November 14, 2005
The bitter end | Greene-based Maine Poly closes again amid a storm of recrimination between major investors
By Sean Donahue
Operations at Maine Poly ceased this summer, when the plastic and foil packaging manufacturer closed its doors and let go its workforce of about 40 employees due to financial issues. But that doesn't mean there's been no activity surrounding the Greene company recently. In late October, New York businessman Morris Lowy bought the company's manufacturing equipment from Maine Poly's primary creditor, GE Capital Corp., and Lowy in early November was under contract to buy the 60,000-square-foot building from owner Bruce Daniel, a Massachusetts real estate developer.
Although Lowy owns the packaging manufacturer NAP Industries in Brooklyn, he says the company is not involved with his recent Maine transactions. He also says he has not decided what to do with the equipment or the Green facility yet ˆ and probably won't make any decisions until the beginning of 2006. "I don't know if I'm going to sell it off or open the plant," Lowy says.
But even if the next chapter of the Maine Poly story is a positive development for the town of Greene ˆ which once counted the company as its largest employer ˆ it probably won't erase the ill will generated by the company's demise this summer. The nature of that shutdown remains a source of contention between investor Richard Dyke, former Maine Poly executive Kimball Dunton and the company's landlord, Daniel ˆ with all parties acknowledging that the situation ended on a bitter note.
The decision to close Maine Poly came from Dyke, who owns Bushmaster Firearms in Windham and stepped in last summer to help then-owner Dunton save the company from foreclosure due to unpaid debts and taxes. Between August 2004 and August 2005, Dyke says he invested about $2 million in the company, which ended its fiscal year in June with a $200,000 loss.
The loss wasn't insurmountable, Dyke says, until the company received a July notice from landlord Daniel asking for a significant rent increase and for Maine Poly to renew insurance on the property. Those costs, Dyke says, would have been too much for him to bear this year, and, he says, they forced him to close the company. "Suddenly we were faced with not only digging our way out of a $200,000 hole after investing $2 million, but we were going to have to invest more money and add to our expenses to pay for a rent increase and insurance," says Dyke. "I just decided it wasn't worth it."
But to Kimball Dunton, who took over Maine Poly after the company's 2001 bankruptcy, that abrupt decision seems like an arbitrary end to what he says was the company's slow but steady turnaround. He also maintains that Dyke knew a rent increase was coming at the end of the summer and should have budgeted for the additional cost. Bruce Daniel, the company's landlord, sides with Dunton's assessment, saying that even though he did insist on a rent increase, Dyke chose not to negotiate a final price with him. Now, Daniel feels like he's being made a scapegoat for Maine Poly's demise.
Dyke disputes Dunton and Daniel's take on the situation. But whatever the facts surrounding the closure, the controversy is another dark spot in the recent, troubled history of a company that once operated debt-free, employed 250 workers and earned revenues of more than $25 million annually, says Ron McKinnon, a Department of Economic and Community Development business development specialist who works out of the Androscoggin Valley Council of Governments office in Auburn. McKinnon and DECD worked to help preserve Maine Poly in the aftermath of its 2001 bankruptcy, and McKinnon says a combination of improper capitalization, management issues and industry factors kept the company on shaky ground for the past several years.
He calls the latest shutdown "disappointing as hell." "When you spend as much time as we do with a company, you try not to get too close or personally involved," says McKinnon. "But the fact is, even on the professional side it's disappointing not to see the company make it."
A conservative past
Maine Poly's recent troubles stand out all the more, say people familiar with the company, because of the success it had under original owners Bob Neal and Bob Ray, who founded Maine Poly in 1973 and eventually printed and manufactured shrink wrap, film, bags and packaging for clients such as Poland Spring and L.L. Bean. McKinnon and Dunton describe the pair's management style as conservative, saying the company grew steadily without taking on much debt.
The company's fortunes turned after Ray and Neal sold it to Baltimore-based JPB Enterprises, which struggled to manage Maine Poly and eventually filed for Chapter 7 bankruptcy in 2001, laying off the firm's remaining 120 workers and attracting an employee lawsuit alleging unpaid salaries. In early 2002, though, Rumford native and New York investor Kimball Dunton emerged as the first buyer to try to bring the company back from the brink.
