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Catalyst Paper to File for Creditor Protection

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Catalyst Paper Corp., Richmond, B.C., Canada, reported this week that it has decided to file for creditor protection under the Companies' Creditors Arrangement Act (CCAA) of Canada. The terms and conditions of a restructuring plan have not yet been determined by the company.

Operations of the company and its subsidiaries will continue as usual and obligations to employees and suppliers during the restructuring process are expected to be met in the ordinary course, Catalyst noted, adding that its management will remain responsible for day-to-day operations of the company. The company expects that the Interim Order from the Supreme Court of British Columbia will provide that, while the company and its subsidiaries are under CCAA protection, all proceedings on the part of its creditors will be stayed.

The company previously had announced a consensual recapitalization transaction under the Canada Business Corporations Act (CBCA) that had support of certain of the holders of the company's 11% senior secured notes due 2016 and 7 3/8% senior notes due 2014 who were parties to a Restructuring and Support Agreement. The Agreement provided that, among other conditions, the recapitalization transaction was subject to the following two conditions being met by Jan. 31, 2012: (a) a new labor agreement ratified by all six union locals at the company's British Columbia mills and (b) two-thirds support of all 2014 and 2016 note holders. Since these conditions will not be met, the company will not be proceeding with a recapitalization under the CBCA.

"Our debt restructuring objective remains clear and unchanged though our path forward was altered by recent setbacks," said Catalyst President and CEO Kevin J. Clarke. "Without the new labor agreement, and without two-thirds support of 2014 note holders, the economics of the previously announced consensual restructuring transaction was undermined. After reviewing this matter carefully with our board of directors and advisors, we have elected to begin the CCAA proceeding," he said. "The board, management, and our advisors believe this approach will best facilitate the completion of a recapitalization transaction that delivers the improvements to our liquidity and capital structure necessary to put our company on firm financial and competitive footing in the current business and economic environment."

Catalyst produces specialty printing papers, newsprint, and pulp. The company operates four mills in British Columbia and Arizona, with a combined annual production capacity of 1.9 million metric tons.

 

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