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Bain acquisition sent Holland jobs out of state; Williamhouse closing ended 136 years in WNY

WASHINGTON – The workers at the Williamhouse envelope plant in the Town of Holland most likely never heard Mitt Romney's name. They just knew that an out-of-town owner bought the company and, within a few years, their jobs were shipped to Pennsylvania.

"The company was doing just fine," said Carolyn Gibbon, of West Seneca, who, with her husband, Thomas, worked at Niagara Envelope for 10 years that she now calls wasted. "Then, the following summer, we were being shut down."

Some 185 workers lost their jobs in that 1999 closing of a venerable local company previously known as Niagara Envelope. That happened two years after the company's new owner, American Pad and Paper, or "Ampad," closed the local firm's downtown Buffalo headquarters as well as the main office of a sister company in New York, eliminating 250 jobs.

To critics of Romney, the presumptive Republican nominee for president who will be in Buffalo on Friday for a ?fundraiser, all this matters in the context of the current campaign.

That's because Bain Capital, the private equity firm then headed by Romney, bought Ampad in 1992 and put it on an aggressive path of borrowing to buy other paper companies. While Bain and its investors made more than $100 million off Ampad, the company plunged deeply into debt and ended up filing for bankruptcy in 2000.

Told of the role Romney's company played in connection to Ampad, Gibbon said: "It really makes me dislike him more than I already did."

Romney, however, has long disavowed responsibility for problems at the companies Bain invested in.

"I'm proud to take responsibility for my own record as a manager," Romney told Bloomberg News in February. "I can't possibly take the blame for all 200 companies in Bain's portfolio, any more than I am going to take credit or blame for all the investments in my 401(k)."

In any case, there's no doubt that Bain Capital, which is otherwise hugely successful, did not succeed in reviving Ampad and that workers at what was once Niagara Envelope suffered as Ampad struggled.

Niagara Envelope was one of the Buffalo area's oldest companies, tracing its roots back to 1863, when it made currency packets for Wells Fargo.

Things still looked bright for Niagara Envelope 131 years later, when the family-owned company moved its local manufacturing operation from Buffalo to a vacant Fisher-Price plant in the Town of Holland.

"We have no set timetable for expansion, but we will grow," the company's president at the time, Frederick G. Pierce II, told The Buffalo News upon moving to the new facility in 1994.

The Erie County Industrial Development Agency bet on that growth, too, giving Niagara Envelope $4.5 million in financing for the move to Holland.

Two years later, though, Pierce opted for another path, selling the company to Ampad, a Bain-backed paper company based in Dallas that merged Niagara Envelope into its Williamhouse operation.

Niagara Envelope was profitable at the time, earning $8.5 million on sales of $106 million in 1995, Ampad said at the time.

Ampad said it paid $48.2 million for Niagara Envelope, financing the move primarily by selling another operation.

"APP is an excellent company, and we're confident Niagara's tradition of quality products and outstanding customer service will continue in the future," Pierce said in 1994.

It didn't continue for long.

First came the closing of Niagara Envelope's downtown headquarters and a similar New York office. Ampad said those moves were among the company's "most significant cost-reduction actions."

And before long, things started changing in Holland.

"There was more talk that the business is getting worse, that things aren't so good," Gibbon said.
The ultimate bad news came in May 1999, when Ampad announced it was moving the Holland operations to a plant in Pennsylvania.

"Suddenly we were both unemployed at the same time, with a baby," Gibbon said. "We had just bought our house. It was bad."

It was bad because things were bad at Ampad.

The company had been struggling for a while. Bain Capital, the private equity firm Romney formed in 1984, bought American Pad and Paper from Mead Corp. in 1992 after Mead admitted in public filings that its acquisition of Ampad hadn't worked out.

Buying troubled firms is what private equity firms do: They snatch up companies that aren't reaching their potential in the hopes of installing new management, turning things around and eventually selling the fixed-up outfit for a profit.

Private equity firms often rely on debt to do that, and that's exactly what Bain did when it bought Ampad for $40 million. Only $5 million of that came from Bain's investors. Bain borrowed the rest.

The managers Bain installed at Ampad hoped to revive Ampad through what's called a "roll-up" strategy, where a company buys up competitors in hopes of emerging bigger and stronger itself.
But Ampad rolled up a lot of debt in the process – $450 million as of 1995, up from $20 million a year earlier.

"We were highly leveraged as a company," Russell Gard, the chief operating officer that Bain installed at Ampad, told National Public Radio earlier this year. "Like, squeaky leveraged. We were tight."

At about the same time as the Niagara Envelope purchase, Bain arranged for Ampad to go public. Selling stock to the public allowed Ampad to pay down about $70 million in debt.

But by the end of 1996, Ampad was losing money.

And by January of 1999, two of its top executives had resigned, and the stock had been delisted from the New York Stock Exchange.

"It became very weak last year for a variety of reasons, with very high leverage," Cynthia Werneth, an analyst with Standard & Poor's Corp. in New York, said at the time.

A few months later, Ampad announced the closing of the Holland plant, and early the following year, Ampad filed for bankruptcy because it could no longer make its debt payments.

The Romney campaign stresses that debt was by no means the central cause for Ampad's troubles. The company had a similar debt ratio as other companies in the paper industry, which was beset at the time with cost competition and other pressures.

But Charles Hanson III, Ampad's chief executive officer in the 1990s, told the Boston Globe in 2002 that he had no doubt Romney approved of the debt-friendly "roll-up" strategy that led to the company's failure.

"Any significant direction we received would certainly have been authorized by him," Hanson said.
That direction may not have worked for Ampad, but it worked for Bain. Bloomberg, citing a prospectus from Deutsche Bank, reported that thanks to the Ampad stock sale and consulting fees, Bain earned $107 million in profits on its $5 million investment in Ampad.

Ampad's bankruptcy, and the closing of its plant in Holland, would be little-known chapters in business history by now if not for one thing.

In 2002, Mitt Romney ran for and won the governorship of Massachusetts.

Ampad's history has haunted him ever since.

The unions made sure of that. John Kaczorowski, president of the AFL-CIO chapter in Buffalo, and other union leaders traveled to Massachusetts at the time to campaign against Romney – only partly because of what happened in Holland.

Kaczorowski said he made the trip "because of how [Romney] treated people all around the country."

Indeed, Romney has found himself under attack for Bain's investments and subsequent layoffs at an Ampad facility in Indiana and at a Kansas City steel mill, among others.

Still, Romney never made day-to-day management decisions at the companies Bain invested in. What's more, Romney left Bain to run the Salt Lake City Winter Olympics in February 1999, three months before Ampad announced the closing of the facility in Holland.

Above all, Ampad was something of an outlier.

As the New York Times reported last week, Bain invested in more than 40 companies between 1984 and 1999, and only seven eventually went bankrupt.

Much more common were the successes, such as Staples and Domino's Pizza, which Bain nursed into the thriving companies we know today.

"The jobs created at Bain Capital by companies that we helped start or that we helped manage, those companies today employ well over 100,000 more jobs than those that were lost," Romney told Bloomberg.

Still, Newt Gingrich bashed Romney on Bain's record during the GOP primaries, and President Obama's campaign has been doing the same for weeks.

And given Bain's history with Ampad, Gibbon, of West Seneca, is ready to join the chorus.

"He's trying to act like he's an average guy and he's trying to help the small people out, and he really isn't," she said of Romney. "He's the reason I lost my job back then."