Dunton restarted a company that had lost all its employees, inventory and contracts, but he says he managed to produce $2 million in revenues the first year. That figure gradually climbed over the next two years, but Dunton says Maine Poly's operations couldn't overcome a $5 million debt to GE Capital Corp., which had financed the company's equipment.
By the summer of 2004, Dunton says, he was unable to continue making $25,000 monthly payments to GE Capital ˆ as well as tax payments to the town of Greene ˆ and Maine Poly was facing foreclosure. That's when Dunton called an old acquaintance, Richard Dyke, seeking financial assistance. After touring the plant and deciding he wanted to try to help save local jobs, Dyke immediately invested $150,000 and began negotiating with GE Capital to reduce Maine Poly's debt from $5 million to $1 million, while working out a schedule to pay off back taxes. Dyke continued to invest in the company to cover accounts receivable, repair equipment and pay salaries, ultimately boosting his total payments to about $2 million, he says. As part of the reorganization, Dyke hired new management and made Dunton an informal director of the company.
Though both parties welcomed the arrangement at the time, both Dyke and Dunton trace at least part of this summer's dispute back to that quick intervention. Dunton regrets losing his management role in the company, while Dyke admits he didn't perform proper due diligence on the deal. "I jumped in quickly without a great deal of thought," says Dyke. "Honestly, I thought $500,000 would turn it around, but found the problems with the company much more serious, so that's shame on me."
The end of an era
Although Maine Poly continued to operate at a loss after August 2004, the crisis point emerged this summer, after landlord Bruce Daniel says he learned that Maine Poly was no longer paying insurance on the building. Dyke admits he let an existing policy lapse in February, but says he had not signed a formal lease agreement with Daniel requiring Maine Poly to cover the building's insurance ˆ which meant that payment was the building owner's responsibility. Daniel agrees that there was no signed lease, but maintains that Dyke in August 2004 agreed to live up to Maine Poly's existing commitments, including paying rent, insurance and taxes.
Another part of that initial, informal 2004 agreement, says Daniel, was that Maine Poly would begin paying a higher rent after having a year to get back on its feet. Maine Poly had been paying only 77 cents a square foot on the its 60,000-square-foot facility ˆ a discount Daniel and Dunton negotiated when the company was struggling. When Daniel learned about the lapsed insurance, he says he immediately demanded that Maine Poly begin paying insurance and the promised higher rent by Sept. 1, sending Dyke a market study prepared by a real estate broker pegging the fair market value at $3-$3.50 a square foot.
Dyke says that in that notice Daniel requested a new rent of $174,000 annually ˆ up from the $45,000 the company had paid the previous year. Daniel says he never offered a final number, but either way, Dyke says the additional cost would have required further capital investment, which he was not prepared to make.
Dyke's decision still upsets Dunton, who argues that Dyke should have been more patient with the company; Dyke could have made what Dunton describes as "tough decisions" to cut the company's operating costs and reduce staff slightly to offset the increased rent. "There's no question we had turned the corner and the company should have been perfectly able to absorb a reasonable rent increase," says Dunton. "[Dyke] knew money was going to be tight, but hell, it had been tight since day one."
Dyke argues that he did make a tough decision ˆ to shut the plant down ˆ noting that he's the one party in the dispute who's losing his own money in the process. Dyke figures he'll be out about $1 million from his time operating Maine Poly. The town of Greene is also a loser, though, with Town Manager Charles Noonan saying the company left about $123,000 in unpaid taxes for this year.
Following the shutdown, Daniel decided to sell the building, negotiating with Lowy to take over the property for an undisclosed sum (Lowy says that deal had not closed by the time this issue of Mainebiz went to press). But Daniel is still upset about being seen as the cause of Maine Poly's shutdown, after being flexible with the company during most of its troubled, post-bankruptcy run. "It really is aggravating after spending almost four years helping keep this business afloat," says Daniel.
