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1976, KKO received financing for the first step of the project
through a $10 million loan from Aetna Life Insurance Co. (Aetna).
The sawmill was built near the end of 1976, and it commenced
operations in January 1977. The sawmill generated losses in each
of the years from 1977 through 1981; by the end of 1980, KKO had
lost approximately $17.224 million. Due to these losses, KKO,
around 1980, decided not to build the pulp mill on its own but to
search for a partner. As of the end of 1980, KKO's investment in
the sawmill project totaled $31.5 million.
In 1978, GNN had an adequate cash flow and wanted to
undertake a major capital project. After studying several
capital projects, GNN decided to build a pulp mill; GNN wanted to
enter the pulp business because of projected worldwide shortages
of pulp. Due to the enormous cost associated with constructing a
pulp mill, GNN desired to obtain a partner for a joint venture to
effectuate the construction. In about August or September 1980,
GNN learned about KKO's interest in entering into a joint venture
to build a pulp mill in Mississippi.
In the fall of 1980, KKO began serious discussions with GNN
to build jointly a pulp mill on LRFP’s Mississippi property. At
that time, the parties believed that construction of the pulp
mill would cost approximately $440 million. KKO’s initial
objective was a 20-percent equity relationship and long-term pulp
supplies that would be 20 percent of the output of the intended
mill. At this time, KKO was buying large quantities of pulp in
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