The city secured a $500,000 Minnesota Investment Fund loan for the manufacturer of aircraft components to expand its Duluth operations in 2007. Republic Bank and Duluth's 1200 Fund both proffered matching loans of equal value, providing the company with a total infusion of $1.5 million. Facility improvements were expected to lead to the creation of another 50 jobs in Duluth when the loans were approved. <\/p>\n
But the timing for the project could hardly have been worse, with the bruising 2008 recession just around the corner. <\/p>\n
In response to reduced demand, the company's primary client, Cirrus Aircraft, severely curtailed production, sending Northstar into a tailspin. <\/p>\n
David Montgomery, Duluth's chief administrative officer, said he has been dealing with fallout from the loan since he came onboard with the city in 2009. <\/p>\n
\"This is almost systemic. It goes to what their original business model was, the downturn, what happened to one of their main customers Cirrus and their heavy focus on one particular customer,\" he said. <\/p>\n
With repeated loan extensions, Montgomery said: \"We've been essentially buying time.\" He noted, however, that the company has continued to make interest payments until recently. <\/p>\n
Northstar was expected to settle its outstanding loans with a balloon payment in April of this year, but as that date neared it became clear the company would be unable to fulfill the obligation. <\/p>\n
City staff met with representatives of other secured creditors, including Republic Bank, the 1200 Fund and the Northland Foundation. A resolution that will be considered by the Duluth City Council Monday calls for an additional 12 to 24 months \"to work proactively with Northstar in hopes of identifying a course of action that will allow the company to continue to operate and retain the existing 38 jobs it currently has on the payroll, while also pursuing opportunities for restructuring its outstanding debt, which may include a potential business sale.\" <\/p>\n
\"The jobs are important to us. Those have been decent jobs, and we've been able to retain those jobs. But there are several outcomes that this could result in and many different permutations on that,\" Montgomery said. <\/p>\n
\"We just wanted to give ourselves all the time to properly go through and assess where things are, what the opportunities are for ideally retaining this commercial activity, be it in some other form potentially, but retaining the activity, retaining the jobs and potentially even expanding them,\" he said. <\/p>\n
Northstar has had trouble making rent on its Airpark facility, and on Feb. 14, its landlord the Duluth Seaway Port Authority terminated the company's lease. <\/p>\n
Republic Bank stepped in to help prevent Northstar's eviction, entering into a two-year lease with the Port Authority itself and then subletting the building back to the company to allow \"additional time to restructure or sell its business or business assets in an orderly manner,\" to quote directly from an intercreditor agreement. <\/p>\n
\"We're all acting in concert to try to get to the right conclusion with these guys,\" Montgomery said. <\/p>\n
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Read the rest here: <\/p>\n
Deal could provide space for Northstar Aerospace - Duluth News Tribune<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" The city secured a $500,000 Minnesota Investment Fund loan for the manufacturer of aircraft components to expand its Duluth operations in 2007. Republic Bank and Duluth's 1200 Fund both proffered matching loans of equal value, providing the company with a total infusion of $1.5 million. Continue reading