End of paper making in Sault Ste. Marie? Details of St. Marys Paper sale
Who is buying St. Marys Paper?
A number company, 2319839 Ontario Inc., is in the process of purchasing St. Marys Paper.
Ernst & Young, as receiver of St. Marys Paper, describes 2319839 Ontario Inc. as a consortium of companies including an auctioneer, a real estate redevelopment company, a metals recycling company, and a forest products company.
In the purchase agreement, the Authorized Signing Offer for the purchaser is Justus Veldman. The purchasing company’s representing law firm is Mandryk, Stewart & Morgan of Tillsonburg, Ontario.
This purchaser may potentially seek to redevelop the mill into a biomass facility with a co-generation plant while liquidating the assets of the paper mill.
The purchase price has not been disclosed.
As a condition of sale, the employment of all the employees of St. Marys Paper will be terminated before the sale is closed.
The sale does not include the mill yard wood which is subject to a lien in favour of the Ontario Ministry of Natural Resources. Ernst & Young will continue to pursue a sale of the mill yard wood.
Who was interested in the mill? What was the sales process like?
- 36 parties executed confidentiality agreements to have access to the financial data and were offered visits to the site
- 14 parties visited the site
- 15 parties submitted letters of intent
- 9 parties submitted bids
- of the 9 bids, 3 were interested in operating certain aspects of the mill, or developing the mill into a biomass operation with a co-gen plant while liquidating all or some of the mill’s assets, 3 were from auctioneer firms, and 3 were from demolition firms
- minimal interest in operating the mill as a going concern or as a paper mill
- the 3 bids from parties planning to use a portion of the mill were focused on – but each of these parties presented significant closing risks with respect to closing the sale in a timely manner
- none of the bids would have generated significant proceeds to pay the mill’s debt to International Forest Products
- only 1 of the 3 bidders that wanted to operate a portion of the mill included a cash deposit – the other two were more an expression of interest. The party that included the deposit was a joint submission from two companies - one of which decided they were no longer willing to partner and withdrew from the sales process, and the other showed no evidence they had the financing to complete the sale
- Next the receiver moved on to those two demolition and auctioneering firms who had expressed interest.
- 3 bids were received from demolition and auctioneering firms. One was interested in operating certain parts of the mill or redeveloping the mill into a biomass operation while liquidating certain assets of the mill.
- another bid was received from a party who had not previously submitted a letter of intent
- the receiver evaluated the 4 bids and selected 2319839 Ontario Inc. as purchaser
Why does no one want to make paper at St. Marys Paper?
Parties interested in the mill said that in their view, the mill was uncompetitive in the current market and the cost to return the mill to an operating status would make the restart uneconomical for the purposes of manufacturing paper.
Debt owing to International Forest Products
The proceeds of the sale will go to International Forest Products as the first secured creditor, but it will not cover the amount indebted.
As of August 31, 2011, St. Marys Paper owes International Forest Products $7,621,606.14 In addition, the receivership process was funded by International Forest Products ($1.045 million) (including ongoing holding costs of the mill, security, insurance, other staff, electricity, etc).
Source: Ernst & Young
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