Catalyst intends to finance the acquisition through a combination of advances under its revolving asset-based credit facility, the maximum amount of which is to be increased in connection with the transaction. To provide additional working capital following the consummation of the transaction, Catalyst also intends to initiate a $25.0 million offering of additional PIK Toggle Senior Secured Notes, which would form part of the same series as Catalyst's outstanding PIK Toggle Senior Secured.

 

Completion of the Transaction is subject to customary closing conditions, including the completion of the previously announced acquisition by Verso Paper Corp. of NewPage Holdings Inc., the execution of a transition service agreement, materials and service supply agreements, and certain other ancillary agreements relating to the transaction, and certain regulatory approvals. There is no financing condition to Catalyst's obligation to consummate the transaction. The Agreement may be terminated by the sellers and Catalyst in certain circumstances, including upon or at any time following the final uncontested termination of the Verso transaction.

 

"With this transaction, Catalyst will be better able to serve new and existing customers through operational synergies and a more diversified and higher value suite of products," said Joe Nemeth, president and CEO of Catalyst. "Our acquisition of these U.S. pulp and paper mills, once complete, will support our efforts to improve our balance sheet and enhance the company's long-term competitiveness."

 

The addition of the paper mills is expected to increase Catalyst's production capacity by approximately 65% or 995,000 metric tpy. The Biron Wisconsin mill has 355,000 metric tpy of capacity for lightweight coated and ultra-lightweight coated paper. The Rumford Maine mill has 510,000 metric tpy of capacity for coated specialty, coated freesheet, and coated groundwood paper, and 130,000 metric tons of kraft market pulp capacity to produce both hardwood and softwood pulp. Efficiencies are expected to be gained as overhead costs will be distributed over a larger production base. Access to new markets and business opportunities is anticipated.

 

Based on unaudited historical financial summaries prepared by the sellers, the paper mills achieved total sales of $782.2 million for the 12 months ended Sept. 30, 2014, and $787.1 million for the 12 months ended Dec. 31, 2013. Total mill contribution was $29.5 million and normalized mill contribution was $45.6 million for the 12 months ended Sept. 30, 2014, compared with $72.4 million for mill contribution and normalized mill contribution for the 12 months ended Dec. 31, 2013.

 

Mill contribution is a non-U.S. GAAP measure of mill operating performance defined as total sales minus the cash cost of goods sold. Mill contribution was normalized for the 12 months ended Sept. 30, 2014, for the adverse impact of extreme weather conditions and market curtailment. These figures do not include sales and general and administrative expenses, which are estimated to be approximately $10.0 million per year. Capital spending for the two mills is expected to be similar to that of our Canadian mills, approximately $7.0 million per facility per year.