Dunton also decided to put Maine Poly behind him, saying he declined to work with potential investors to purchase either the equipment or the building when both came on the market this fall. But Dunton, like Dyke and Noonan and McKinnon of DECD, is curious to see what, if anything, buyer Lowy does with the company's equipment, hoping that the disagreement between former owners won't be the last word on Maine Poly.
Although Lowy owns the packaging manufacturer NAP Industries in Brooklyn, he says the company is not involved with his recent Maine transactions. He also says he has not decided what to do with the equipment or the Green facility yet ˆ and probably won't make any decisions until the beginning of 2006. "I don't know if I'm going to sell it off or open the plant," Lowy says.
But even if the next chapter of the Maine Poly story is a positive development for the town of Greene ˆ which once counted the company as its largest employer ˆ it probably won't erase the ill will generated by the company's demise this summer. The nature of that shutdown remains a source of contention between investor Richard Dyke, former Maine Poly executive Kimball Dunton and the company's landlord, Daniel ˆ with all parties acknowledging that the situation ended on a bitter note.
The decision to close Maine Poly came from Dyke, who owns Bushmaster Firearms in Windham and stepped in last summer to help then-owner Dunton save the company from foreclosure due to unpaid debts and taxes. Between August 2004 and August 2005, Dyke says he invested about $2 million in the company, which ended its fiscal year in June with a $200,000 loss.
The loss wasn't insurmountable, Dyke says, until the company received a July notice from landlord Daniel asking for a significant rent increase and for Maine Poly to renew insurance on the property. Those costs, Dyke says, would have been too much for him to bear this year, and, he says, they forced him to close the company. "Suddenly we were faced with not only digging our way out of a $200,000 hole after investing $2 million, but we were going to have to invest more money and add to our expenses to pay for a rent increase and insurance," says Dyke. "I just decided it wasn't worth it."
But to Kimball Dunton, who took over Maine Poly after the company's 2001 bankruptcy, that abrupt decision seems like an arbitrary end to what he says was the company's slow but steady turnaround. He also maintains that Dyke knew a rent increase was coming at the end of the summer and should have budgeted for the additional cost. Bruce Daniel, the company's landlord, sides with Dunton's assessment, saying that even though he did insist on a rent increase, Dyke chose not to negotiate a final price with him. Now, Daniel feels like he's being made a scapegoat for Maine Poly's demise.
Dyke disputes Dunton and Daniel's take on the situation. But whatever the facts surrounding the closure, the controversy is another dark spot in the recent, troubled history of a company that once operated debt-free, employed 250 workers and earned revenues of more than $25 million annually, says Ron McKinnon, a Department of Economic and Community Development business development specialist who works out of the Androscoggin Valley Council of Governments office in Auburn. McKinnon and DECD worked to help preserve Maine Poly in the aftermath of its 2001 bankruptcy, and McKinnon says a combination of improper capitalization, management issues and industry factors kept the company on shaky ground for the past several years.
He calls the latest shutdown "disappointing as hell." "When you spend as much time as we do with a company, you try not to get too close or personally involved," says McKinnon. "But the fact is, even on the professional side it's disappointing not to see the company make it."
A conservative past
Maine Poly's recent troubles stand out all the more, say people familiar with the company, because of the success it had under original owners Bob Neal and Bob Ray, who founded Maine Poly in 1973 and eventually printed and manufactured shrink wrap, film, bags and packaging for clients such as Poland Spring and L.L. Bean. McKinnon and Dunton describe the pair's management style as conservative, saying the company grew steadily without taking on much debt.
The company's fortunes turned after Ray and Neal sold it to Baltimore-based JPB Enterprises, which struggled to manage Maine Poly and eventually filed for Chapter 7 bankruptcy in 2001, laying off the firm's remaining 120 workers and attracting an employee lawsuit alleging unpaid salaries. In early 2002, though, Rumford native and New York investor Kimball Dunton emerged as the first buyer to try to bring the company back from the brink.
Dunton restarted a company that had lost all its employees, inventory and contracts, but he says he managed to produce $2 million in revenues the first year. That figure gradually climbed over the next two years, but Dunton says Maine Poly's operations couldn't overcome a $5 million debt to GE Capital Corp., which had financed the company's equipment.
