Catalyst Paper announces Amendments to Plan of Arrangement
RICHMOND, BC, May 15, 2012 /PRNewswire/ – Catalyst Paper today announced that
it has amended its proposed Plan of Arrangement (the Plan) under the Companies’ Creditors Arrangement Act. The Plan as so amended (the Amended Plan) will be considered by Catalyst Paper’s
secured and unsecured creditors at the meetings scheduled for May 23,
2012 (the Meetings).
“We’re pleased that over the past weeks, the various stakeholders,
advisors and the company have worked diligently to craft an agreement
that sizably reduces the company’s debt level,” said Kevin J. Clarke,
President and Chief Executive Officer. “This agreement, with the
support of creditors at the meetings on May 23, 2012, will enable
Catalyst to emerge from creditor protection with improved liquidity and
the capacity to return and sustain normal trade terms for the
foreseeable period.”
The court-appointed monitor (the Monitor) is recommending that creditors
vote in favour of the Amended Plan at the Meetings. Catalyst Paper’s
Board of Directors is unanimously recommending that all holders of
First Lien Notes, Unsecured Notes and General Unsecured Claims vote in
favour of the Amended Plan at the Meetings.
For more information please refer to Catalyst Paper’s information
circular dated March 23, 2012 (the Circular) available on SEDAR (www.sedar.com), EDGAR (www.sec.gov) and Catalyst Paper’s web page (www.catalystpaper.com). Terms used in this news release that are defined in the Circular have
corresponding meanings. In the event there is any inconsistency between
the terms of the Amended Plan and the summary of the Amended Plan set
forth below, the Amended Plan will govern.
The principal changes to the Plan include:
-- A reduction of US$120 million in the amount of notes to be
issued under the Amended Plan so that the total debt reduction
under the Amended Plan will be US$435 million (rather than the
US$315 million reduction under the Plan);
o the reduction of the principal amount of New First Lien Notes to be
issued under the Plan from US$325 million to US$250 million; and
o the elimination of the New First Lien Coupon Notes to be issued
under the Plan (approximately US$45 million);
-- the distribution of 50% of the net proceeds (PREI Proceeds
Pool) from the sale of Catalyst Paper's interest in Powell
River Energy Inc. and Powell River Energy Limited Partnership
(PREI Interest) to Unsecured Creditors who do not receive a
Convenience Cash Amount or elect to receive equity;
-- 100% of the New Common Shares to be issued to holders of the
First Lien Notes subject to the ability for Unsecured Creditors
to elect (Equity Election) to acquire up to 600,000 New Common
Shares (4%) rather than receive cash from the PREI Proceeds
Pool or the Maximum Convenience Claims Pool; and
-- the elimination of the issuance of the Warrants under the Plan.
There were no changes to the provisions of the Plan relating to the
payment of Convenience Cash Amounts.
The Amended Plan
Specifically, the Amended Plan treats each of the creditor classes as
follows:
11% Senior Secured Notes due 2016 (First Lien Notes)
-- Pursuant to the Amended Plan, Catalyst Paper's US$390.4 million
aggregate principal amount of outstanding First Lien Notes will
be exchanged for:
o US$250 million aggregate principal amount of 11% first lien notes
due November 1, 2017 (New First Lien Notes) allocated as to US$182
million on account of the Class A Notes and US$68 million on
account of the Class B Notes; and
o 14.4 million New Common Shares of Catalyst Paper (being 100% of the
outstanding common shares of Catalyst Paper subject to dilution
from the issuance of common shares to Unsecured Creditors who make
the Equity Election described below and under any Management
Incentive Plan), 10,502,352 New Common Shares on account of the
Class A Notes and 3,897,648 New Common Shares on account of the
Class B Notes.
Prior to this amendment, the Plan provided that the outstanding First
Lien Notes would be exchanged for (a) US$325 million aggregate
principal amount of New First Lien Notes (b) 80% of Catalyst Paper’s
New Common Shares and (c) New First Lien Coupon Notes in a principal
amount equal to accrued and unpaid interest on the New First Lien Notes
as of the Effective Date.
