HARTLAND — Prime Tanning, the largest employer in this small town, said late Tuesday it had filed for bankruptcy protection.

The announcement comes as the financially beleaguered company is also more than a year behind on its property tax payments to the town, owing more than $300,000 in back payments.

Known also as Irving Tanning Co., the company said in a statement that it had filed a petition for Chapter 11 in the U.S. Bankruptcy Court in Bangor. The tannery has twice before filed for bankruptcy in recent years, according to town officials.

Prime Tanning’s Hartland facility, which produces finished leather and has about 180 employees, will remain in operation as the company reorganizes its finances, the statement said.

“The restructuring will allow Prime to emerge as a lean and profitable stand-alone company,” Paul Larochelle, president of Prime Tanning, said in the statement. Larochelle did not return calls Tuesday seeking further comment.

As the news trickled out late Tuesday, townspeople and local officials were stunned and scrambling to find a bankruptcy lawyer who could help the town navigate the complicated court process.

The three-member Board of Selectmen held an emergency meeting Tuesday night, attended by about 20 citizens, and selectmen came to the realization that they essentially had one full day — today — to find a bankruptcy lawyer. The first bankruptcy court hearing starts at 10:30 Thursday morning, involving various motions intended to speed up the court process.

“It was quite a surprise for me,” said Judy Alton, chairman of the Board of Selectmen. “I knew it was a possibility, but I didn’t know it would happen quite this quick.”

At the selectmen’s meeting was resident Richard Tucker, an attorney with the Tucker Law Group in Bangor. Although he isn’t trained in bankruptcy law, Tucker told selectmen that he would help them get in touch with such a lawyer today to prepare for the upcoming court hearings.

Tucker was visibly frustrated with the tannery company, making reference to its earlier bankruptcies and how the town has previously forgiven the company’s unpaid bills.

“They haven’t done us a damn bit of good in the last 10 years and they don’t intend to in the future,” Tucker said.

In its statement, Prime Tanning said it had also reached an agreement with the Maine Rural Development Authority “for a new loan which will provide needed and continued working capital.” It didn’t specify the amount of the loan.

Prime also said it had an agreement with the firm Porter Capital “to continue to provide financing during the Chapter 11 case, and with its primary hide supplier to continue to provide raw material to the company.” The company also said it’s seeking additional financing “with a goal of completely recapitalizing the company.”

What led to its bankruptcy filing? The company’s statement blames “legacy liabilities resulting primarily from the formerly unprofitable operations at the now-discontinued Berwick operation and the now-sold Prime Missouri.”

In March 2009, according to the statement, the company aimed to stem the losses from its Missouri operation by selling the assets to National Beef Leathers and the proceeds were used to pay the company’s then-lender, Wells Fargo.

Prime Tanning was then sued by residents of northwest Missouri — assisted by famed environmental activist Erin Brockovich — for allegedly selling fertilizer containing a cancer-causing chemical to farmers. The case is still pending, but Prime Tanning’s statement said “the defense of the Missouri litigation was expensive and time-consuming” and was “exacerbated” a recent federal court decision in Maine finding that the company’s insurers didn’t need to provide coverage for financial losses arising from the court dispute.

The Missouri court case has also prevented the company from tapping into $1.5 million of the purchase price for the Prime Missouri operation; the cash is held in escrow, pending the outcome of the court case.

Combined, all of those troubles “made it exceedingly difficult for Prime to obtain further financing for its operations at reasonable costs, if at all,” the statement said.

Hartland town officials said Tuesday that the tannery owes the town a total of $226,000 in late property taxes, from last year and this year. The town on June 10 this year placed a lien on the tannery property and is scheduled to foreclose on it by January 2011 if the tannery fails to pay its 2009 property taxes by then.

The tannery also owes the town about $64,000 toward operation of the Hartland Sewage Treatment Plant.

Susan Frost, Hartland’s town manager, told selectmen Tuesday night that Larochelle informed tannery employees of the bankruptcy filing about 1 p.m. and contacted her about an hour later, faxing the bankruptcy paperwork to the town at about 5 p.m.

Frost said the tannery isn’t shut down but is currently operating at a “bare minimum.” Larochelle told her that the company expects to bounce back after emerging from bankruptcy because they’re “back-logged” with orders.

But Frost said the tannery has only been able to pay $65,000 of its property tax bills recently after “each time they sell a piece of equipment.”

Tucker, the Bangor lawyer, advised town officials to be wary of the company’s efforts during the bankruptcy process.

“You should participate,” Tucker said. “The court should be made aware of all the money they owe us.”

Scott Monroe — 861-9239

smonroe@centralmaine.com

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