Saturday, January 14, 2012

Maine, Wisconsin fight for new airplane plant

The state is launching a new bid to bring Kestrel Aircraft -- and as many as 600 manufacturing jobs -- to Maine, but the company's top executive says he expects to see a crucial financing package from Wisconsin first.

On Friday afternoon, Gov. Paul LePage said the Finance Authority of Maine will consider a $4.75 million loan guarantee and that the Midcoast Regional Redevelopment Authority can provide a $3 million loan guarantee or letter of credit for Kestrel.

The company announced in July 2010 that it would open a plant to build a new type of six- to eight-seat turboprop plane at Brunswick Landing, the former Brunswick Naval Air Station.

LePage said state officials are waiting for updated financial information from Kestrel to move forward on the guarantees, which would let the company more easily borrow money at better interest rates than unguaranteed loans carry.

Alan Klapmeier, chief executive officer and chairman of Kestrel, said the offers help the financing package for the $100 million project, but they're not enough by themselves.

He said officials in Superior, Wis., who are bidding to get Kestrel to build the manufacturing plant there, "are very close" to completing a deal that Klapmeier said he will consider.

"We're waiting for a very few pieces of documentation" from Wisconsin, Klapmeier said Friday night. "It's still a race."

However, LePage's spokeswoman, Adrienne Bennett, said Maine's efforts are being delayed by Kestrel's failure to provide the financial information that FAME and the Midcoast Regional Redevelopment Authority need.

The authority is in charge of redeveloping the former Navy base.

"The governor has bent over backwards to see that we're accommodating," Bennett said. "It lies in the hands of Kestrel at this point. We cannot do anything else until that financial information is forwarded to us."

Klapmeier said the applications for the guarantees are being handled by Cate Street Capital, an investment firm in New Hampshire, and that after he talked to LePage about the guarantees on Jan. 6, he asked Cate Street to start compiling the information immediately.

He said timing is the key to where the plant winds up. Klapmeier said the company has lost opportunities while trying to nail down a complete financing plan in Maine and will locate the plant wherever officials first put together a deal that enables him to go forward with the project.

Klapmeier said that for the Maine deal to work, Kestrel needs the additional investment and infusion of cash that comes from more New Market Tax Credits, designed to help revitalize low-income areas, in addition to the loan guarantees.

The company was offered a $20 million New Markets investment package, which would net about $5 million for the company immediately, from Coastal Enterprises Inc., a private, nonprofit community development company based in Wiscasset.

But in his news release on Friday, LePage said the state had to step in when "Kestrel's expectations of financing from Coastal Enterprises Inc. were not met."

Bennett said she couldn't immediately say what the governor believes Kestrel was expecting from Coastal Enterprises.

Klapmeier said LePage's statement was "accurate" but he declined to specify what he was expecting from Coastal Enterprises.

For its part, Coastal Enterprises reiterated Friday that it never offered a deal other than the $20 million package.

New Market Tax Credits pull in investments for companies that locate in low-income areas. Coastal Enterprises pulled together investors to put $20 million -- which would have to be repaid -- into the company.

Such investment triggers federal tax credits, which can be sold, with most of the proceeds going to the company that got the investment.

"We've always been very clear," said Charlie Spies, chief executive officer of CEI Capital Management, a financing arm of Coastal Enterprises. "We told them that we would help them find as much allocation (of New Market Tax Credits) as we could, but we couldn't provide it all by ourselves."

Spies said Coastal Enterprises never mentioned anything other than $20 million in all of its discussions with Kestrel and used that figure in a letter of intent it issued in the fall of 2010.

"It's kind of ironic," Spies said. "We put in the first piece (of financing) of this thing and stepped up, and now we're getting criticized."

The redevelopment authority has applied to the U.S. Treasury Department to become an "allocator" of the tax credits. It requested authority to leverage as much as $62 million with the tax credits, but there's no guarantee it will get approval or the amount it has requested.

It hopes to get a decision next month.

Klapmeier repeated Friday that the financing deal he thought had been agreed to 18 months ago never materialized, and that's why the location of the plant remains up in the air.

"It will create jobs, but it needs a certain amount of financing," he said.