Aug. 26--WEST CARTHAGE -- Carthage Specialty Paperboard, which finished a $3 million expansion this month, is asking public agencies to finance $1 million in loans for cash flow after spending more than it expected on the project.
The Development Authority of the North Country's board of directors will consider approving a six-month, $1 million line of credit on Thursday to quickly provide funding to company at 30 Champion St. Three other public entities, meanwhile, will be asked by the authority to pay down $525,000 of that $1 million by approving loans this fall: the Jefferson County Industrial Development Agency ($200,000), North Country Alliance ($225,000) and the village of Carthage ($100,000). The authority will consider approving $475,000 in loans.
All low-interest loans would be offered for 10 years except for the JCIDA's, which would be offered for five. As the lead agency, the authority would collect loan payments from the company and then pay off debt owed to other entities.
Carthage Paperboard had $53 million in net assets at the end of 2013, according to information presented during the meeting. In July, the company divested itself from Climax Manufacturing Co. of Lowville to operate independently. The move came after the company changed its name last year from Climax Paperboard to Carthage Paperboard. The two companies are still owned by the same private equity group with multiple investors, which bought the company for $6.9 million in 2008 from the Hirschey family. DeltaPoint Capital Management LLC of Rochester owns the majority stake of the company.
On Thursday, the JCIDA's loan review committee tentatively approved its loan request, which will be considered by the full board for final approval Sept. 4. Michelle L. Capone, the authority's director of regional development, said during the meeting that the Carthage manufacturer spent more than it expected on its expansion, in which a paper machine was rebuilt to increase the company's production capacity by about 20 percent.
"They wanted to pay down the existing debt for the project, but when they factored in the transaction cost there was still a $1 million cash shortfall," Mrs. Capone said. "The transaction cost caught them off-guard."
Mrs. Capone said the company, which has about 80 employees, is expected to hire 14 more workers in the next five years. The company manufactures graphic arts board used for photo mats, pharmaceutical closures, white gift boxes, among other things. Products are distributed worldwide.
Though committee member Michelle D. Pfaff said the agency would be taking a calculated risk in approving the loan. If loans failed, the agency would not likely be able to get back its owed debt with collateral, she said. But she said the loan would still be a worthwhile investment, citing the company's strong financial track record.
"It looks like they have a strong balance sheet with good cash flow, but it is a pretty cyclical business and things can be tight," she said. "We're looking at an unsecured loan with no collateral, because we're behind" the other agencies. "But it's a successful business that has done very well."
The group of investors who bought the plant used funding from a state pension program to do so. Mrs. Capone said about 75 percent of the holding company owned by investors is funded by that program, which is called the state Common Retirement Fund's In-State Private Equity Program.
The village and NCA will consider approving loan requests in September.
Carthage Paperboard President and CEO Patrick J. Purdy did not return a call Tuesday seeking comment.
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