Mary J. Gore
Contributor
What was once a closed sawmill without prospects has become a flourishing business again in Live Oak. More than 100 employees are working there, a mix of both former and new employees. That number is up from zero at the time the mill was shuttered in 2020. Today, binderholz Live Oak, owned by the binderholz lumber company in Austria, is paying about 10 percent of all property taxes for Suwannee County, $2.1 million out of a total budget of about $20 million, says Suwannee County Economic Development Director Jimmy Norris. At its peak performance, Norris says, “the mill was operational for 24 hours a day, six days a week, with about 200 truckloads of wood per day coming in. It was one of our top three businesses in the county.”
“Today, with just one shift, 100 truckloads are coming in again — about one third more than previously at peak, which had been 65 truckloads on one shift,” three shifts per day, Norris explained.
Creditors who were owed money have finally reached a settlement that will repay them. Recent negotiations had a favorable outcome for those owed money. A finalized plan was agreed to, about 95 cents on the dollar to creditors that were owed when the plant closed down. Liquidation of the plant would have been a worse outcome. In a typical case when a company is liquidated, most creditors would get only pennies per dollar owed. The company is shuttered for good and sold off at a low price for parts. The high rate of return can be traced to Asgaard Capital based in Vienna, Va., a firm that helps distressed businesses and worked to assemble a team of professionals who worked at risk (no pay) until the mill was sold at auction in 2020 for $61 million.
“There was a vision for a path forward, but it wasn’t going to be easy,” said Charlie Reardon, Asgaard’s senior managing director. “All of the problems had to be solved in a logical, specific order. Successful step-by-step progress on every front was the only way this could happen.”
If there had been liquidation rather than the effort to get the mill back to working order and a sale of the enterprise, Suwannee County would have suffered. With liquidation, people permanently lose jobs, suppliers lose a large customer and the county loses a significant taxpayer. An additional benefit is that a different business also decided to relocate to Suwannee County. Given the problems in Florida with flooding and building collapses during 2021, a welding and fabrication company also has decided to make its second location in the county.
“When they heard that binderholz was locating in Live Oak, that definitely was a big factor in their decision to locate there,” says Norris. “In fact, almost every time I go out there, they have one of their trucks working at binderholz.”
How the turnaround happened
The path to saving the shuttered mill took a lot of planning and negotiation. Failure to meet each intermediate goal would have resulted in liquidation of the plant, Reardon said. The outcome would have been perhaps a few million dollars in liquidation money, rather than $61 million. After the mill closure and Asgaard’s plan to rescue the mill was proposed, Suwannee County officials met with the chief restructuring officer (CRO), Mike Freeman, from Asgaard Capital. Suwannee County Commissioner Don Hale knew that local people were angry the mill closed and people went unpaid, but a defunct sawmill was no help to anyone.
“We knew we had to work as a team with them to get the mill ready to sell. It was an international operation to get a buyer,” Hale said. “We could see Mike Freeman wanted what we wanted: an operational mill so we could attract a buyer.”
Built in 2014, the lumber mill in Live Oak, was the first of two that the Klausners, an Austrian-based family, built in the United States (the other mill is still nonoperational but being revived in North Carolina). By late 2019, Klausner Lumber One LLC (known then as KL1) ran into problems finding further funding. Foreign investors, who previously put $50 million into the business, were growing restless and complained that their investment was not producing returns. By March 2020, the KL1 mill was in a perfect storm. Covid had become a global problem. The Austrian owners and leaders of the mill all returned to Europe due to concerns they would not be able to leave the United States under lockdown.
The mill was left with no employees and no money with which to pay them or any benefits. Remaining employees at the mill got no warning, no more pay and no further benefits. Those working in related businesses like tree farmers, loggers and truckers also lost income. The mill no longer operated and was in disrepair. No money was available from Austria to re-establish the mill. Some of the foreign investors from China, operating under the federal EB-5 program, were also at risk of losing more than their money. Some were in line to lose their path to a green card available through the program, if a certain number of created jobs at the mill was not met. KL1 could no longer pay county taxes. The company had been paying total combined taxes of $2.1 million (county plus school board taxes). Asgaard Capital convinced a team of professionals to work at risk to try and save the mill. Under these unusual circumstances, the company decided to file for a Chapter 11 bankruptcy and give the mill a chance by trying to find a new owner. It took discussions with 10 to 12 county leaders to explain every aspect of how to get the mill into working order again and what the county could expect as the mill went up for sale to the highest bidder.
“Getting the mill back was a shared goal with hundreds of people, the majority of whom were previous employees,” CRO Freeman said. “We had to make sure we could deliver on our promises despite all of the problems facing the mill, starting, of course, with the fact that we had been left with literally no money to pay any bills – new or old.”
Hiring back key managers who could explain to Freeman how the mill worked and what was needed for operations was important. The goal was to show the mill could still operate after months of non-use. Suwannee County played a key role in the process, by helping turn back on the utilities, bringing in golf carts to help potential buyers tour the facility, recovering needed documents and explaining the mill’s ties to the state and who the state players were. The mill also needed to obtain insurance, hire security on grounds and have a working fire-suppression system to avoid being forced into a sell-off of equipment and property. Freeman himself pitched in and cut high grass as the grounds were groomed and sinkholes repaired. The county helped to update permit requirements, so that these could be re-issued without problems. Some bidders, for example, had questions about the water management permits for retention ponds and the rail spur on the property that the county owned. County and local officials also helped build trust among the local providers and suppliers in the community, assuring potential buyers that the vendors were on board. Valley Electric and natural gas providers had to become willing partners to expedite the mill reopening.
“We assured all the bidders that we fully intended to work with whoever would be coming here and we wanted to have an open-door policy, both ways,” said Norris, the Suwannee County Economic Development Director.
To enable potential buyers who couldn’t travel to inspect the plant before making a bid due to the Covid travel restrictions in place, Freeman arranged for an aerial drone video, along with video of key portions of the sawmill line working again.
“The day of the mill auction, we got on the Zoom meeting and when the closing bell rang and we knew who the buyer was, we became hopeful and confident. We got the right partner,” said Norris.
That partner and buyer was an affiliate of Austrian-based Binder Beteiligungs AG (called binderholz) and had remained quiet during the early stage of the sale process. Up until then, the main bidder had been Mayr-Melnhof Holz Holding AG (MMH), also based in Austria. Following a very competitive auction, binderholz outbid both MMH and Mercer International in Canada at $61 million, plus additional equipment and cash considerations. United States companies were not interested, because they didn’t use the Linck mill technology used by KL1 in their mills. Binderholz, also an Austrian company, understands the high-tech sawmill line and computer systems that Klausner used because it uses the same Linck system in its other plants in Europe. The very challenging path to rescuing the mill was ultimately successful and rewarding.
In addition to getting employees back to work and more money flowing to the county, Freeman notes, “Importantly, we were able to get about 95 cents back on the dollar to local trade suppliers who were owed money.” The CRO’s charge is to maximize the value of a business, which paid off at auction, he says.
According to Tom Draghi of Westerman Ball, lead counsel in the bankruptcy case, “The bankruptcy and sale process was a total team effort. Working collaboratively with the county and other creditor groups helped us achieve Charlie Reardon’s early vision, overcoming incredible obstacles and yielding extraordinary results for all parties involved.”
County officials noted that Asgaard quietly gave money to the people in need in Suwannee County. The company has donated money to Toys for Tots and to Love Inc. to feed and clothe family members, sponsored a large Christmas dinner, and also built two wheelchair ramps. “They did this unexpectedly,” Norris said. “They helped a lot of people.”