Print | Share | Reprint

Catalyst's noteholders bid $275M for assets

by Hayley Kaplan | Published April 9, 2012 at 9:09 AM

A group of Catalyst Paper Corp.'s first-lien noteholders will serve as stalking-horse bidder with a $275 million bid for the British Columbia specialty paper and newsprint producer if the company's reorganization efforts fail.

According to an April 1 monitor's report, CP Acquisition LLC, an entity controlled by the company's first-lien noteholders, is the debtor's stalking-horse bidder. Invesco Canada Ltd. owns the majority of the secured notes.

In making the offer, CP Acquisition would credit bid a portion of its claim, assume some of its existing notes and pay for the rest of the assets in cash.

The stalking-horse bidder is entitled to up to $1 million in expense reimbursement if it doesn't win an auction.

Justice Robert J. Sewell of the Supreme Court of British Columbia signed an order March 23 approving the solicitation process and CP Acquisition as Catalyst Paper's stalking-horse bidder, the latter only on the condition that the debtor fails to reorganize.

Catalyst will also sell two parcels, comprising 1,800 acres, of farm plantation land in Snohomish County, Wash. The company will sell the land to U.S. Golden Eagle Farms LP for approximately $3.6 million.

The land was once used as a farm for poplar trees in Canada. However, due to the weak economy, the company decided to sell the land and has been marketing it since 2008.

Sewell signed an order approving the sale on April 4.

The company said that if it fails to secure approval of its plan of arrangement under Canada's Companies' Creditors Arrangement Act by April 25, then it would pursue the solicitation process.

Under the proposed sale and solicitation process, bids would be due for the company 14 days after plan failure, and an auction would be held 73 days after the failure. A sale would close by July.

The monitor's report said the backup sale process was a consensual agreement between the parties in the case.

Catalyst entered into a plan of arrangement with certain noteholders on March 11.

Catalyst filed for CCAA protection on Jan. 31 after scrapping a recapitalization plan it previously proposed under the Canada Business Corporations Act.

Catalyst also filed for Chapter 15 protection on Jan. 17 with 16 affiliates in the U.S. Bankruptcy Court for the District of Delaware in Wilmington to seek recognition of its CBCA case as its foreign main proceeding.

Judge Peter J. Walsh on March 5 granted Catalyst recognition of the CCAA proceeding as a foreign main proceeding under Chapter 15, which protected the company's U.S. assets while it restructures in Canada.

Catalyst produces paper and pulp for commercial printers, publishers and paper manufacturers in North America, Latin America, the Pacific Rim and Europe. Catalyst is the region's only producer of lightweight coated paper and the world's largest manufacturer of paper for telephone and other directories, court documents said.

The company has manufacturing plants in British Columbia and Arizona with an annual production capacity of approximately 1.9 million tons.

Catalyst said in court documents that its gross revenue has steadily decreased since 2006 as a result of the reduced global demand for paper products. The company blamed a decline in print advertising and an increase in online and media advertising for the slide in demand. In addition, raw material prices have increased.

According to the company's third-quarter financial report, it lost C$266.3 million on C$941.7 million in sales for the first three quarters of 2011 after losing C$407.2 million on C$895 million in sales over the same period in 2010.

In October, Catalyst realized that it wouldn't be able to make its debt payments on its $390.4 million in senior secured notes. As a result, the company entered into restructuring talks with its creditors, court papers said.

In addition, the company blamed its financial state on a fire at its Snowflake Mill that destroyed a raw materials stockpile, resulting in a C$4.1 million loss.

Catalyst listed C$1.45 billion in assets and C$1.31 billion in liabilities as of Sept. 30 in its latest financial report.

Court papers show asset management firm Third Avenue Management LLC is Catalyst's largest equity holder, with a 29% stake. No other entity owns more than 10%.

Van C. Durrer II and Christopher Morgan of Skadden, Arps, Slate, Meagher & Flom LLP are counsel to Catalyst in the Chapter 15 case.

PricewaterhouseCoopers Inc. is the company's monitor. Fasken Martineau DuMoulin LLP counsels PricewaterhouseCoopers.

Bill Kaplan of Blake, Cassels & Graydon LLP is debtor counsel in the CCAA case, and Nancy Turner of Perella Weinberg Partners LP is Catalyst's financial adviser.

Michael S. Stamer and Stephen Kuhn of Akin Gump Strauss Hauer & Feld LLP and Ryan Jacobs of Fraser Milner Casgrain LLP represent the supporting secured noteholders; Moelis & Co. LLC is their financial adviser.

Kramer Levin Naftalis & Frankel LLP and Robert Chadwick of Goodmans LLP are counsel to the supporting unsecured noteholders; Houlihan Lokey Capital Inc. is their financial adviser.

Share:

Tags: Bankruptcy | Catalyst Paper Corp. | CP Acquisition LLC | Invesco Canada Ltd. | stalking horse

Restructuring

Catalyst's noteholders bid $275M for assets

Free preview

Meet the journalists

Hayley Kaplan

Reporter/researcher, bankruptcy & restructuring

Movers & Shakers

Video

A fast start toward an uncertain finish

Sectors