Rivers developer eyes mill

A judge also ordered the company must pay severance to former mill workers
by: chrisTOPHER ONSTOTT The Blue Heron Paper Co. site.

As a federal judge ordered last week that Blue Heron Paper Company workers be paid severance benefits 'as soon as possible,' he revealed that there was a 'stalking horse' buyer for the former mill site.

The mysterious potential buyer turned out to be none other than CenterCal, developer of a controversial landfill-topping shopping mall known as The Rivers proposed for the other end of downtown Oregon City.

CenterCal President Fred Bruning acknowledged that the company was interested in the waterfront property for a mixed-use development intended to be complementary, rather than in lieu of The Rivers.

'We think it's quite an interesting property of a type that doesn't come along very often, so we felt it was important to show some interest,' Bruning said.

Presiding over a courtroom packed with dozens of former mill workers, U.S. Bankruptcy Court Judge Randall L. Dunn compared the $20 million CenterCal was tentatively prepared to pay for the property with the $14 million owed to Blue Heron creditors and concluded that the bankrupt company had potential to use its assets to prevent insolvency.

'The employees ought to be paid in accordance to the federal statute,' Dunn said. 'They're out there applying for unemployment; they need the funds.'

The order was simple for the 175 laid-off mill workers who wanted 60 days severance pay and other benefits under the Worker Adjustment and Retraining Notification Act.

'Chapter 7 shuts it down so that they can just walk away, but Chapter 11 forces them to do some kind of orderly reorganization,' said former Blue Heron pipe fitter Joe Whitley.

Whitley felt lucky to be facing the potential loss of two weeks' vacation pay, because many of his fellow workers could lose five.

After mandating the appointment of a Chapter 11 trustee this week, Dunn set an April 1 hearing on the progress between the creditor and debtor on a payment plan.

'We're proceeding with negotiations of the parties,' said Vivienne Popperl of the U.S. Trustee Office.

Future of site

Attorney Rick Baroway, representing the city of Oregon City, expressed concern at last week's hearing about environmental impacts to the site.

The federal judge offered skepticism about a mill ever operating on the site again.

'I'm not hearing anything from anyone about the resuscitation of an operating plan,' Dunn said.

CenterCal is requesting a Phase II environmental assessment as part of looking into a Blue Heron purchase, which Bruning expects could affect the final price.

As a 'stalking horse' bidder on the Blue Heron property, CenterCal could reap advantages in the purchase of the property. For example, CenterCal's costs in assessing the property would be factored into the final sale price.

But CenterCal could still be outbid by another buyer, and the development company would lose any investment it made into the Blue Heron site if it didn't close the transaction, according to the federal rules on so-called stalking horses.

The City Commission is discussing the possibility of extending the downtown urban renewal area to encompass the Blue Heron site.

However, a Blue Heron developer would more likely face the Planning Commission, according to City Manager David Frasher's assessment of the current situation. That may allow CenterCal to avoid the more politically charged Urban Renewal Commission, although a sliver of the Blue Heron property is in the UR zone.

Frasher said that CenterCal's proposed mixed-use development would be subject to a city review for a zoning change, since the Blue Heron property is zoned industrial.