Restructuring
On June 18, 2009, Fraser Papers Inc., together with its subsidiaries (“Fraser Papers” or the “Company”), initiated a court-supervised restructuring under the Companies’ Creditors Arrangement Act (Canada) (the “CCAA”) in the Ontario Superior Court of Justice for an initial period of 30 days. Several extensions have been granted and the current extension (approved February 24, 2010) expires April 9, 2010.
Fraser Papers also filed for protection pursuant to Chapter 15 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware and, on July 13, 2009, the court granted the Company’s motion for a recognition order recognizing the CCAA proceeding as a foreign main proceeding and granting ancillary relief, including a stay of proceedings.
PricewaterhouseCoopers Inc. was appointed by the court as Monitor to assist Fraser Papers through the restructuring process. Debtor in possession financing was secured from Brookfield Asset Management and CIT Business Credit Canada to provide the necessary resources to fund operations during the restructuring process. In addition, the Government of New Brunswick financed the completion of the modernization of Fraser Papers’ lumbermill in Plaster Rock, New Brunswick, which was completed, and the mill has since recommenced operations.
The Company remains in control of its assets and business operations.
On February 24, the Company announced that it had cleared the remaining material conditions to sell its specialty papers business to a new company sponsored by the secured creditors of Fraser Papers and is working diligently to close the sale in early April 2010, pending court approval in Canada and the United States. The new company will be named Twin Rivers Paper Company (“Twin Rivers”) and will consist of the integrated pulp, energy and paper operations in Edmundston, New Brunswick and Madawaska, Maine, as well as two lumber mills located in Plaster Rock and Juniper, New Brunswick.
The unsecured creditors of Fraser Papers will receive promissory notes and a 49% common equity interest in Twin Rivers. Brookfield Asset Management Inc., a secured creditor, has agreed to convert its secured claim against Fraser Papers into a 51% common equity interest in Twin Rivers, while the Government of New Brunswick has agreed to convert its $35 million secured loan plus accrued interest into equity in the form of preferred shares of Twin Rivers.
In order to ensure that the price for the sale of the specialty papers business maximizes value for Fraser Papers’ creditors, PricewaterhouseCoopers actively marketed the business for a period of approximately 60 days, contacting 133 potential purchasers and overseeing the due diligence process. Potential bidders were required to submit non-binding letters of intent on or before the extended deadline of January 26, 2010. While a number of parties expressed preliminary interest, PricewaterhouseCoopers did not receive any letters of intent. As a result, the bid process was terminated.
The proceeds from the sale of the specialty papers assets will be used to partially settle the remaining claims against Fraser Papers. The Company will accumulate the balance of proceeds from the sale, plus additional proceeds from the sale of the remaining assets in Fraser Papers, prior to distributing to its unsecured creditors. The other assets include a paper mill in Gorham, New Hampshire; hardwood kraft pulp mill in Thurso, Québec; and, two lumber mills in Ashland and Masardis, Maine. The ultimate recovery for unsecured creditors will be dependent, in part, upon the long term success of Twin Rivers.
Contacts
PricewaterhouseCoopers: www.pwc.com/car-fraserpapers
E-mail: FPMonitor@ca.pwc.com
416-815-5118 and 877-332-1688 (toll-free for Canada and the U.S.)
Fraser Papers: E-mail: restructuring@toronto.fraserpapers.com
877-374-3834 (toll-free for Canada and the U.S.)