7 3/8% Senior Notes Due 2014 (Unsecured Notes)
-- Pursuant to the Amended Plan, Catalyst Paper's US$250 million
aggregate principal amount of outstanding Unsecured Notes will
be exchanged as follows:
o unless the holder of Unsecured Notes has made an Equity Election,
such holder will receive its pro rata share (calculated by
reference to the aggregate amount of all claims of Unsecured
Creditors allowed under the Plan) of the PREI Proceeds Pool; and
o each holder of Unsecured Notes may elect (the Equity Election) to
receive its pro rata share (calculated by reference to the
aggregate amount of all claims of Unsecured Creditors allowed under
the Plan) of 600,000 New Common Shares of Catalyst Paper rather
than participate in the PREI Proceeds Pool. An Equity Election Form
and information on how to make such election will be provided to
Unsecured Creditors following the Sanction Order.
General Unsecured Claims
-- Pursuant to the Amended Plan, in exchange for all General
Unsecured Claims, each holder of an allowed General Unsecured
Claim shall receive:
o Unless the holder of such General Unsecured Claim has made an
Equity Election or a Cash Election or is a Convenience Creditor,
such holder will receive its pro rata share (calculated by
reference to the aggregate amount of all claims of Unsecured
Creditors allowed under the Plan) of the PREI Proceeds Pool;
o Each holder of an allowed General Unsecured Claim who has not made
a Cash Election may elect by way of the Equity Election to receive
its pro rata share (calculated by reference to the aggregate amount
of all claims of Unsecured Creditors allowed under the Plan) of
600,000 New Common Shares of Catalyst Paper rather than receive
such holder's pro rata share of the PREI Proceeds Pool or
Convenience Cash Amount. Holders of General Unsecured Claims who
have filed a Cash Election under the prior Plan and who wish to
file an Equity Election under the Amended Plan must revoke their
prior Cash Election prior to the date of the meetings. See
"Revoking a Cash Election" below; and
o Each holder of a General Unsecured Claim equal to or less than
C$10,000 (unless such holder makes an Equity Election) and holders
of General Unsecured Claims in an amount over C$10,000 who validly
file a Cash Election (pursuant to which the allowed amount of such
holder's General Unsecured Claim will be reduced to C$10,000), will
receive cash in an amount equal to 50% of such holder's allowed
General Unsecured Claim, provided that the aggregate amount of cash
payable to all such holders shall not exceed C$2.5 million.
Prior to this amendment, the Plan provided that the outstanding
Unsecured Notes and General Unsecured Claims would be exchanged for (a)
20% of Catalyst Paper’s New Common Shares (b) Warrants exercisable, on
a cashless basis, to acquire up to 15% of the fully diluted New Common
Shares of Catalyst Paper for up to four years from the effective date
of the Plan and (c) in respect of holders of General Unsecured Claims
in an amount equal to or less than C$10,000 (or who agreed to reduce
their claim to such amount), cash in an amount equal to up to 50
percent of such holder’s General Unsecured Claims (unless they elected
to receive the New Common Shares and Warrants referred to above),
provided that the aggregate amount of cash payable to such holders
would not exceed C$2.5 million.
PREI Proceeds Pool
Under the Amended Plan, Catalyst has agreed to use commercially
reasonable efforts to sell all of its right, title and interest in
Powell River Energy Inc. and the Powell River Energy Limited
Partnership (PRELP) comprising 50,001 common shares in Powell River
Energy Inc., long term subordinated debt of $20.8 million owed by
Powell River Energy Inc. to Catalyst Paper Energy Holdings Inc. and a
49.95% limited partnership interest in PRELP. The PREI Proceeds Pool
shall consist of an amount equal to 50% of the net proceeds received by
Catalyst on account of the sale of the PREI Interest. The sale shall be
conducted pursuant to an amended sale and investor solicitation
process, which would likely not include a stalking horse bid, to be
established and approved by the Supreme Court of British Columbia
(Court) following obtainment of the Sanction Order for the Plan and is
subject to the terms of a contractual right of first refusal in favour
of Catalyst’s joint venture partner.
Power River Energy Inc. owns two hydroelectric dams near the Powell
River mill, with a combined generating capacity of 83 megawatts.
