Fraser Papers Clears Final Conditions for Sale of Specialty Papers Business

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Fraser Papers Inc., Toronto, Ont., Canada, announced this past week that it has cleared remaining material conditions and will proceed with the sale of its specialty papers business to a company sponsored by the secured creditors of Fraser Papers (Newco). The company, the Canadian Energy and Paperworkers Union of Canada (CEP), the Government of New Brunswick, and other stakeholders have agreed to the broad terms of the offer that includes proposed changes to the collective agreements at the company's Edmundston pulp and energy complex, which will require ratification on or before March 10.

Fraser filed the agreement with the Ontario Superior Court of Justice today, and said that it will work diligently with its secured creditors and Newco to close the sale of the specialty papers business before March 31. The final agreement (Purchase Agreement) will be subject to court approval prior to closing. Under the terms of the Purchase Agreement, unsecured creditors of Fraser Papers will receive promissory notes and a 49% common equity interest in the new company. Brookfield Asset Management Inc., a secured creditor, has agreed to convert its secured claim against the company into a 51% common equity interest in Newco, 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 the new company. Newco and the company are currently negotiating a $50 million revolving credit facility with CIT Business Credit Canada Inc., which will provide Newco with operating liquidity.

The company also announced this week that the Court has granted a further extension of the initial Order under which Fraser Papers was granted creditor protection according to the Companies' Creditors Arrangement Act (CCAA) of Canada. This extension is through April 9, and was supported by PricewaterhouseCoopers Inc., the Court appointed Monitor of the company's CCAA process.