 of the $800,000 needed to pay off an American lender by the end of the month.
As The Province reported last week, residents of Midway, population 630, came together earlier this year to buy an economically vital local mill, which was shut down in the economic meltdown of 2008 by Fox Forest Products of Montana.
The community was led by Stephen Hill of Rossland, a financial planner and failed Conservative candidate in the 2011 election.
To fund the $2.9-million deal, shares were sold to locals, including a stake worth $250,000 put up by the municipality. Also, the local owners took out $2 million in loans, which come due on Aug. 31.
The deal included a lease with Vaagen Brothers Lumber of Washington; the company is now pumping about $9 million in upgrades into the Midway mill, which is expected to start producing in October.
A Canadian lender, Southern Interior Development Initiative Trust, has agreed to an extension on its $1-million loan, Hill said Wednesday.
But the other lender, Fox Forest Products, said it expects to be paid $1 million on Aug. 31. Fox retains the option to foreclose on the mill land, which means the municipality and local investors will lose their money.
Hill was sent last week to Vancouver by the local owners in a desperate bid to raise $800,000. He's been pleading for funds from everyone from strangers on the street to wealthy angel investors.
"We're up over $60,000 [in the past week], so it's starting to work," Hill said. "We're very pleased."
People have invested as little as $100, and as much as several thousand, Hill said. Several private investors with deep pockets are now considering the deal.
Some of the locals who stand to lose their investments of $10,000 are retirees who worked at the Midway mill before the original owner, Pope and Talbot, went bankrupt.
"I just hope Stephen Hill can raise the money," said Gordon Jones, who worked at the mill for 34 years.
"[If the mill opens in October], it would be the best thing that happened in this town in a long time."
But even if Hill doesn't raise $740,000, the purchase deal includes a clause for Vaagen Brothers to take over ownership by assuming the $1-million mortgage owed to Fox.
Hill says Vaagen Brothers has already set aside $1 million and is ready to step in on Aug. 31 if fundraising comes up short.
"They will pay off that [$1-million] note to Fox," Hill said. "So the mill opens, the employment occurs, but the problem is Vaagen Brothers now owns the mill. The idea was we always wanted the community to own it and protect it."
Vaagen Brothers did not return a request for interview.
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