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Fraser Restructuring Approved by Ontario Court

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Fraser Papers, Toronto, Ont., Canada, reports that it received approval this past week from the Ontario Superior Court that is overseeing its filing under the Companies' Creditors Arrangement Act (CCAA) of Canada, to proceed with a firm and binding offer to sell its specialty paper assets. The specialty papers assets will be sold to a newly incorporated company, initially sponsored by the company's secured creditors, subject to receiving a superior bid. The assets to be sold include the pulp and paper facilities located in Madawaska and Edmundston, Maine, in the U.S., as well as the two New Brunswick, Canada, lumber mills located in Plaster Rock and Juniper.

Under the terms of the offer, Brookfield Asset Management Inc., a secured creditor, has agreed to convert its secured claim against the company into a 51% common equity ownership in a new specialty papers company. The Government of New Brunswick also agreed to convert its $35 million secured loan plus accrued interest into equity in the form of preferred shares of the new company. CIT Business Credit Canada Inc., the company's existing working capital lender, has agreed to provide a $50 million revolving credit facility from which its existing secured loans to the company will be repaid or otherwise satisfied on closing. The new company will also issue common shares, representing a 49% common equity interest and promissory notes to the unsecured creditors of Fraser Papers as further consideration for the assets purchased.

To ensure that the price under the proposed sale transaction maximizes value for the company's creditors, Fraser Papers will seek superior bids through a court-supervised process for a period of approximately 60 days. Potential bidders will be required to submit non-binding letters of intent on or before noon EST on January 22. PricewaterhouseCoopers, the court appointed monitor, will have the responsibility for managing this process, including identifying and contacting prospective purchasers, coordinating information requests, and receiving offers.

Proceeds from the sale of these assets will be used to partially settle the remaining claims against Fraser Papers. The company will accumulate the balance of proceeds from the initial 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, N.H., a hardwood kraft pulp mill in Thurso, Que., 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 the new company.

Fraser has filed similar materials with the U.S. Court in Delaware, which oversees the company's ancillary proceeding under Chapter 15 of the U.S. Bankruptcy Code.


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