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Judge dismisses recycling plant bankruptcy

August 27, 1998|By JULIE E. GREENE

A U.S. Bankruptcy Court judge on Monday dismissed a bankruptcy filing by the partnership that owns a failed $250 million paper recycling plant in Hagerstown.

The fate of the recycling plant at Eastern and Memorial boulevards remains uncertain, according to officials and the ruling of the court in New York City.

In his decision, Judge Stuart M. Bernstein states "the mill has never successfully operated commercially, and it is not likely to do so in the foreseeable future," according to court records filed on the Internet.

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A grand opening for the plant was held in October 1996. In August 1997, the plant shut down, and company officials cited a depressed market for recycled paper.

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The Hagerstown Fiber Operations plant, formerly known as 1st Urban Fiber, will go back into receivership now that the bankruptcy has been dismissed, Joseph J. Bellinger of Miles & Stockbridge in Baltimore said on Wednesday.

Bellinger represents First National Bank of Maryland, the trustee for the plant's bondholders.

Carl C. Landegger wants to restart the plant when pulp prices rebound, but they are still low, said Robert Harris, his assistant. Landegger is chairman of Pencor First Fiber Inc., which filed the motion for dismissal.

Harris said Pencor First Fiber officials were pleased with the judge's decision.

Pencor First Fiber was general partner of Hagerstown Fiber Limited Partnership until the minor partners removed the firm as general partner because of Landegger's apparent conflict of interest. Pencor Inc. was made general partner.

Bernstein decided the removal of Pencor First Fiber as general partner triggered the dissolution of the partnership, therefore the partnership is not eligible for reorganization under Chapter 11, Bellinger said.

Robert Catzen, vice president of Pencor Inc. in Baltimore, said partnership officials were studying the judge's ruling and would decide whether to appeal.

"I think in the overall scheme of things it's not going to mean a whole lot," Catzen said of the ruling.

Partnership officials continue to talk to potential buyers, Catzen said.

Pencor First Fiber has filed in New York State Supreme Court to have the firm reinstated as general partner, but no decision has been made, according to the court.

A separate $130 million suit the partnership filed against Landegger and 25 co-defendants alleging fraud and breach of contract in the plant's construction has not been dismissed, according to bankruptcy court.

Bernstein will consider a motion to dismiss the lawsuit on Oct. 14, according to bankruptcy court.

Washington County Circuit Judge W. Kennedy Boone III put the plant into the care of a receiver on Aug. 14, 1997, to maintain the plant and defend it against litigation.

City Administrator Bruce Zimmerman said city officials were trying to determine the status of the bankruptcy case and lawsuit on Wednesday and what it meant for the city.

The city was listed as a creditor in the bankruptcy papers, claiming $2.35 million for construction of an electrical substation for the plant as well as water and sewer costs.

The U.S. Bankruptcy Court ruling can be reviewed on the Internet at //ecf.nysb.uscourts.gov/cgi-bin/show_case_doc?151,337.

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