VICTORIA – The sale of Skeena Cellulose Inc. to NWBC Timber and Pulp Ltd. has closed successfully, Minister of Competition, Science and Enterprise Rick Thorpe said today.
"We have fulfilled our government's commitment to return Skeena Cellulose to the private sector where it belongs," said Thorpe. "It has been a difficult process for the communities and families of the Northwest who rely on Skeena for their livelihoods. But I hope that the sale brings a feeling of stability to them and that the new Skeena will have a profitable and sustainable future."
NWBC paid $6 million to the province and the TD Bank - which were the secured creditors - for the company and $2 million for claims of unsecured creditors. On April 2, all five classes of creditors approved Skeena's Companies' Creditors Arrangement Act restructuring plan by an overwhelming margin. On April 4, the B.C. Supreme Court also approved Skeena's plan.
Skeena Cellulose has been under protection from creditors under the Companies' Creditors Arrangement Act since Sept. 5, 2001, after the TD Bank demanded repayment of all outstanding loans. The company has a pulp mill in Prince Rupert, a whole log chipper in Hazelton and sawmills in Terrace, Carnaby, Smithers and Kitwanga. Before the closing of the sale to NWBC, the province owned 72.3 per cent of Skeena Cellulose and the TD Bank owned 27.7 per cent.
Since 1997, when the previous government became involved, the total debt owed by Skeena Cellulose to the taxpayers of British Columbia has surpassed $400 million, including more than $270 million in financial assistance received from the government in the form of loans, loan guarantees and contributions.
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Contact: Rueben Bronee, Communications Co-ordinator, Ministry of Competition, Science and Enterprise, 250 952-0259
BACKGROUNDER - SKEENA CELLULOSE INC. HISTORICAL OVERVIEW
On March 3, 1997, Skeena filed for protection from creditors under the Companies' Creditors Arrangement Act, and Coopers and Lybrand was appointed as monitor.
With the filing, as a result of Repap Enterprises Ltd. abandoning the company, ownership of Skeena passed to the Royal Bank and Toronto Dominion Bank.
In June 1997, the previous government commenced a due diligence review for consideration of a package of measures in its attempt to keep the company operating.
On June 27, 1997, Skeena Cellulose shut down its operations after the banks decided not to advance further funds to the company.
On Sept. 26, 1997, the previous government, the banks and Pulp and Paper Workers of Canada Local 4 agreed on a restructuring plan enabling Skeena to restart its operations on Oct. 3. As part of the plan the province agreed among other things, to fund $74 million of a $170-million capital expenditure program for the pulp mill and guarantee $16 million of $40 million in interim funding requirements.
On Oct. 3, 1997, the court also extended the date for Skeena to file its Companies' Creditors Arrangement Act restructuring plan from Sept. 30, 1997, to Nov. 28, 1997.
On Oct. 30, 1997, after detailed revisions to their financial projections, the monitor informed the province and the banks that Skeena Cellulose required added working capital of $20 million to meet operating requirements through 1998.
On Nov. 28, 1997, when the Royal Bank declined any further financial assistance, the province reached an agreement to purchase the Royal Bank's 50 per cent share of Skeena Cellulose for $31.3 million (including its existing term loan to Skeena of $37.5 million and its existing operating loan to Skeena of $42 million), both at interest rates of prime plus one per cent. As part of this agreement, the province provided the TD Bank with a guarantee of 70 per cent of the $20-million increase in the operating loan to $120 million needed to meet working capital requirements, and took over the Royal Bank's commitment to fund a portion of the capex loan ($48 million).
On Jan. 7, 1998, creditors approved the final restructuring plan, which would result in the following share ownership of Skeena: provincial government, 52.5 per cent; Toronto Dominion, 27.5 per cent; employees of the pulp mill, 20 per cent.
On Feb. 13, 1998, the province announced a $65-million loan guarantee program through Forest Renewal B.C. for small and medium-sized businesses affected by the Skeena situation.
