Appvion’s public announcement last week of its proposed sale left out a significant detail.

The paper company has an Employee Stock Ownership Plan (ESOP), which means the company is owned by its employees. If the proposed $325 million bid by an unnamed lender is successful, the ESOP will have no value and employees will lose the shares they expected to collect at retirement, according to a letter sent internally to employees by company CEO Kevin Gilligan.

The internal letter was forwarded to USA TODAY NETWORK-Wisconsin by an Appvion worker.

In the letter, Gilligan wrote:

“As we noted when we began our restructuring, the ESOP was a critical item in our discussions with our lenders, and we advocated for the interest of ESOP Plan Participants as best we could.“However, as in any bankruptcy proceeding, equity holders do not negotiate from a position of strength and, under the Purchaser’s offer, the current ESOP structure would not continue and your interests in the ESOP will not have any value.”

In a follow-up email to USA TODAY NETWORK-Wisconsin, company spokesman Bill Van Den Brandt said if the company gets a higher offer before the April 19 bid deadline, there is a chance that ESOP members could recoup something. “Yes, that is possible,” he said.

Appvion filed for Chapter 11 bankruptcy reorganization in October. Gillian told employees the company was working with its lenders before and after the filing to find a solution “that would reduce our debt, enhance our liquidity and best position Appvion for the future.”

The company is in an unusual position, said an ESOP expert. “ESOP bankruptcies are actually quite rare,” said Corey Rosen, founder of the National Center for Employee Ownership, a nonprofit research organization in Oakland that provides information on ESOPs. “We did a study during the recession and the default on loans from creditors was two per 1,000 per year. ESOP companies go bankrupt much less often than non-ESOP companies. Unfortunately, Appvion is not one of them.”

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