Omak Mill Files For Reorganization Bankruptcy Procedure Follows Union’s Failure To Grant Concessions

Omak Wood Products Inc., Okanogan County’s largest employer, Monday filed for reorganization in U.S. Bankruptcy Court.

The action follows a union vote last Thursday rejecting a package of wage, vacation, and pension concessions that, along with cuts to salaried employees, would have reduced the company’s annual operating expenses by $3 million.

But bankruptcy attorney Shaun Cross said the filing probably would have been made anyway in order to provide U.S. Bank of Washington, the company’s largest creditor, additional protection as the reorganization goes forward.

Omak employs 525, all but 50 of whom are paid hourly. Between 30 and 70 will be laid off temporarily, in part because spring “break up” conditions that impede access to timber have arrived earlier than usual.

The company produces plywood, and wood chips for papermaking. Cross said prices for both have plunged in the last year.

Chip prices tumbled from $129 per 2,400-pound unit to $30. Plywood was worth only $215 per 1,000 board feet, compared with $240 the year before.

The result: revenues fell from $83.1 million in 1995 to $64.5 million in 1996.

Cross said the collapse in prices was particularly cruel because it came immediately after a restructuring undertaken by Omak in December 1995 that put the company in its strongest financial position since 1988, when employees bought majority ownership of the company from Sir James Goldsmith.

Also, the company had signed a three-year labor contract that did not allow for new discussions on wages until June 1, 1997.

With prices under pressure, Cross said Omak asked the union to shelve a 3.5 percent wage hike last June 1. That bid failed, but contract negotiations were renewed in November, sometimes with the participation of a federal mediator.

On Thursday, members of the Lumber, Plywood and Industrial Workers, Local No. 3023, rejected the concessions that came out of those talks.

Local head Lloyd Groomes said he would not comment on member reasons for their vote until he could examine the company’s filing.

But Cross said the company Wednesday will ask the Bankruptcy Court in Spokane to take the rare step of imposing most of the conditions of the pact while the reorganization continues.

In the meantime, he said Omak will operate with funds generated by its accounts receiveable and a new lending agreement with U.S. Bank, to which the company owes $14.4 million.

Total debts are $28.9 million, and total assets are $34.7 million.

The company intends to pay all creditors in full, Cross said, estimating the mill’s total economic contribution to Okanogan County at nearly $70 million per year.

President Jim Aher said the reorganization will require the cooperation of employees as well as suppliers, loggers and other members of the community.

“We hope to be in and out of Chapter 11(reorganization) fairly quickly,” he said.

, DataTimes