In early April 1998, as a result of poor pulp markets and operating losses, and to ensure the company continued to operate within the $120-million operating loan limit, the company developed a cost-reduction program including deferring and minimizing capital expenditure program spending (reduced from the original $170 million to $110 million) and operating only one of the two lines at the pulp mill. (The B line was shut down).
During 1998, as a result of continuing poor pulp markets and to provide more working capital, the province approved added loan guarantees including an increase in the operating loan from $120 million to $150 million.
In May 1999, the province approved an increase in the operating loan to $200 million, and Skeena Cellulose was authorized to proceed with the remaining components of the $110-million capital expenditure program, with the province funding the TD Bank's share of the undisbursed portion of the loan.
There were no further funding approvals provided to Skeena after May 1999.
Encountering delays due to labour problems, the major part of the capital expenditure program was not completed until August 2000.
In June 2001, the newly elected government of British Columbia announced its intention to return Skeena Cellulose Inc. to the private sector.
On Aug. 22, 2001, Mercer International Inc. announced its intentions to complete a review of the company with a view to potential purchase.
On Sept. 5, 2001, Skeena Cellulose was granted protection from its creditors under the Companies' Creditors Arrangement Act, and Arthur Andersen was appointed as monitor when the TD Bank demanded payment of all outstanding loans.
On Oct. 5, 2001, Skeena Cellulose was granted a 30-day extension of protection from its creditors under the Companies' Creditors Arrangement Act based on sales discussions ongoing with Mercer and NWBC Timber and Pulp Ltd.
On Nov. 8, 2001, Skeena Cellulose was granted a 90-day extension of protection from its creditors under the act to Feb. 15, 2002, to proceed to finalize an agreement with Mercer. The court required that a definitive agreement be signed with Mercer by Dec. 14.
On Dec. 15, 2001, as a result of the definitive agreement with Mercer not being signed, the exclusivity period with Mercer expired.
On Dec. 17, 2001, written purchase proposals were received from NWBC Timber and Pulp Ltd., Forest Capital Ltd. and Skeena Acquisition Corp. None of these offers were acceptable to the province, and negotiations continued to finalize a definitive agreement with Mercer.
On Jan. 8, 2002, the TD Bank made an application for an order lifting the stay of proceeding previously granted and extended by order dated Nov. 8, 2001. Chief Justice Donald Brenner denied the application after being advised of the status of Mercer negotiations and that a proposed form of agreement would be submitted to Treasury Board and cabinet for consideration Jan. 22 - 23, 2002.
On Jan. 25, 2002, a motion by the directors of Skeena Cellulose Inc. to continue the company's stay of proceedings under the Companies' Creditors Arrangement Act was approved by the British Columbia Supreme Court. The stay of proceedings was extended until Feb. 15, 2002, by which time Skeena was required to file a plan of compromise or arrangement to the court. With continued protection under the act, the company pursued a definitive sales agreement with NWBC Timber and Pulp Ltd. The purchase proposal was brought forward after cabinet carefully considered the proposal made by Mercer, which was unacceptable as the forestry and environmental concessions requested by Mercer could have fettered government forest policy.
On Feb. 15, Skeena Cellulose received a five-day extension of its protection from creditors under the Companies' Creditors Arrangement Act. The extension gave negotiators more time to reach a sales agreement with NWBC Timber and Pulp Ltd.
On Feb. 20, 2002, provincial negotiators reached a definitive sales agreement leading towards the sale of Skeena Cellulose Inc. to NWBC Timber and Pulp Ltd.
On Feb. 28, 2002, Provincial Treasury Board and cabinet approved the transaction leading towards the sale of Skeena Cellulose Inc. to NWBC Timber and Pulp Ltd.
On April 2, 2002, creditors approved Skeena's Companies' Creditors Arrangement Act restructuring plan by an overwhelming margin. The vote of unsecured creditors passed with 85 per cent who voted voting in favour, representing 92 per cent of the dollar value of the voted claims.
On April 4, 2002, the B.C. Supreme Court also approved Skeena's plan.
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