The City of Redding has approved a signed Letter of Intent (LOI) with Southwest Paper USA for purchase of 125 acres in the Stillwater Business Park, on which the firm would construct a $300 million premium paper products facility.
The City Council on Tuesday gave approval to continue discussions with Southwest, which has signed the non-binding LOI and provided a $52,000 refundable deposit. The action allows the City and Southwest Paper USA to begin negotiations on a binding Purchase and Sales Agreement for acquisition of the property. Once agreement is reached, the transaction would close by April 30, 2012.
The LOI is a milestone in discussions that began more than five years ago between the principles of Southwest Paper USA and the Economic Development Corporation of Shasta County and the City of Redding. A startup company, Southwest Paper USA was formed by Len Sugarman, who has had a long career in the consumer product tissue market. He is joined by a group of executives, managers and engineers, all of whom have proven track records in the consumer paper products business.
Once constructed, the Southwest Paper USA facility would create up to 250 jobs and hire primarily from the Redding-area market. The company would be required to pay wages that are at least 110 percent of the Redding-area median wage and use local labor for construction of the facility.
Under the terms of the LOI, Southwest Paper USA would purchase all or part of three parcels comprising 125 acres at the newly opened Stillwater Business Park for $10.7 million. The City would receive $3 million cash at the close of escrow. A $7.7 million loan from the City to Southwest Paper USA would be forgiven over a period of four years after the facility begins production, if the company meets certain milestones. Those milestones include creation of up to 250 full-time jobs at a time when Shasta County unemployment is 17.1 percent (March figures).
The Southwest Paper USA facility would produce premium-quality corporate-branded tissue products, utilizing “through-air-dry” (TAD) technology, which produces maximum absorbency and strength. In the City of Redding and Stillwater Business Park, Southwest has found a location that would allow it to serve California retailers that now purchase products produced outside the state.
Southwest Paper USA was attracted to the ability to use renewable resources, particularly Redding Electric Utility power, as much of 65 percent of which will come from renewable sources, according to Patrick Keener, City Economic Development Liaison. In addition, the location of Stillwater Business Park, midway between Seattle and Los Angeles, puts the facility in a strategic position to serve the West Coast, he said.
Not to be confused with pulp processing mills, the Southwest Paper USA facility would utilize state-of-the-art technology to transform already-processed wood pulp into household paper products. The process would be carbon-friendly, clean and odor-controlled.
Mr. Sugarman has a significant experience in the field, becoming President of Statler Industries, a major tissue products producer, in 1969. It acquired additional facilities in Augusta, Maine, and partial assets of the Doeskin Company of Canada, consolidating operations in Augusta. Statler prospered from 1964 through 1994, receiving an award from the Environmental Protection Agency in 1992 for its low emission levels. During that period, sales volume rose from $4 million to more than $63 million.
Increased competition in the mid-1990s from new, more technologically efficient mills made the Augusta facility unprofitable and Statler filed for Chapter 11 reorganization, repaying all secured debt and selling the business in 1996.
Plans for a modern TAD paper facility began in 1997. Mr. Sugarman was joined by Tom Cook, an engineer with 30 years of experience in paper production. They are joined by a team of experienced consumer paper managers and engineers who will be responsible for hiring and training employees from the Redding area.
About Stillwater Business Park: Stillwater, a 678-acre fully entitled business park, is unique in that it is City-developed and owned, and is designed specifically for large-parcel manufacturing needs. The park’s first phase was completed in mid-2010 and is drawing interest from companies such as Southwest Paper USA looking for “shovel ready” sites that have already met environmental and other clearance. Infrastructure, such as water, sewer and electric lines for the park, are in place, requiring prospective companies to obtain only a building permit to begin construction.
Click here for the city’s background on Southwest Paper USA.
-from press release