Columbia Pulp assets sold

SEATTLE–The sale of the assets of the defunct straw-to-pulp Columbia Pulp I, LLC is complete except for a judge's final order approving distribution of the funds, and there's good news for Columbia County: tax obligations owed to the county are first in line for payment from the proceeds of the sale.

A hearing on a motion that would authorize distribution of the proceeds by receiver Paladin Management Group, LLC's Lance Miller is set on October 23 in King County Superior Court, Judge Coreen Wilson presiding.

The sale transactions yielded distributable cash proceeds of $3.7 million, court documents show. About $634,000 in unspent funds from the Receivership Advance brings the total to approximately $4,334,000, an amount which pales in comparison to the $246,378,528.25 outstanding in secured bonds issued by the Washington Economic Development Finance Authority (WEDFA) and held in trust by UMB Bank, N.A. Almost $13 million was allotted in the Receivership Advance.

"After satisfaction of administrative expenses and outstanding property taxes, the Receiver intends to distribute the balance of the estate's cash to the Receivership Advance Lender, in partial satisfaction of the Receivership Advance. Other junior secured (including the bond Trustee) and unsecured creditors will not receive any distributions," the court document indicated.

Back taxes due Columbia County totaled $2,227,790.42, which includes interest of $230,773.71 and penalties of $25,120.32. (See sidebar.)

Three separate transactions made up the sale.

-The "Straw Sale" was initiated in June, 2022, to liquidate straw inventory and a truck scale in exchange for $550,000, a transaction that would have not only provided significant value for the estate, but also would have resolved a dispute between the Receiver and Columbia Straw, LLC, which was a separate company that supplied straw to Columbia Pulp I, LLC. Columbia Ventures Corporation of Vancouver, Wash., objected to the Straw Sale on the grounds that a $5 million working capital loan made to Columbia Pulp was secured "by certain 'Working Capital Priority Collateral' that consisted of Columbia Pulp's straw inventory," the court document showed. The parties resolved the issues and the court ordered the sale on July 27, 2022. Columbia Ventures Corporation's claim was deemed subordinate to the Receivership Advance and the Trustee, making any "intercreditor dispute between CVC and the Trustee moot."

-The "Pomeroy Sale" involved the sale of all assets of the company's 18,000-square-foot Pomeroy facility in exchange for $150,000 in cash plus a 15% equity in the Pomeroy Buyer's parent entity (Palouse Fiber Holdings, LLC, a start-up company initiated by Kyler Lovgren, former vice president in charge of operations at Columbia Pulp I, LLC), and the court entered an order approving that sale on July 26, 2023.

-The "Lyons Ferry Sale" consists of two bids. One was for $3 million for the machinery and equipment located at the 1351 Highway 261 location from Loeb Auction Services Group, LLC, an Illinois company, Holland Industrial Group, LLC, a Florida company, and Maynards Industries USA, LLC, a Delaware company. The other was for the real property from Palouse Enterprises LLC, affiliated with Lovgren's Palouse Fiber Holdings, in consideration for assuming certain liabilities as consideration for the purchase of the real property. The court entered an order approving these transactions on August 28, 2023, and they closed on August 31, 2023.

Columbia County and UMB Bank, N.A. submitted proofs of claim in a timely manner, the county for outstanding property taxes and the bank for bonds issued by the WEDFA. Columbia County asserted a priority secured claim of $501,481.18 (plus 12% compounding interest per annum) and the total amount not less than $2,228,000. A portion of the total were state taxes to be collected and distributed by the county.

Subtracted from the distributable proceeds which totaled $4,334,000 is $579,000 for accrued administrative expenses and $220,000 reserved for estimated professional fees, leaving $3,535,000. "The estate does not have sufficient funds to pay the Receivership Advance in full, let alone make any distributions to the Trustee on account of its $246,378,528.25 senior accrued bond claim," the document stated. Columbia County's unpaid taxes in the amount of $2,228,000 will be paid in full and 10% of the Receivership Advance, $1,307,000 will go to the Receiver. The trustee's $246 million claim receives nothing.

WEDFA bonds were issued between August, 2017, and June, 2021. Records available from WEDFA concerning bonds issued for Columbia Pulp I, LLC, within the past five years, show that Goldman Sachs purchased $23,864,269 in tax-exempt bonds at 12.00%, and $5,930,446 in taxable bonds at $14.25% in June, 2021. In this bond sale, documentation shows jobs created or preserved to number 101. On July 26, 2019, Goldman Sachs purchased $43,060,000 at 7.50% in taxable bonds, and estimated 90 jobs would be created or preserved.

A call to Rodney Wendt, executive director of the Washington Economic Development Finance Authority, Seattle, was not answered prior to this edition's press deadline.

Columbia Pulp first introduced its concept to local small-grains producers in 2014 and labored for several years as it secured funding and a site for the plant.

After several delays, funding for the $184 million construction project was announced in August, 2017, celebrated by a ground-breaking ceremony in September, 2017.

The company purchased the former Columbia REA building on Main Street for offices, and developed a pilot plant in Pomeroy, inaugurating it in October, 2018.

The plant operated until shut down due to COVID-19 in early 2020. It reopened in June, 2021, then was "idled" in February, 2022.

In December, 2021, creditors were awarded a $758,490 default judgment in Columbia County Superior Court, and the assets were ordered to be sold via Sheriff's Sale.

UMB Bank, N.A., trustee of the bonds that financed the venture, petitioned a judge in King County to halt the sheriff's sale here and send the property into receivership.