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Restructuring and Insolvency

Insolvency Watch: Catalyst Paper Secures CCAA Protection After Negotiations with Note-Holders and Unions Fail

Published: 02/02/2012

By Joseph J. Bellissimo, Larry Ellis, Deborah S. Grieve, Bruce Leonard, Eleonore Morris, David Ward

Catalyst Paper (TSX:CTL) has obtained CCAA protection from the British Columbia Supreme Court after the company's bondholders and unions rejected its proposed restructuring plan.

The Richmond, BC-based company had earlier obtained an initial court order under the Canada Business Corporations Act (CBCA) to begin a consensual restructuring process that would have required substantial agreement on the proposed plan from its note-holders and unionized workers.

In the wake of the failed negotiations, Catalyst has secured creditor protection through an initial order under the Companies' Creditors Arrangement Act (CCAA) that will temporarily stay proceedings against the company.

Catalyst Paper has secured debtor-in possession (DIP) financing from JP Morgan, which has agreed to provide up to $175 million of available capital during the CCAA proceedings. Management says that the terms and conditions of a new restructuring plan have not yet been determined.

The company says its operating revenue and the new DIP financing will be used to meet its ongoing obligations to employees and suppliers and to maintain normal operations during the restructuring process. Catalyst says it intends to apply for recognition of the BC court’s interim order under chapter 15 of the US Bankruptcy Code to secure creditor protection in the United States.

The court granted protection under the CCAA for an initial period expiring on February 14, 2012, but that date could be extended with its approval.

The CCAA filing applies to Catalyst, Catalyst Paper General Partnership, Catalyst Pulp Operations Limited, Catalyst Pulp Sales Inc., Pacifica Poplars Ltd., Catalyst Pulp and Paper Sales Inc., Elk Falls Pulp and Paper Limited, Catalyst Paper Energy Holdings Inc., 0606890 B.C. Ltd., Catalyst Paper Recycling Inc., Catalyst Paper (Snowflake) Inc., Catalyst Paper Holdings Inc., Pacifica Papers U.S. Inc., Pacifica Poplars Inc., Pacifica Papers Sales Inc., Catalyst Paper (USA) Inc. and The Apache Railway Company.

Catalyst Paper manufactures a variety of specialty printing papers, newsprint and pulp products for customers in North and South America, the Pacific Rim and Europe. Its four mills in British Columbia and Arizona have a combined annual production capacity of 1.9 million tonnes.