Tag Archives: Terrace Bay Pulp

Some updates from Terrace Bay Pulp:

• Insurance: Terrace Bay Pulp has general liability insurance until May 31, 2012. The company has made efforts to re-establish Replacement Property Insurance, but the only quote secured totaled $2.2 million per year with a limit of $50 million, subject to a $10 million deductible. This amount was deemed too expensive for a mill that is not operating, so the general liability insurance alone will be maintained.
• Green Transformation Program Projects: Terrace Bay Pulp had been participating in two projects under the federal Green Transformation Program. The company had already received funding of $420,000 for these projects. Terrace Bay Pulp sought and obtained a court order during its creditor protection proceedings authorizing it to finish these projects. At this time, work has not been restarted on these projects and Terrace Bay Pulp has not been able to pay the $420,000 it owes to contractors in relation to work on completed on these projects prior to November 2011. At this time, it seems unlikely that these projects will be fully completed by their March 31, 2012 deadline.
• Sales Process: In regards to the sales process, interested parties have executed confidentiality agreements, and Ernst & Young, as court appointed monitors, said earlier this week that they were expecting to receive letters of intent by the Feb. 15 deadline outlined in its sales process.
• Extension: Terrace Bay Pulp’s creditor protection period is set to expire on Feb 24. The company is seeking an extension to April 27, 2012, allowing it to continue the sales process, sell its other real estate (nine-hole golf course, undeveloped lakefront land and townhouses in the community of Terrace Bay), as well as to complete repairs on the blow tank and stabilize the mill.

Source: Ernst & Young

The document listing Terrace Bay Pulp‘s creditors is 8 pages long and totals $41,456,859.90 Canadian, and another $1,531,404.42 is owed in U.S. Funds.

The biggest creditor is the Ontario Government at $24,166,666.00

Many of the companies owed are in Terrace Bay and Thunder Bay, Ontario, ranging from chemical companies, to fuel supplies, trucking and transportation companies, office equipment providers, couriers, engineering firms, mechanical equipment, rental, and service providers, logging companies, and local food and accommodation providers.

View the full list [.pdf]

Terrace Bay Pulp is now in a period of creditor protection through the Companies’ Creditors Arrangement Act (CCAA).

Ernst & Young Inc. has been appointed as Monitor by the Ontario Superior Court of Justice.

The initial court order has provided a stay of proceedings until February 24, 2012. During the stay period, the company is unable to make payments on the supply of goods or services prior to January 25, 2012, unless specifically mentioned in the court order. All parties are prohibited from commencing or continuing legal action against Terrace Bay Pulp during the stay period.

What Happened?

Terrace Bay Pulp completed its annual major shutdown just prior to the explosion of a blow tank on October 31, 2011 that resulted in the death of an employee. The unexpected shutdown that occurred as a result of the explosion happened at a time when the mill was vulnerable to additional expenses and a lack of production due to the annual shutdown. This resulted in a major liquidity crisis at a time when pulp prices were declining.

Terrace Bay Pulp told the court the declining market conditions, the liquidity crisis, and the upward impact on costs of production due to the loss of equipment damaged in the explosion resulted in their decision to idle the mill.

The mill was restarted briefly after the explosion only to convert the remaining raw material to finished goods.

Due to their liquidity crisis, Terrace Bay Pulp was unable, financially, to replenish the raw materials necessary to resume operations at the mill.

Financial Status

As of December 31, 2011 the company had just over $4 million in cash. Combined with net receivables, inventories, cpaital, and other assets, Terrace Bay Pulp has assets worth $46,290,607.

There are approximately 375 employees of the mill (50 non-union, 325 union). There are two unions representing workers at the mill – the United Steelworkers (Local 665) and the International Brotherhood of Electrical Workers (Local 1861). Most of the mill’s employees have been laid off.

As of December 31, 2011 the company is up to date with its contributions to its employees’ defined contribution pension plan.

The mill’s 4 executives (Wolfgang Gericke, Taras Sawula, Russell York, and Aaron Blazina) are employed by Buchanan Sales Inc. and will continue to perform various executive functions at the mill central to the sales process. The court has approved Gericke’s request that Terrace Bay Pulp reimburse Buchanan Sales Inc. for their services at rates of $75 to $100 per hour.

Terrace Bay Pulp has received financing from Callidus Capital Corporation and the province of Ontario for its operations. All amounts owing to Callidus have been repaid.

The province of Ontario is currently owed over $24 million and is the primary secured lender for Terrace Bay Pulp.

The Computershare Trust Company of Canada is the trustee for a promissory note of $30 million owed to unsecured creditors’ claims from the company’s last restructuring.

The Township of Terrace Bay is owed $571,000 in deferred municipal realty taxes.

