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Sunday, March 25, 2007 - Page updated at 02:01 AM

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Sunday Buzz

Bankrupt company leaves vendor in lurch

Patrick Keep didn't ask to get involved in a highly leveraged acquisition with cash-flow problems. He just expected to service a bunch of overhead cranes and get paid for the work.

But the $6,500 owed him for last October's job is now a footnote in the $133 million bankruptcy case of Port Townsend Paper, the largest private employer in Jefferson County.

Keep is left to fume that the mill's executives must have known about their financial problems before asking his Portland-based Northwest Crane Service to send two employees for a week's worth of inspections. And afterward, he says, they "strung us out" with promises for weeks before filing for bankruptcy protection.

"You don't just keep going out and buying stuff when you don't have the money," he declares with a small proprietor's straightforward logic. "There must be hundreds of guys out there like me."

Bradley Creswell's private-equity firm, Northwest Capital Appreciation, bought the mill in 1997 using mostly borrowed money, and he says the Seattle company "was just over-leveraged."

The bondholders who loaned that money will now get ownership of the 80-year-old paper-and-packaging operation, and Northwest Capital will lose whatever millions it invested.

But the mill and its 300 workers will keep going.

Creswell says philosophically that private equity is "a portfolio business," meaning that scoring big on other, more successful deals can make up for his firm's loss on Port Townsend Paper. "Unfortunately, they don't all work out."

Creswell readily acknowledges that the Port Townsend Paper acquisition was built on heavy debt, so it couldn't make the payments when industry conditions shifted for the worse. He adds that Northwest Capital is "trying to get the best recovery" for the unsecured creditors.

What he's not ready to discuss is Keep's premise — that Port Townsend Paper and its owners ought to have dug into their other pockets to find the money to repay business partners like Keep.


The bankruptcy papers of parent company PT Holdings suggest Keep is right about this much, at least: As early as last September, before Keep's firm did its work, executives knew the mill faced a financial crunch and were talking about "restructuring."

And, the day before it filed Chapter 11, Port Townsend Paper paid $187,000 to two of the handful of law firms it has retained.

Far from stringing out those crucial advisers, mill execs included advance payment for future work on the bankruptcy proceedings.

Not paying the less-crucial vendors is "a classic way for a company that's in financial trouble to hold on to as much cash as it can," says Mark Northrup of Graham & Dunn, the attorney for the unsecured creditors committee.

Keep could find out Thursday what his prospects are for collecting any of the $6,500 his firm earned. That's when a detailed reorganization plan is scheduled to be unveiled.

Northrup says the arithmetic of assets and liabilities means general unsecured creditors such as Keep conceivably could get little or nothing.

But the bondholders who will soon be Port Townsend Paper's owners have "an incentive ... to treat people as fairly as they possibly can, because they risk threatening the long-term viability of the company."

Keep says a firm that buys bankruptcy debt has been offering him 20 cents on the dollar for his claim.

Meanwhile, he's probably wishing he had the luxury of treating his entire customer list as "a portfolio business," with someone else available to make up his losses.

Going nonpublic

Starbucks Chief Executive Jim Donald played two hours of tennis with Paul Kagame, the president of Rwanda, last Wednesday evening.

Kagame's doubles team won, but then he hadn't spent the day presiding over a three-hour stockholders meeting with Starbucks Chairman Howard Schultz.

That's not to mention the basketball game Donald played until 11 the night before the meeting, or the couple of hours after it, when he and other executives answered questions from reporters, including:

• How many CDs a year does Starbucks' new Hear Music label plan to release? Answer: three in 2007, including an upcoming CD from Paul McCartney, and eight in 2008.

• When will Starbucks open its first store in Russia? Answer: August or September, beginning with Moscow, then likely St. Petersburg.

• How about India? Answer: Probably December.

• When might Starbucks reopen stores in Israel? Answer: It's not on the radar.

• Is Starbucks' entertainment business profitable? Answer: Yes, but executives won't say how profitable.

• What is the average annual revenue for a Starbucks store? Answer: More than $1 million a year for U.S., company-operated locations.

— Melissa Allison

Finding Dreamliner

Think you're a Boeing whiz?

Don't be so sure until you've tried to find the word "rakish" in a jumble of 225 letters.

That's just one of about 50 clues that readers will have to search for when Wonderword releases its Boeing-related word-search puzzle April 2. The puzzle is based entirely on Boeing's new 787 Dreamliner, to be rolled out this summer.

The puzzle, syndicated by Universal Press Syndicate, will run in about 245 newspapers across North America, including The Seattle Times.

The puzzle is the result of Wonderword owner David Ouellet's interest in Boeing.

"I've been looking at the Airbus and Boeing wars and I follow it intimately," says Ouellet.

Ouellet, his wife, Sophie, and co-worker Linda Boragina create the puzzles without the use of a computer program. The only rule is nothing political or highly controversial.

So you might see something Christmas-related but nothing about Britney Spears' rehab.

Wonderword, based in Toronto, was founded more than 35 years ago and produces about 500 puzzles a year.

Ouellet won't disclose the company's revenues, saying only that "it's a labor of love."

In addition to the 787 Dreamliner puzzle, Ouellet's other favorites over the years have been food and foreign-country related.

This isn't the first time Boeing has been featured.

The company was the subject of a word-search puzzle in 1990 when a new Air Force One, a modified Boeing 747-200B, was delivered to former President George H.W. Bush.

Words for the 787 Dreamliner puzzle are based on Wonderword research, a process that typically takes about 45 minutes looking through Internet data and books.

In Boeing's case, research lasted a bit longer because Ouellet is fascinated with the company.

Rakish, by the way, is a term used to describe the nose of the airplane and generally means it has a streamlined appearance.

We don't want to spoil your fun, but "aerodynamics" and "commercial" are in there, too.

Boeing manufacturing manager Dave Papenfuss, who has been toiling overtime building titanium components for the 787 in Auburn, finds it amusing that all his hard work is the feature of a word-search puzzle.

"It's kind of fun to see something humorous about it," he says.

"Except 'rakish' is not something you find in the general lexicon of people. That should be interesting to see if people get that one."

— Kirsten Orsini-Meinhard

Rami Grunbaum:

Copyright © 2007 The Seattle Times Company


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