June 7, 2004
Keeper of the flame | John Witherspoon, new CEO of the Finance Authority of Maine, hopes the agency will continue to spark investment in Maine companies
By Sean Donahue
John Witherspoon didn't exactly have an easy transition into his new role as CEO of the Finance Authority of Maine. Barely a month after taking the position on April 9, Witherspoon found himself working on one of the largest, most complex deals FAME has encountered in years: a $5.5 million loan guarantee package needed to close First Paper Holding LLC's $23 million purchase of bankrupt Eastern Pulp and Paper Co.
The situation got trickier after FAME's conditions for approving the package ˆ especially a requirement that First Paper's partners be personally liable for $1 million if the company defaults on its loan ˆ appeared to derail the deal. With First Paper prepared to walk away, FAME risked being seen as the spoiler for 350 potential jobs in Lincoln.
As the former president and CEO of Bangor-based UnitedKingfield Bank, Witherspoon, 47, was familiar with commercial lending transactions; he just wasn't used to working on those deals in the spotlight. And though the public attention made for a difficult start, Witherspoon says it clarified for him the biggest difference between his previous career and his new role at FAME. "In the private sector, it's very easy to err on the side of protecting your capital, because your mission is to build shareholder value," he says. "But FAME's mission is to build the value of the Maine economy, so you have to weigh that mission against the need to protect our capital resources."
To that end, Witherspoon and FAME quickly went back to the table with First Paper and agreed to remove the personal liability requirement. The sale closed just before Memorial Day weekend, and First Paper re-opened the Lincoln mill on June 1.
Loan guarantees like the First Paper transaction are probably FAME's best-known service, but the 21-year-old, state-chartered organization in Augusta also helps encourage business startup and expansion through programs like the Maine Seed Capital Tax Credit Program and the Small Enterprise Growth Fund. Witherspoon says his 20 years at UnitedKingfield and, prior to a 2000 merger, Kingfield Bank, showed him how important those programs are to companies in rural Maine ˆ which typically have less access to capital ˆ as well as to banks trying to finance deals that otherwise would be too risky. "Working in western Maine, I'm probably more familiar [than most bankers] with financing more difficult or challenging transactions, which is the type of transactions FAME typically deals with," he says.
Now, though, Witherspoon is bringing himself up to speed on the other set of FAME's programs, which are aimed at funding higher education in Maine. FAME administers both federal programs such as Stafford loans and Pell grants, as well as state scholarship grants and programs like the NextGen College Investment Plan, a tax-exempt savings vehicle.
But with 45 different programs and services under FAME's control, Witherspoon says identifying the organization's future capital needs ˆ and, he hopes, boosting its $25 million capital reserves ˆ is his first goal. He's noticed a trend toward FAME backing larger loan deals like the First Paper transaction, and wants to make sure the organization has enough capital in its revolving loan pool to meet those needs. One idea he's considering is having FAME take equity stakes in some of the companies it helps finance, such as the warrant it will hold entitling it to five percent ownership of First Paper.
As he works to increase FAME's capital resources, though, Witherspoon plans to say focused on FAME's niche: enhancing existing private funding sources and encouraging new ones, rather than replacing them. "FAME is not a bank, and I don't intend to compete with banks," says Witherspoon. "I want FAME to remain a spark plugˆ that allows companies or individuals to access more funds from the private sector."
The situation got trickier after FAME's conditions for approving the package ˆ especially a requirement that First Paper's partners be personally liable for $1 million if the company defaults on its loan ˆ appeared to derail the deal. With First Paper prepared to walk away, FAME risked being seen as the spoiler for 350 potential jobs in Lincoln.
As the former president and CEO of Bangor-based UnitedKingfield Bank, Witherspoon, 47, was familiar with commercial lending transactions; he just wasn't used to working on those deals in the spotlight. And though the public attention made for a difficult start, Witherspoon says it clarified for him the biggest difference between his previous career and his new role at FAME. "In the private sector, it's very easy to err on the side of protecting your capital, because your mission is to build shareholder value," he says. "But FAME's mission is to build the value of the Maine economy, so you have to weigh that mission against the need to protect our capital resources."
To that end, Witherspoon and FAME quickly went back to the table with First Paper and agreed to remove the personal liability requirement. The sale closed just before Memorial Day weekend, and First Paper re-opened the Lincoln mill on June 1.
Loan guarantees like the First Paper transaction are probably FAME's best-known service, but the 21-year-old, state-chartered organization in Augusta also helps encourage business startup and expansion through programs like the Maine Seed Capital Tax Credit Program and the Small Enterprise Growth Fund. Witherspoon says his 20 years at UnitedKingfield and, prior to a 2000 merger, Kingfield Bank, showed him how important those programs are to companies in rural Maine ˆ which typically have less access to capital ˆ as well as to banks trying to finance deals that otherwise would be too risky. "Working in western Maine, I'm probably more familiar [than most bankers] with financing more difficult or challenging transactions, which is the type of transactions FAME typically deals with," he says.
Now, though, Witherspoon is bringing himself up to speed on the other set of FAME's programs, which are aimed at funding higher education in Maine. FAME administers both federal programs such as Stafford loans and Pell grants, as well as state scholarship grants and programs like the NextGen College Investment Plan, a tax-exempt savings vehicle.
But with 45 different programs and services under FAME's control, Witherspoon says identifying the organization's future capital needs ˆ and, he hopes, boosting its $25 million capital reserves ˆ is his first goal. He's noticed a trend toward FAME backing larger loan deals like the First Paper transaction, and wants to make sure the organization has enough capital in its revolving loan pool to meet those needs. One idea he's considering is having FAME take equity stakes in some of the companies it helps finance, such as the warrant it will hold entitling it to five percent ownership of First Paper.
As he works to increase FAME's capital resources, though, Witherspoon plans to say focused on FAME's niche: enhancing existing private funding sources and encouraging new ones, rather than replacing them. "FAME is not a bank, and I don't intend to compete with banks," says Witherspoon. "I want FAME to remain a spark plugˆ that allows companies or individuals to access more funds from the private sector."
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