Thursday, February 8, 2018 12:15 pm

TURNERS FALLS, Mass. (From news reports) -- The company that intended to purchase the former Southworth Paper Mill building has backed out, and Southworth plans to sell the building in a public auction instead.

Southworth disclosed the collapse of the deal in federal bankruptcy papers filed this week. SBD Greentech, the would-be buyer from Maine, told Southworth on Jan. 16 that it no longer intends to purchase the mill.

SBD Greentech would have paid $4 million for the mill. The sale would have included the building along with equipment and the federal license to generate hydropower at the site.

Numerous phone calls to SBD Greentech and Southworth's lawyers were not returned as of Wednesday.

According to court documents, the sale of the building and its assets are essential to Southworth paying back the $275,000 it currently owes the town of Montague in unpaid taxes and fees. Southworth intends to hire Aaron Posnik & Co. Inc. to conduct the auction, which will occur around March 31.

Southworth estimates that by the time the auction is over, it will owe the town of Montague $300,000.

Maintenance and preservation of the plant cost approximately $93,000 per month, and if Southworth cannot pay, "it is likely that boilers would cease to function and fire suppression systems would fail." This would convert their Chapter 11 bankruptcy to Chapter 7.

In a Chapter 7 bankruptcy, the debtor's assets are sold off to pay lenders, whereas in Chapter 11, the debtor negotiates with creditors to alter the terms of the loan without having to sell assets.

Southworth filed for Chapter 11 bankruptcy on Sept. 28, 2017, and was approved by bankruptcy court in December to sell to SBD Greentech.

Southworth abruptly shut down at the end of August, saying it could no longer receive financing. The company had 120 employees throughout Turners Falls, Agawam, and Seattle, Wash. About 60 employees worked in Turners Falls and were all laid off immediately after the decision to close.

Southworth bought the mill in Turners Falls in 2006 as part of its acquisition of the Esleeck Paper Co. Esleeck had opened its mill in 1900.

Federal Bankruptcy Court gave Southworth permission to pay employees who were owed for their last paycheck, benefits, sick time and vacation time. According to court documents, those payments are being processed.

A hearing in Bankruptcy Court is scheduled for Feb. 15 in Springfield.

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