Pursuant to a power purchase agreement between Catalyst Paper and Power
River Energy Inc., Power River Energy Inc. provides the power generated
by its facilities to Catalyst Paper at a fixed rate approximating
current British Columbia Hydro and Power Authority rates. Power River
Energy Inc.’s hydroelectric facilities supply approximately 40% of the
annual power needs of the Powell River mill, although this amount
varies depending on hydrological conditions. The power purchase
agreement will continue following the sale.
New First Lien Notes
-- There are no material changes to the terms of the New Notes
under the Amended Plan other than as described above and other
than:
o the Priority Lien Debt Cap will be reduced from US$400 million to
US$325 million;
o the definition of Threshold PIK Notes will be revised to refer to
New Notes outstanding, if any, in excess of US$250 million (as
opposed to US$325 million), excluding any New Notes issued after
the issue date (other than any PIK notes); and
o the maturity date of the New Notes will be November 1, 2017 rather
than October 30, 2017.
Required Approvals
Implementation of the Amended Plan will be subject to the requisite
approval by Catalyst Paper’s secured and unsecured creditors at the
Meetings to be held on May 23, 2012, the approval of the Court and, to
the extent applicable, the approval of the United States Bankruptcy
Court for the District of Delaware. In the event the Amended Plan is
not approved at the Meetings, Catalyst Paper will commence a sale
transaction in accordance with certain agreed and Court-approved sale
and investor solicitation procedures.
Conditions and Timing of Distributions
Implementation of the Amended Plan remains subject to a number of other
conditions including a condition that Catalyst shall have entered into
agreements with respect to a new ABL Facility and, if necessary, Exit
Facility, satisfactory to the Majority Initial Supporting Noteholders,
in consultation with the Initial Supporting Unsecured Noteholders. The
conditions are set out in the Amended Plan and in the Circular. Please
see below for information as to how to obtain a copy of these
documents. Under the Amended Plan, each of these conditions must be
satisfied within 45 days of the date of the Sanction Order unless such
condition is waived or the date for fulfillment is extended in
accordance with the provisions of the Amended Plan.
The Amended Plan contemplates that distributions to the holders of the
Unsecured Notes and General Unsecured Creditors (other than General
Unsecured Creditors who are receiving the Convenience Cash Amount) will
not be made until all claims of Unsecured Creditors being disputed have
been allowed or determined by Final Order in accordance with the Claims
Procedure Order.
Voting
Catalyst Paper’s Board of Directors is unanimously recommending that all
holders of First Lien Notes, Unsecured Notes and General Unsecured
Claims vote in favour of the Amended Plan at the Meetings. The Meetings
to consider the Amended Plan will be held on May 23, 2012 at the Westin
Wall Centre, Vancouver Airport, 3099 Corvette Way, Richmond, BC at
10:00 am for Unsecured Creditors (including holders of Unsecured Notes
and General Unsecured Claims) and 11:00 am for First Lien Noteholders.
For instructions on how to vote at the Meetings, please refer to the
Circular (available on SEDAR (www.sedar.com), EDGAR (www.sec.gov) and Catalyst Paper’s web page (www.catalystpaper.com). Please contact the Monitor with any questions regarding voting.
Revoking a Proxy
-- Individuals who have already submitted a proxy may revoke their
proxy by delivering to the Monitor a document specifying that
the proxy is revoked that is signed by the individual or the
individual's attorney duly authorized in writing.
-- Creditors who are not individuals who have already submitted a
proxy may revoke their proxy by delivering to the Monitor a
document specifying that the proxy is revoked that is signed by
a duly authorized officer or attorney thereof.
Such documents must be delivered to the Monitor at
PricewaterhouseCoopers Inc., 250 Howe Street, Suite 700, Vancouver,
British Columbia, V6C 3S7 (Attention: Patricia Marshall), phone:
604-806-7070 or email: catalystclaims@ca.pwc.com prior to the commencement of the Meetings.
Holders of First Lien Notes and Unsecured Notes who wish to change
voting instructions previously given should contact Globic Advisors,
Inc. (Attention: Robert Stevens) at One Liberty Plaza, 23(rd) Floor, New York, NY 10006, phone: 212-227-9699, facsimile: 212-271-3252
or email: rstevens@globic.com for additional information.
