Buchanan's Terrace Bay Pulp initiating CCAA protection process once again after failing to come to terms with current lender; idled mill in Ontario will not restart March 1, after all

LOS ANGELES , January 13, 2012 () – Terrace Bay Pulp Inc. is once again initiating Companies' Creditors Arrangement Act (CCAA) protection after negotiations with its current lender failed to result in an agreement on terms, according to information being provided to customers today.

The company’s idled northern bleached softwood kraft (NBSK) market pulp mill in Terrace Bay, Ontario, will not be restarting on March 1, after all.

The mill went down at the beginning of December, mainly due to market conditions. The closure also followed an Oct. 31 accident in which a worker was killed.

Terrace Bay Pulp, owned by the Buchanan Group, restarted the larger of its two lines, with a capacity of 350,000 tonnes/year, in September 2010, after being down while the company spent 19 months in creditor protection. Ontario provided a C$25 million loan guarantee and private loans accounting for almost C$30 million.

The new asset-based lender financed raw materials, inventory, and receivables—basically a one-year “bridge-financing” term, a company executive said in a statement to customers. But it was unable to come to an agreement on terms with its current lender going forward.

The executive said in the statement that a decision has been made “to initiate a new CCAA process effective immediately.”

Industry sources describe the mill as a high-cost operation and therefore vulnerable to price downturns, such as the one currently underway. Some pulp buyers contacted today told Forestweb the latest news was not unexpected.

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