Foreclosure announced for proposed Fay-Penn Fiber site
One dream apparently has ended. On Thursday, the Fayette Industrial Fund announced it is foreclosing on property it sold for construction of the Fay-Penn Fiber plant in the Fayette Business Park near Fairchance.
That plant, first announced six years ago, would have created about 200 jobs involved in the manufacture of medium density fiberboard and related products. In addition, the factory would have provided a market for area sawmills to sell their waste wood products.
Owned by Clarion Fiber Inc. of DePere, Wis., Fay-Penn Fiber got as far as buying 70 acres from Fayette Industrial Fund (FIF), which owns the business park. It also did some site preparation.
Clarion bought the property for $1.8 million in July 1999 from FIF. However, FIF held the mortgage on the property and Clarion Fiber has defaulted on that mortgage agreement.
This has forced FIF to start foreclosure proceedings.
“The FIF is extremely disappointed to be forced to take this action. This project has been ongoing for years, but we must move on. We cannot afford to miss any future development opportunities,’ Mike Krajovic, FIF executive director and president of Fay-Penn Economic Development Council, said Thursday in a prepared statement.
“Unfortunately for the company, Clarion Fiber has lost millions of dollars it has spent on the project. It is rare to see a company make this large an investment and not be able to complete the project,’ Krajovic said.
“The company gave its best effort, but sometimes things just do not work out. To the best of my understanding, it was a combination of financing difficulties, a national recession, increased competition from South American wood products and the negative impact from Sept. 11, such as increased insurance fees, which caused these latest developments,’ Krajovic added.
“It is sad for the community and the FIF that has invested hundreds of hours and thousands of dollars to support the project over the years,’ he said.
Krajovic noted the site is one of the few available large manufacturing sites in the state. It has great development potential and is already being marketed to other potential users, he said.
“National site location consultants have been and are continually being contacted to inform them of the site’s availability,’ Krajovic said.
Krajovic was not available for further comment on Thursday.
Several times over the past half-dozen years questions were raised at Fay-Penn board meetings about the progress of the project.
In addition to the input by Fay-Penn, the Fairchance-Georges Joint Sewage Authority spent $762,000 to increase sewage capacity to serve the plant.
In April the Fairchance-Georges Joint Sewage Authority expressed concern that Clarion Fiber was not making payments for those improvements.
The joint authority had made $3,680 monthly payments to the Pennsylvania Infrastructure Investment Authority (PENNVEST) since Sept. 1, 1999.
“The exact figure owed to the authority today stands at $114,080,” said Joe Angel, authority board president.
To provide sewage service for the fiberboard manufacturer’s proposed plant in the Fayette Business Park, the authority expanded its treatment plant on Big Six Road to nearly double its size. Authority solicitor Simon John said Fay-Penn Fiber signed a contract with the authority, agreeing to take over payments for the expansion Sept. 1, 1999, the day the first payment was due to PENNVEST.
At that time, Krajovic said Fay-Penn had “raised the issue’ with the company.
Krajovic said the company was “experiencing financial difficulties due to the national recession and the event that occurred last Sept. 11. Unfortunately, it has moved the project back.
“They certainly are not able to advance the plan at the time schedule they originally communicated to us last year (2001),’ Krajovic said, adding the company hoped to break ground sometime during the first half of this year.
The company had been pursuing a tax-free bond issue through the state to help fund the estimated $165 million project but later abandoned that plan.
The company then shifted its focus to using 100 percent bank financing.
It was learned in September 1996 that the company, which had been headquartered in Savannah, Ga., had been involved in discussions and planning with Fay-Penn for about 18 months to build the fiberboard plant in the business park in Georges Township.
Fay-Penn Fiber planned to turn sawdust, wood chips and other wood waste products into a high-quality MDF that can be used in construction, furniture and other industries. The material, while similar to particleboard, has superior physical characteristics.