Reprieve From Harshest Wrath of Recession

Editor’s note: Contributing columnist, Steve Nicklas, expresses his views and insights on various topics of local interest.

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The local economy has gotten a reprieve from the harshest wrath of the recession. One of the county’s largest employers – the Smurfit Stone Container Corp. mill in Fernandina Beach – has reportedly regained solid financial footing after a sudden slide.

The mill’s parent corporation is reorganizing nicely from within its structured bankruptcy and should emerge in a new, sleeker version come April.

The long-standing mill employs about 700 people in relatively high-paying positions for this area. With many local businesses being impaired by the most-severe recession in at least 30 years, the area hardly needed another blow.

Since Smurfit Stone entered Chapter 11 bankruptcy last year, the local mill has continued to operate without a noticeable hitch. Within the packaging company, the local mill is widely viewed as one of the most profitable.

The company has downsized, however, through layoffs and the closure of non-performing mills. Some 2,000 jobs were cut last year, with another 600 expected this year, according to reports. Smurfit Stone has also rid itself of two-thirds of its debt.

The company is expected to emerge from bankruptcy with a capacity for increased earnings — due in large part to lower expenses for salaries, debt, etc. In addition, the company has reportedly gained market share over the past year while operating under the protective covenants of Chapter 11. The global company also expects to benefit from an economic recovery.

Other major employers here have struggled with the economic downturn. The Amelia Island Plantation Company has also sought out the protection of Chapter 11 bankruptcy, attempting to reduce debt and restructure. It is widely expected that the resort company will also be successful in its restructuring efforts.

According to the latest figures, the Amelia Island Plantation employs about 1,100 workers. Many of these, however, have had to reduce their hours in recent months.

The largest employer here is the Nassau County School District with 1,400 employees, followed by Amelia Island Plantation and Smurfit Stone. The Ritz-Carlton Amelia Island Hotel employs about 600 people, and the Federal Aviation Administration center in Hilliard has 400 workers – rounding out the top five employers.

As is normal, some aspects of the Smurfit Stone reorganization may face legal challenges. There are some reports that shareholders of Smurfit Stone’s common stock may oppose the final bankruptcy agreement. Often in a bankruptcy proceeding, shareholder value is wiped out as new company stock is issued.

The plan of reorganization must be presented to the bankruptcy court and receive final approval. Creditors, who are owed money by the company, also have a vote in the matter. From a bankruptcy judge this month, Smurfit Stone received a four-month extension on its deadline for filing its final plan.

The local economy needed a break. If the Smurfit Stone mill had closed here, 700 well-paying jobs would have been lost. The impact could have been devastating. We have apparently avoided this bleak outcome.

(Steve Nicklas is a financial advisor who lives on Amelia Island. He can be reached at 904-753-0236 or at [email protected].)

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