By the summer of 2004, Dunton says, he was unable to continue making $25,000 monthly payments to GE Capital ˆ as well as tax payments to the town of Greene ˆ and Maine Poly was facing foreclosure. That's when Dunton called an old acquaintance, Richard Dyke, seeking financial assistance. After touring the plant and deciding he wanted to try to help save local jobs, Dyke immediately invested $150,000 and began negotiating with GE Capital to reduce Maine Poly's debt from $5 million to $1 million, while working out a schedule to pay off back taxes. Dyke continued to invest in the company to cover accounts receivable, repair equipment and pay salaries, ultimately boosting his total payments to about $2 million, he says. As part of the reorganization, Dyke hired new management and made Dunton an informal director of the company.
Though both parties welcomed the arrangement at the time, both Dyke and Dunton trace at least part of this summer's dispute back to that quick intervention. Dunton regrets losing his management role in the company, while Dyke admits he didn't perform proper due diligence on the deal. "I jumped in quickly without a great deal of thought," says Dyke. "Honestly, I thought $500,000 would turn it around, but found the problems with the company much more serious, so that's shame on me."
The end of an era
Although Maine Poly continued to operate at a loss after August 2004, the crisis point emerged this summer, after landlord Bruce Daniel says he learned that Maine Poly was no longer paying insurance on the building. Dyke admits he let an existing policy lapse in February, but says he had not signed a formal lease agreement with Daniel requiring Maine Poly to cover the building's insurance ˆ which meant that payment was the building owner's responsibility. Daniel agrees that there was no signed lease, but maintains that Dyke in August 2004 agreed to live up to Maine Poly's existing commitments, including paying rent, insurance and taxes.
Another part of that initial, informal 2004 agreement, says Daniel, was that Maine Poly would begin paying a higher rent after having a year to get back on its feet. Maine Poly had been paying only 77 cents a square foot on the its 60,000-square-foot facility ˆ a discount Daniel and Dunton negotiated when the company was struggling. When Daniel learned about the lapsed insurance, he says he immediately demanded that Maine Poly begin paying insurance and the promised higher rent by Sept. 1, sending Dyke a market study prepared by a real estate broker pegging the fair market value at $3-$3.50 a square foot.
Dyke says that in that notice Daniel requested a new rent of $174,000 annually ˆ up from the $45,000 the company had paid the previous year. Daniel says he never offered a final number, but either way, Dyke says the additional cost would have required further capital investment, which he was not prepared to make.
Dyke's decision still upsets Dunton, who argues that Dyke should have been more patient with the company; Dyke could have made what Dunton describes as "tough decisions" to cut the company's operating costs and reduce staff slightly to offset the increased rent. "There's no question we had turned the corner and the company should have been perfectly able to absorb a reasonable rent increase," says Dunton. "[Dyke] knew money was going to be tight, but hell, it had been tight since day one."
Dyke argues that he did make a tough decision ˆ to shut the plant down ˆ noting that he's the one party in the dispute who's losing his own money in the process. Dyke figures he'll be out about $1 million from his time operating Maine Poly. The town of Greene is also a loser, though, with Town Manager Charles Noonan saying the company left about $123,000 in unpaid taxes for this year.
Following the shutdown, Daniel decided to sell the building, negotiating with Lowy to take over the property for an undisclosed sum (Lowy says that deal had not closed by the time this issue of Mainebiz went to press). But Daniel is still upset about being seen as the cause of Maine Poly's shutdown, after being flexible with the company during most of its troubled, post-bankruptcy run. "It really is aggravating after spending almost four years helping keep this business afloat," says Daniel.
Dunton also decided to put Maine Poly behind him, saying he declined to work with potential investors to purchase either the equipment or the building when both came on the market this fall. But Dunton, like Dyke and Noonan and McKinnon of DECD, is curious to see what, if anything, buyer Lowy does with the company's equipment, hoping that the disagreement between former owners won't be the last word on Maine Poly.
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