Retired salaried employees of Catalyst Paper Corporation stand to lose a substantial portion of their pensions if the company’s restructuring plan fails.
Catalyst has been under Companies’ Creditors Arrangement Act (CCAA) creditor protection since late January.
A creditor vote on a restructuring plan the company has proposed under the CCAA process will be held on April 23.
If the restructuring plan is not approved by creditors, Catalyst has asked for court approval to sell its remaining mills.
The company and the 2016 noteholders have put forward a sales and investor solicitation process, which includes a “stalking horse bid.” This means the 2016 noteholders are prepared to bid to become the new owners of the company.
Jim Donnelly was the investment recovery manager at the Powell River division before he retired in 2007 after working for the company for 29 years. He said salaried pensioners hold about 10 per cent of the company’s debt and the salaried pension plan is underfunded by $73.5 million.
“All of us hope very strongly that Catalyst management is able to sail through this creditor protection and continue their operations,” he said. “If they do, then this is not a problem to any of us.”
If the company doesn’t sail through, however, Donnelly added, “Our pensions are at risk.”
There are between 1,000 to 1,100 salaried pensioners, Donnelly said, who are facing a cut of up to 50 per cent. In Powell River, there are about 200 salaried pensioners, he added. “We’re all hoping that our company can make it through this creditor protection successfully and carry on business under its reorganization,” he said. “But, if it doesn’t, the fact remains there are about 1,000 people who stand to lose 40 to 50 per cent of their pension income.”
The Superintendent of Pensions has allowed Catalyst relief from making regular contributions to the salaried pension plan for several years, Donnelly explained, because the company has pleaded it was in a difficult financial position. “What that’s done is run down the value of the pension plan, to the point where it’s $73.5 million underfunded,” he said.
Most people don’t realize that under Canadian law, pensions are not protected in an insolvency, Donnelly explained. “We’re considered unsecured creditors,” he said. “If the company were to go into bankruptcy or into a forced court-approved sale, the pension liability does not have to be honoured.”
Hundreds of people have been lobbying the federal government for a number of years to change the federal laws, to be similar to the rest of the world where pensions have a priority in bankruptcies, Donnelly added. “People who worked for Catalyst in the United States who are on pensions are completely protected,” he said.
The group of Catalyst salaried employees and pensioners has hired Koskie Minsky LLP, a Toronto law firm, to represent it in BC Supreme Court during the creditor protection process.
Gary McCaig, a retired Catalyst employee who lives in Port Alberni, said if the restructuring plan fails, then the company goes through a sales process. “Once they go into that process, the future becomes much less certain,” he said. “We know for sure that under the present sales proposal, our pension plan would be abandoned.”
No one knows who would ultimately own the company if the sales process is initiated, McCaig said, or “how many mills would be run, whether some of the assets would be sold off or shut down, or what would continue and what wouldn’t. It’s a very high risk and very uncertain process for everyone.”
McCaig thinks municipal, provincial and federal governments should provide the support Catalyst requested, including providing a more competitive industrial tax rate, providing funds to support new hiring and training programs and not apply the provincial sales tax to BC Hydro rates.
Donnelly pointed out that the City of Powell River’s mayor and council and the previous mayor and council should be recognized for tax relief to Catalyst and trying to make the business climate better.