Thunderpine (a party related to the Buchanan Group) has four liens registered against a piece of equipment (a Komatsu Wheel Loader) owed by Terrace Bay Pulp and repaired by Thunderpine.

There are $9.2 million of construction lien claims registered on the mill’s property. The company plans to pay for many of these claimants from funds they will be receiving from Natural Resources Canada through the Pulp and Paper Green Transformation Program in connection with two capital investments underway at the mill to reduce emissions and improve biomass power generation. (The court has granted the company permission to complete these projects by their March 31, 2012 deadline).

$432,000 is owed to other members of the Buchanan Group for the supply of goods and services.

If a going concern sale is not completed, the mill will owe its employees severance and termination payments.

Certain members of the mill’s management team have been charged with Occupational Health and Safety Act offences in connection with an accident that occurred in January 2011. Because these employees are key to restarting the mill, their defence will be funded by Terrace Bay Pulp. The company has asked that $200,000 is put towards the legal counsel of these employees. The explosion on October 31 is still under investigation.

Insurance of the mill expires on January 31, 2012. The company is currently working towards an insurance claim to replace and repair equipment damaged by the October 31, 2011 explosion.

The company plans to sell its existing pulp inventory for cash flow during this period of creditor protection.

Sales Process

The court has permitted Terrace Bay Pulp to lay off or terminate the employment of any of its employees, as well as downsizing or permanently close the mill. Terrace Bay Pulp has been authorized by the court to sell its assets or shares before April 16, 2012. At this time, Terrace Bay Pulp projects it will run out of cash by the end of April.

The company is now soliciting non-binding letter of intent from interested bidders by February 15, 2012. The letters of intent will be considered by the company, the monitor, and the province of Ontario, who will limit the bidders to a list of qualified bidders.

All qualified bidders will be notified by February 17, and will be invited to tour the facility and meet with management, labour unions, and representatives from the province.

All final offers will be due on March 16. One qualified bidder will be selected as the potential purchaser by March 19. The sale should be concluded by April 16.

Terrace Bay Pulp would like to sell the mill as a going concern, and is prepared to maintain heat and basic operations at the mill to keep the mill from deteriorating, but will consider purchase offers from liquidators.

If a sale is not concluded by April 16, the company will be required to use whatever cash it has left to completely shut down and decommission the mill.

Golf Course and Lake Front Property

The company’s assets that are not used in connection with the operation of the mill, including a golf course and certain lake front real estate, will be marketed. Their sale will be subject to court approval.

Previous Financial Problems

This isn’t Terrace Bay Pulp’s first period of creditor protection.

Terrace Bay Pulp previously filed for creditor protection on March 11, 2009, and emerged from those proceedings on September 15, 2010.

The mill was idle from February 23, 2009 until October 4, 2010.

About the Mill

The Terrace Bay Pulp mill was constructed in 1948 by the Kimberly-Clark Corporation.

Neenah Paper acquired the mill from Kimberly-Clark in 2004.

Currently Terrace Bay Pulp is a wholly-owned subsidiary of Lucky Star Holdings Inc. and is one of several companies in what is sometimes referred to as the Buchanan Group. In 2006, the Buchanan Group acquired the mill from Neenah Paper.

The mill is capable of producing various blends of northern bleached softwood kraft pulp and northern bleached hardwood kraft pulp, together with certain other byproducts.

The mill has two full integrated pulp lines, and three integrated pulp machines, with a rated capacity of approximately 550,000 air-dried metric tonnes of pulp per year (hardwood and softwood combined).

Source:
Ernst & Young

Terrace Bay Pulp will not be restarting operations as scheduled on March 1st.

And now the mill is for sale.

It is believed that the current owner, The Buchanan Group, headed by company founder Ken Buchanan Sr., has lost its financial backer. Terrace Bay Pulp exited creditor protection in the fall of 2010 with the help of $30 million in capital from Toronto lender Callidus Capital Corporation, and a $25 million loan from the province of Ontario.

The community of Terrace Bay, Ontario sensed there was bad news coming about their mill. Union officials said the company unexpectedly paid out about $2 million in vacation pay last month.

The mill announced it was taking 3 months of downtime starting on November 30, 2011.

In 2006 it appeared the mill was about to be torn down, but The Buchanan Group made a deal to transfer to assets of the mill to them from Neenah Paper for $18 million.

Read more:
Northwest pulp mill for sale (The Chronicle Journal)

Terrace Bay Pulp has decided to take 3 months of downtime, starting on November 30.

There had been rumours for months that the pulp mill was struggling. Terrace Bay’s mayor, Mike King, said he believes the decision to idle the mill is simply the fallout from the ongoing slump in the global economy. King said he remains confident that the mill will reopen at the end of February as the company has forecast. “They told me that they will continue to make repairs and invest in the mill during the shutdown, so we take them at their word,” said King. “This is not an issue of (the company) walking away.”

