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Bear Island hopes for plan OK

by Jamie Mason | Published September 9, 2011 at 10:00 AM

Newsprint producer Bear Island Paper Co. LLC is closing in on distribution of the proceeds from the sale of its assets.

Chief Judge Douglas O. Tice Jr. of the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond is set to consider approval of the disclosure statement for the debtor's liquidation plan on Oct. 5.

Bear Island, a unit of fellow debtor White Birch Paper Co., hopes to schedule a Nov. 14 voting deadline for creditors and Nov. 22 confirmation hearing.

The debtors won approval on Oct. 13 in the U.S. and Sept. 24 in Canada to sell their assets to stalking-horse bidder BD White Birch Investment LLC for $236.1 million. The sale price consists of $94.5 million in cash, a $78 million credit bid, $36.7 million in assumed liabilities and $26.9 million in cure costs.

The buyer is an investment vehicle formed by first-lien lenders Black Diamond Capital Management LLC, Credit Suisse Loan Funding LLC and Caspian Capital Advisors LLC, which holds about 65.5% of some $424.9 million in debt.

According to court papers, the debtor still is negotiating the sale closing with BD White Birch. Once the sale is completed, the debtor will liquidate any remaining assets.

Under the plan, filed Aug. 24, priority nontax claims would be repaid in full in cash on the plan's effective date. The debtor's $140 million debtor-in-possession loan from first-lien lenders led by Credit Suisse AG and including Black Diamond Commercial Finance LLC also would be paid in full in cash.

First-lien lenders would receive a pro-rata share of a creditor fund and a pro-rata share of proceeds from the sale of their collateral. The creditor fund will consist of sale proceeds, causes of action and any wind-down proceeds.

Second-lien creditors, owed $105.07 million, also would receive a pro-rata share of the creditor fund, to the extent permitted by an intercreditor agreement. Credit Suisse First Boston, Credit Suisse First Boston Toronto Branch and TD Securities (USA) LLC provided the second-lien loan on April 8, 2005.

General unsecured creditors, owed $1.4 million, and holders of intercompany claims, owed $135.92 million, also would receive a pro-rata share of the creditor fund.

Equity holders would be wiped out.

Bear Island did not estimate creditor recoveries under the plan.

The Ashland, Va., company filed for Chapter 11 on Feb. 24, 2010. On the same day, White Birch, formerly known as Brant-Allen Industries Inc., filed for protection under Canada's Companies' Creditors Arrangement Act in Montreal and Chapter 15 in Richmond.

Bear Island has a mill in Ashland and produces 235,000 tons of newsprint paper for customers in New York, Philadelphia, Baltimore and Washington. It has 200 employees.

The companies were forced to seek bankruptcy protection due to the overall decline in the world economy and its impact on demand for, and price and inventories of, newsprint.

White Birch said in documents that the drop in demand for newsprint from the fourth quarter of 2008 through the third quarter of 2009 led to a loss of $380 million in revenue.

Richard Cieri and Christopher Marcus of Kirkland & Ellis LLP in New York and Jonathan Hauser of Troutman Sanders LLP in Virginia Beach, Va., are debtor counsel.

AlixPartners LLP is Bear Island's financial adviser, and Lazard is its investment bank.

Benjamin Ackerly, Tyler Brown and Jason Harbour of Hunton & Williams LLP represent the official committee of unsecured creditors. FTI Consulting Inc. is financial adviser to the committee.

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Tags: asset sale | bankruptcy | Bear Island Paper Co. LLC | stalking-horse bidder | White Birch Paper Co.

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