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Fraser to restructure without Gorham mill

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December 16, 2009
TORONTO — Fraser Paper received court approval to form a new company that will focus on producing specialty paper. The Gorham mill will be sold off under the plan.

The new company will be formed by Fraser's creditors.

According to a Fraser Paper press release and documents from the bankruptcy, Ontario Superior Court approved the restructuring plan. It is still in question, however, whether Fraser's creditors or someone else will wind up owning the new company, which will be responsible for some of Fraser's debts.

The plan calls for Fraser to sell off its assets in two rounds. The first round will be the sale of the specialty paper "core assets" to the new company, including Fraser's pulp and paper mills in Madawaska, Maine, and Edmundston, New Brunswick, and two lumber mills in Plaster Rock and Juniper, New Brunswick.

During the second round, Fraser will sell off the Gorham paper mill, as well as shutdown its pulp mill in Québec and two lumber mills in Maine. The sale of all of the assets will go towards paying off Fraser's debts.

Under the plan, Fraser's secured creditors will form the new company initially, but Fraser must put the company out for bid. The bidding will ensure creditors get as much money for the company as possible, the press release explained.

If no one outbids the secured creditors, Brookfield Asset Management will hold 51 percent common interest in the new company; the Government of New Brunswick will get preferred stock; and CIT Business Credit Canada will provide $50 million credit, with which Fraser will pay off some debts.

The new company will also issue shares for the remaining 49 percent common interest and promissory notes to Fraser's unsecured creditors.

The proceeds from the sale of the assets will be used to partially settle some of Fraser Papers' debts, the press release said, but repaying all its debts will depend on the success of the new company.

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