Catalyst Paper Restructuring Plan Not Approved by Creditors

Catalyst Paper Corp., Richmond, B.C., Canada, reports that it did not receive the necessary creditor approval for its amended plan of arrangement under the Companies' Creditors Arrangement Act of Canada. Approval of not less than 66 2/3% of the principal amount of each creditor class voting on the plan is required. Although 99.5% of the principal amount of the secured creditor class voted in favor of the plan, only 64% of the principal amount of the unsecured creditor class voted in favor of the plan at meetings held this past week in Richmond. Voting results, including votes on a class-by-class basis, are available online.

Since the amended plan of arrangement was not approved at the meetings, Catalyst Paper is required to commence a sale transaction in accordance with certain court-approved sale and investor solicitation procedures (SISP) as described in the Management Proxy Circular delivered to Catalyst Paper's creditors in advance of the meetings.

"Today's creditors' vote makes it clear for stakeholders that our path to emerge from protection will be through a sales process initiated by a stalking horse bid from secured note holders. Our objective remains unchanged and that's to put our company on better financial footing to enable us to compete vigorously and to adapt as necessary to the continuing changes in the markets for our products," said President and CEO Kevin J. Clarke. "Stakeholders can be assured that as milestones in the sales process are met, issues resolved, and decisions reached, we will continue to provide timely updates on developments and progress."

The company's debtor-in possession (DIP) financing continues to be available to the company and, combined with the company's operating revenue, is expected to continue to provide sufficient liquidity to meet ongoing obligations to employees and suppliers and ensure that normal operations continue during the sale process.

The SISP outlines the procedures and timelines for soliciting bids to purchase all or substantially all of the assets of Catalyst Paper or to make an investment in the business and operations of Catalyst Paper. The SISP also contemplates that Catalyst Paper will enter into a stalking horse purchase agreement with holders of Catalyst Paper's First Lien Notes for the purchase of all or substantially all of the company's assets on a going concern basis. In the event that Catalyst Paper does not receive or accept a qualified bid, pursuant to the SISP, the company must terminate the SISP and within three business days of such termination must file an application with the court seeking approval of a sale transaction under the Stalking Horse Purchase Agreement, which agreement has been finalized and approved by the court.

The SISP will be implemented as follows:

  1. An initial offering summary and confidentiality agreement will be distributed to known potential bidders within two days
  2. Potential bidders will submit certain information and an executed confidentiality agreement within 14 days
  3. The determination of which potential bidders are qualified bidders will occur within five days after such bidders have delivered their materials
  4. Qualified bidders will submit a non-binding indication of interest within 35 days following the Potential Bidder Deadline (the Phase 1 Bid Deadline)
  5. The non-binding indication of interest will be assessed within five days of the Phase 1 Bid Deadline
  6. Provided the non-binding indication of interest has been determined to likely be consummated, the bidder will submit a purchase bid or investment bid no later than 21 days from the Phase 1 Bid Deadline (the Phase 2 Bid Deadline)
  7. The purchase bid or investment bid will be assessed within the five days following the Phase 2 Bid Deadline
  8. In the event that there is more than one acceptable purchase bid or investment bid, an auction will be conducted within three days of the Phase 2 Bid Deadline.

Catalyst Paper produces specialty mechanical printing papers, newsprint, and pulp, with four mills located in British Columbia and Arizona, USA. It has a combined annual production capacity of 1.8 million metric tons.

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