Revoking a Cash Election
Holders of General Unsecured Claims in excess of $10,000 who previously
filed an election (Cash Election) to receive cash for their General
Unsecured Claim may revoke their Cash Election by contacting the
Monitor (please see the contact information below) and completing the
form that will be provided by the Monitor. Any previously filed Cash
Election must be revoked prior to the date of the Meetings in order to
make an Equity Election.
Certain Canadian Federal Income Tax Considerations
The following discussion supplements the summary of certain Canadian
federal income tax considerations of the Restructuring located under
the heading “Certain Canadian Federal Income Tax Considerations” (the
Canadian Tax Disclosure) in the Circular. The following summary is of
a general nature only and is not intended to be, nor should be
construed to be, legal or tax advice to any particular Affected
Claimholder. This discussion is subject to the limitations,
assumptions and caveats set out in the Canadian Tax Disclosure.
Consequently, Affected Claimholders are urged to consult read carefully
the following discussion, the Canadian Tax Disclosure and to consult
their own tax advisors for advice as to the tax considerations in
respect of the Restructuring having regard to their particular
circumstances.
Residents of Canada
Pursuant to the Restructuring, Resident Affected Claimholders will
dispose of their First Lien Notes and will receive consideration
comprised of the New First Lien Notes and New Common Shares.
Similarly, Resident Affected Claimholders will dispose of their
Unsecured Notes or General Unsecured Claims, as applicable, and will
receive consideration comprised of a pro rata share of the PREI
Proceeds Pool, New Common Shares or cash, as applicable. In general,
the transfer by a Resident Affected Claimholder of its First Lien
Notes, Unsecured Notes or General Unsecured Claims for New Common
Shares, New First Lien Notes, PREI Proceeds Pool or cash, as
applicable, pursuant to the Restructuring will result in a gain or loss
as described in the Tax Disclosure. Resident Affected Claimholders
will be required to value their share of the PREI Proceeds Pool as of
the Effective Date based on all available facts and circumstances at
the time they file their tax returns. Because the amount of cash to be
received under the PREI Proceeds Pool is uncertain, the fair market
value of the PREI Proceeds Pool is not clear. A Resident Affected
Claimholder’s adjusted cost base of its pro rata share of the PREI
Proceeds Pool received pursuant to the Restructuring will be equal to
the fair market value thereof on the Effective Date.
A Resident Affected Claimholder holding First Lien Notes or Unsecured
Notes will generally be required to include in its income the amount of
interest in respect of the First Lien Note or the Unsecured Notes as
described in the Tax Disclosure in the context of the Unsecured Notes
(under the heading “Disposition of Unsecured Notes, First Lien Notes
and General Unsecured Claims”); however, where a Resident Affected
Claimholder is required to include an amount in income on account of
interest on the First Lien Notes or Unsecured Notes, as the case may
be, that is not paid on the Restructuring, the Resident Affected
Claimholders should be entitled to a deduction in computing income of
an equivalent amount.
A Resident Affected Claimholder that holds its Unsecured Notes in a
trust governed by a Deferred Plan should consult its tax advisors for
purposes of determining whether the Restructuring, including the right
to receive PREI Proceeds Pool, will give rise to any adverse tax
consequences.
Non-Residents of Canada
No taxes will be payable under the ITA by a Non-Resident Affected
Claimholder upon the disposition of the First Lien Notes, the Unsecured
Notes or the General Unsecured Claims by the Non-Resident Affected
Claimholder to the Corporation for New Common Shares, New First Lien
Notes, PREI Proceeds or cash, as applicable, pursuant to the
Restructuring.
To the extent that amounts received under the PREI Proceeds Pool by a
Non-Resident Affected Claimholder constitutes “participating debt
interest” for purposes of the ITA, such amount will be subject to
Canadian withholding tax at the rate of 25%, subject to relief provided
under an applicable income tax treaty or convention between Canada and
the country in which the Non-Resident Affected Claimholder resides.
