Fraser Papers has filed a consolidated plan of compromise or arrangement with the Ontario Court overseeing its restructuring proceedings under the Companies’ Creditors Arrangement Act (CCAA). These materials will also be filed with the U.S. Court in Delaware, which oversees the Fraser Papers’ ancillary proceeding under Chapter 15 of the U.S. Bankruptcy Code.
Fraser Papers is seeking an order to authorize a meeting of its creditors on December 20, at which time the creditors will be asked to vote on the plan.
If the plan is approved by creditors, Fraser Papers intends to appear before the Ontario Court on December 22 and the U.S. Court on December 23 to seek the necessary court approvals to implement the plan.
The key component of the restructuring plan is a commitment from Brookfield Asset Management Inc., Fraser Papers largest shareholder, to purchase Fraser Papers’ remaining operating assets and by continuing to provide debtor-in-possession financing to Fraser Papers during the plan’s implementation.
As for the company’s creditors, under the restructuring plan, they can expect:
- repayment of all secured claims against the company
- continuing employment for substantially all active employees of the company’s U.S. operations
- a cash distribution of up to $500.00 for each unsecured creditor claim against the company
- the pro-rata distribution of all proceeds from the sale of the company’s assets (including the sale of the U.S. operating assets) to trusts established for the benefit of unsecured creditors, in satisfaction of all outstanding unsecured creditor claims
Brookfield Asset Management has agreed to acquire the Fraser Papers companies through which the Company carries on its U.S. operations for cash proceeds of $15.0 million. In addition, the U.S. companies of Fraser Papers that are being sold to Brookfield Asset Management will continue to be responsible for certain specified liabilities. All unsecured liabilities or claims that existed at the time Fraser Papers filed for protection under the CCAA will be compromised against all of the Fraser Papers companies under the plan.
Fraser Papers’ U.S. operations consist of two lumber mills in northern Maine (one of which is currently not operating) and a paper mill in northern New Hampshire which has been closed indefinitely. Fraser Papers has entered into a separate agreement with a third party to sell the Gorham Mill. If that separate transaction or any other sale of the Gorham Mill is completed prior to the time of the closing of the transaction with Brookfield Asset Management, the cash proceeds payable on closing of the transaction will be reduced by the proceeds received on the sale of the Gorham Mill, up to a maximum of $2.65 million. If the Gorham Mill is not sold to another party prior to the closing of the transaction, it will be purchased by the Brookfield Asset Management as part of the transaction.
Subject to completion of the transaction pursuant to the restructuring plan and sufficient cash being available to make such payment, the plan provides for a cash distribution for each unsecured claim that has been accepted by the court-appointed Monitor, up to the lesser of: a) the amount of each unsecured claim, and b) $500.00.
The plan contemplates the distribution of all proceeds of the transaction and all prior sale transactions to three trusts that will be established for the benefit of unsecured creditors with Pre-filing Claims, once all secured claims are paid in full. The proceeds include:
- a 49% percent interest in the common equity of Twin Rivers Papers Company Inc., the company that purchased the specialty papers business of Fraser Papers
- unsecured notes issued by Twin Rivers with a face amount of approximately $44 million
- any cash that is not otherwise required to repay secured creditors in full, or cover the costs of the CCAA proceedings
To read the full text of the restructuring plan documents and all related documents on the Monitor’s website, visit www.pwc.com/car-fraserpapers.
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