PORT ANGELES — An auction scheduled in January to sell KPly mill’s buildings and machinery has been put on hold while a Port Angeles man who hopes to reopen the mill negotiates a sale agreement.
Josh Renshaw, a prospective purchaser of the closed 19-acre plywood mill on Marine Drive, said he is in negotiations with Sterling Savings Bank of Spokane to acquire the mill equipment it owns.
Sterling acquired equipment and other materials from the plywood mill in a lien agreement with the mill’s owner, Klukwan Inc. of Alaska.
Sterling had scheduled to auction those assets on Jan. 22. The Port of Port Angeles — which owns the Marina Drive property upon which the mill sits — also scheduled an auction of its assets on that date.
Bob McChesney, port executive director, said the port will also hold off on its auction plans while Renshaw is negotiating a purchase of Sterling’s assets.
At the earliest, Renshaw, who was the sales manager for KPly before he was permanently laid off with 131 other employees in April, said an agreement to purchase mill materials could be made within the next couple of weeks.
He warned that may be overly optimistic.
“Even at this point I don’t have anything but uncertainty,” he said.
“The only thing I’m certain of is that Sterling decided to work with us.”
Renshaw had said in November that previous attempts to negotiate with the bank, as well as with the mill’s owner, Klukwan Inc. of Alaska, had been unsuccessful.
Sterling representatives couldn’t be reached for comment on Friday.
172 jobs
Renshaw, 45, who is backed by a group of Port Angeles business investors he has declined to name, wants to put 172 mill employees to work at the mill, which has operated under different owners since 1941, when it opened as Peninsula Plywood.
Renshaw figures he would need $5 million to reopen the mill.
Renshaw wants to revive the original name, also.
Restarting the mill would require a lease to be signed with the port, which owns the property on Marine Drive.
The port also would have to rent or transfer ownership of mill buildings and equipment, which it acquired due to Klukwan abandoning its lease, to Renshaw.
Klukwan closed the 67-year-old mill on Nov. 2, 2007. It permanently laid off 132 workers at the end of April.
Port staff have said they had delayed taking over the property previously in order to allow Renshaw time to acquire the mill directly from Klukwan.
That ended when Sterling announced its intent to hold an auction.
Forgive back rent
John Calhoun, port commission president, said it is likely the port would forgive Klukwan’s owed rent if Renshaw took over the company’s lease.
The port also would consider providing financial assistance, such as deferred payment, with a lease.
“We wouldn’t hold it [Klukwan’s owed rent] against him,” he said. “We want to do whatever we can to support his success.”
Clallam County Superior Court issued a judgment on Sept. 26 that demands Klukwan pay $212,788.71 to the port for back rent and another $1,826.25 in attorney fees at 12 percent interest.
The company has not responded to the judgment, and its owed rent has continued to increase.
Renshaw credited state Rep. Kevin Van De Wege, D-Sequim, who released a press statement on Nov. 25 saying he was outraged that Sterling was planning to auction the mill’s assets when Renshaw was prepared to make an offer to restart it.
Van De Wege represents the 24th District, which covers Clallam, Jefferson and a portion of Grays Harbor counties.
“Van De Wege’s release prompted action,” Renshaw said.
He added that it is his view that Sterling wasn’t able to address his proposal before because bank officers’ attention was directed more toward the mortgage crisis.
“I’m taking them at their word that they were crushed, from a human resource standpoint.”
Van De Wege said that, given the opportunity to create 172 jobs, something needed to be done to get the bank to respond.
“We wanted to get their attention, and it did that,” he said. “It was the part I could play in getting them into the table.”
Within a couple of days after the press statement was released, Renshaw said that he and Sterling were able to agree to postpone the scheduled auction.
Within the first week of December, Sterling was scheduled to begin some demolition work at the mill in preparation for the auction, he said.
Renshaw said the mill, if restarted, would be producing plywood siding for high-end homes and resorts.
The housing market has certainly not been kind to local mills that also create lumber for home construction.
Housing starts in November were down 47 percent over the same month last year, according to the U.S. Census Bureau.
Niche market
But Renshaw said the mill would be less affected by this trend because it has a niche market.
Its products would require use of Douglas fir trees with minimal defects and cedar trees that aren’t in abundant supply. Therefore, Renshaw said, the demand for these products continue to be in line with the available supply.
He added that the limited supply of these resources wouldn’t allow the mill to expand beyond its current capacity.
Renshaw said the mill, if restarted, would produce 5 million board feet of plywood a month, and that it needs half of that amount to break even.
But before the mill can be restarted, its idled machinery needs to be brought up to par.
About 10 months ago, about $500,000 worth of remedial work was estimated to be needed, Renshaw said.
The recent cold snap will add to those costs.
“If it costs $500,000, great. If $1 million, not so great,” he said. “I don’t know where we would draw the line.”
Though pumps were found to have frozen, Renshaw said, a walk-through of the mill the other week showed low-level weather damage. He credited the port with maintaining much of the facility.
“We are very pleased with the good condition of the plant after the cold weather,” he said. “The port has done a good job.”
Renshaw said he believes he can acquire and restart the mill with $1 million in local financing, a $1 million state loan and $3 million in bank loans.
If Renshaw acquires the mill, Van De Wege said he will pursue $250,000 in state funds for the replacement of two transformers at the mill.
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Reporter Tom Callis can be reached at 360-417-3532 or at tom.callis@peninsuladailynews.com.
