Catalyst Paper Corporation announced yesterday, June 12, that it is seeking the support of its secured noteholders for a proposed amended plan of arrangement under the Companies’ Creditors Arrangement Act.
“We continue to receive and consider input from various parties on further amendments to the plan in an effort to secure a consensual deal that improves our financial structure and that addresses the interest of creditors, our workforce, pensioners and community leaders,” said Kevin Clarke, Catalyst president and CEO in a statement. “In the meantime, the sales and investor solicitation process is proceeding so that regardless of which restructuring pathway is ultimately agreed to, Catalyst can emerge from creditor protection in an effective and timely manner.”
The proposed changes to the plan of arrangement include the compromise of certain extended health benefits plans for former Catalyst salaried employees, which would give the pension groups a vote on the amended plan. Catalyst said it has been advised there is substantial support for the amended plan by the pensioners. As well, certain holders of unsecured notes who previously voted against the plan of arrangement or did not vote on it have indicated that they would support it. “There may be additional unsecured claims voted in favour of the amended plan that when combined with the foregoing would be sufficient to yield creditor approval from the unsecured class,” the company said.
Catalyst has also proposed modifications to its salaried pension plan to provide for a special portability election option and solvency funding relief, which require provincial government approval. The minister of finance has confirmed that he is prepared to submit the proposal to cabinet for its consideration with a recommendation in favour, the company said. Catalyst estimates that it would save approximately $7 million annually if these modifications were implemented following a successful plan of arrangement.
In the event that Catalyst obtains the requisite support of its secured noteholders, it will seek a court order to hold another meeting of the secured and unsecured creditors to vote on the amended plan.
Meanwhile, the company will continue to implement the court-approved sale and investor solicitation process. It announced last week that a number of parties have expressed interest in participating in the procedures.
Meanwhile, MLA Colin Hansen, former BC finance minister, was appointed by Premier Christy Clark to work with pensioners, communities and unions. Hansen said both Catalyst and groups representing salaried employees and pensioners have asked the province to authorize extending the period of time by which the company can make the pension plan whole. Currently, the plan has an estimated $115 million shortfall. “Typically when these kind of cases arise, it’s usually the pension associations that resist the extension of the amortization period,” said Hansen. “In this case I think the two pension groups recognize that that’s going to be a very important component in the viability of the company and the ability of the company to have a more sound financial footing by which they can tackle that problem over a slightly longer period of time.”
There has been a lot of work done by government to go to a 15-year amortization period, Hansen added. “That’s something that is unprecedented to the best of my knowledge. But these are certainly unique circumstances and the finance minister has now agreed that he will take that forward to cabinet to secure the necessary orders-in-council to make that happen.”
All of the stakeholders see a revote on the initial restructuring offer or a new restructuring offer being put to a vote as a best possible outcome, Hansen also said. “There’s an expectation that if there were another vote, it would in fact be successful,” he said. “If we can find a way that the province can be supportive in other ways, then we’re exploring that. That’s being actively worked on.”
Gary McCaig, a retired Catalyst employee who lives in Port Alberni, said the pensioners have agreed to significant compromises in health benefits to support a second attempt at restructuring valued in the tens of millions of dollars.
A second vote requires widespread support from the different creditor groups, McCaig said. “They would not bring it forward if it looked like it had no hope,” he said.
