Catalyst Agrees to Recapitalization Transaction
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Catalyst Paper Corp., Richmond, B.C., Canada, reports that it has agreed to a recapitalization transaction that will result in a significantly reduced debt burden. The company's management team and board of directors say they believe the proposed recapitalization offers substantial benefits to Catalyst Paper, including:
- Enhanced flexibility to respond to the downturn in the market for paper, newsprint, and pulp;
- Improved capital structure—$315.4 million reduction in debt
- Reduced cash interest expense—up to $25.5 million reduction in annual cash interest expense ($37.0 million if paid in kind to the maximum extent possible).
Catalyst's management team and board also believe that, in view of the challenges and risks to the company's ongoing viability created by the current paper, newsprint, and pulp markets and the company's existing capital structure, the recapitalization is the best alternative available to the company and its noteholders, shareholders, and other stakeholders. The new capital structure will provide a stronger financial base for the execution of the company's operating strategy and enhance the long-term value of the company, Catalyst notes.
"This transaction addresses the company's capital structure and interest payment obligations, extending its operating horizon," said Dallas Ross, director and chair of the board's independent committee overseeing the noteholder negotiation. "Based on extensive management analysis and independent review of options related to preservation of enterprise value, the board is unanimous in its recommendation that all shareholders and noteholders support this transaction."
The company intends to implement the recapitalization through a plan of arrangement under the Canada Business Corporations Act (CBCA). In addition, the agreement is subject to termination if a new labor agreement with all union locals at the company's Canadian mills has not been ratified by January 31.
Catalyst Paper produces specialty mechanical printing papers, newsprint, and pulp with four mills in British Columbia, Canada, and Arizona, USA. The company has a combined annual production capacity of 1.9 million metric tons.
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