Certain U.S. Federal Income Tax Considerations
The following discussion supplements the summary of certain material
U.S. federal income tax consequences of the Restructuring located under
the heading “Certain U.S. Federal Income Tax Considerations” (the Tax
Disclosure) in the Circular. This discussion does not purport to be a
complete analysis of all of the potential U.S. federal income tax
considerations that may be relevant to U.S. Holders in light of their
particular circumstances, and U.S. Holders are urged to read carefully
the Tax Disclosure and to consult their own tax advisors.
The exchange of First Lien Notes for New First Lien Notes and New Common
Shares should constitute a recapitalization, as discussed in the Tax
Disclosure, and a U.S. Holder that exchanges First Lien Notes generally
will not recognize any gain or loss as a result of such exchange
(except to the extent of any New First Lien Notes or New Common Shares
allocable to accrued and unpaid interest) and will have a holding
period for the New First Lien Notes and New Common Shares (except to
the extent allocable to accrued and unpaid interest) that includes its
holding period of the First Lien Notes.
The exchange of Unsecured Notes for a pro rata share of the PREI
Proceeds Pool will be a taxable exchange, and a U.S. Holder of
Unsecured Notes who does not make a valid Equity Election will
recognize gain or loss equal to the difference between its basis in the
Unsecured Notes and its share of the PREI Proceeds Pool received in
exchange therefor (except to the extent attributable to accrued and
unpaid interest, which a U.S. Holder will recognize as ordinary income
to the extent it has not already). The Exchange of Unsecured Notes for
New Common Shares should constitute a recapitalization, as discussed in
the Tax Disclosure, and any U.S. Holders of Unsecured Notes who make a
valid Equity Election generally will not recognize any gain or loss as
a result of such exchange (except to the extent of any New Common
Shares allocable to accrued and unpaid interest) and will have a
holding period for the New Common Shares (except to the extent
allocable to accrued and unpaid interest) that includes its holding
period of the Unsecured Notes.
U.S. Holders of General Unsecured Claims will recognize gain or loss as
described in the Tax Disclosure.
Further Information and Monitor Contact Information
A copy of the Amended Plan as well as additional information concerning
the Amended Plan and the Meetings is contained on the Monitor’s
website, which is available at http://www.pwc.com/ca/en/car/catalyst-paper-corporation/index.jhtml.
Creditors who have questions about the Amended Plan or the Meetings may
contact the Monitor at PricewaterhouseCoopers Inc., 250 Howe Street,
Suite 700, Vancouver, British Columbia, V6C 3S7 (Attention: Patricia
Marshall), phone: 604-806-7070 or email: catalystclaims@ca.pwc.com.
General Information
This press release is not an offer to sell or the solicitation of an
offer to buy the New First Lien Notes or the New Common Shares to be
issued in connection with the Amended Plan. Such securities have not
been and will not be registered under the United States Securities Act
of 1933, as amended, and may not be offered or sold in the United
States absent registration or an applicable exemption from the
registration requirements.
Catalyst Paper manufactures diverse specialty mechanical printing
papers, newsprint and pulp. Its customers include retailers, publishers
and commercial printers in North America, Latin America, the Pacific
Rim and Europe. With four mills, located in British Columbia and
Arizona, Catalyst has a combined annual production capacity of 1.8
million tonnes. The company is headquartered in Richmond, British
Columbia, Canada and is ranked by Corporate Knights magazine as one of
the 50 Best Corporate Citizens in Canada.
Forward-Looking Statements
Certain matters set forth in this news release, including statements
with respect to implementation of the plan of arrangement and the
benefits to the company of the plan of arrangement, are forward
looking. These forward-looking statements reflect management’s current
views and are based on certain assumptions including assumptions as to
future operating conditions and courses of action, economic conditions
and other factors management believes are appropriate. Such forward
looking statements are subject to risks and uncertainties that may
cause actual results to differ materially from those contained in these
statements, including failure to obtain court approval, failure to
obtain the requisite approvals of holders of the First Lien Notes and
Unsecured Notes and other creditors, and those risks and uncertainties
identified under the heading “Risk Factors” in the Circular and under
the heading “Risks and Uncertainties” in Catalyst’s management’s
discussion and analysis contained in Catalyst’s annual report for the
year ended December 31, 2011 and report for the first quarter of 2012,
all of which are available at www.sedar.com.
SOURCE Catalyst Paper Corporation