The shutdown is not believed to be linked to last month’s blow tank explosion, which killed an employee.

Terrace Bay Pulp restarted in September 2010 after being idle for 20 months after it was able to obtain refinancing, including a $25 million loan from the province.

Terrace Bay Pulp is owned by the Buchanan Group and employees 350 people.

Read more:
Mill faces shutdown (The Chronicle Journal)

Operations are expected to resume at Terrace Bay Pulp by this weekend.

The mill has been shut down since the explosion on October 31 of the large blow tank killed one worker and injured two others.

The main boiler was expected to be restarted last night. There are two other blow tanks on site that will be used for producing pulp.

The workers are expected to be recalled for work by Friday.

The investigation into the fatal explosion is continuing.

Read more:
Terrace Bay Pulp should resume operations this weekend: Union (TbNewsWatch)

Local residents have identified TJ Berthelot as the victim of Monday’s explosion at Terrace Bay Pulp.

TJ Berthelot was from nearby Schreiber, Ontario. In his late twenties, Berthelot leaves behind a wife and a baby daughter.

Two other people were taken to hospital for non-life threatening injuries.

The mill is expected to be down for at least the rest of the week while the explosion is investigated.

The fire marshal, police, and the Ontario Ministry of Labour are investigating. Two labour inspectors and one engineer have been assigned to the case.

Terrace Bay resident Mike Deslauriers said he smelled something like burning plastic and then he heard an explosion. The man said the explosion blew the roof off a brownstock tank at the back of the mill. (Brownstock is a part of the wood pulp digesting process.) The incident took place in what’s known as “the old mill” or the No. 1 mill.

Terrace Bay Mayor Mike King said the community is in mourning. He said serious accidents at the mill have been rare over the years. King said the mill has a pretty good safety record, but it’s a large complex with complicated machinery, and can be a hazardous place to work.

Read more:
Community in mourning after fatal accident – Witness says Terrace Bay Pulp building seemed to blow in on itself (CBC)
Mill blast claims life of young father (The Chronicle Herald)

There was an explosion yesterday at Terrace Bay Pulp in Terrace Bay, Ontario.

One person has killed, and two other were taken to the hospital with non-life threatening injuries. A large “blow tank” exploded while a worker was welding it, sending metal and debris flying.

The mill was evacuated after the incident and has ceased operations while the incident is being investigated by the Ontario Fire Marshal’s office, the coroner’s office, the Ministry of Labour and the Ontario Provincial Police’s North West Crime Unit.

Terrace Bay Pulp has been back in operation since last November. Owned by the Buchanan Group, the mill was idled for 19 months while the company was under creditor protection. The mill was able to reopen after securing $55 million in government and private loans.

Read more:
Deadly Explosion (TbNewsWatch)
Tragedy at Terrace Bay Pulp (Chronicle Journal)
Reports of Explosion at Terrace Bay Pulp Mill (NetNewsLedger)

There was an upbeat ceremony in Terrace Bay, Ontario yesterday to celebrate the restarting of the Terrace Bay Pulp mill.

It was a long and emotional 19 months for the company and the workers while Terrace Bay Pulp sought credit protection to restructure.

After losing their financial support twice, Terrace Bay Pulp’s luck turned around when they looked towards a little known Toronto lender, Callidus Capital Corporation.

Last month, Callidus Capital Corporation came through with $30 million in investment capital that allowed the mill to finally reopen.

Terrace Bay Pulp founder Ken Buchanan Sr. paid tribute Monday to Callidus president Sam Fleiser, who was among the crowd.

“Sam worked diligently to help us get where we are today,” Buchanan said. “He helped lift this mill off the ground.”

Just four years ago it was Buchanan himself who was seen as the saviour in Terrace Bay, after his company took over the mill from Neenah Paper who was making plans to scrap the operation.

At the ceremony yesterday, Buchanan said, “This is the second opening we‘ve had, and I hope it‘s the last. It‘s been a very hard grind to get where we are.”

Read more:
Back in business (The Chronicle Journal)

Terrace Bay Pulp has been cleared for re-opening.

The Buchanan Group has announced that late last night, it exited creditor protection.

Now 340 people can be recalled to their jobs at the mill in Terrace Bay, Ontario.

The deal was finalized last night with $30 million in investment capital provided by Callidus Capital Corporation.

With Callidus’ investment, Terrace Bay Pulp has ensured that it will receive a $25 million loan from the province of Ontario. This loan was conditional on finding additional financing that would used to pay off nearly $35 million that Terrace Bay Pulp owes to creditors.

Currently the company is aiming to have the mill producing pulp by the first week of October.

Woodland operations will restart immediately.

Read more:
Back in Business (TbNewsWatch)