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UPDATED: Catalyst breathes sigh of relief as restructure plan approved
Politicians and pensioners are relieved taxes, jobs and incomes were saved during Monday's overwhelming approval vote of Catalyst Paper's financial-restructuring plan.
"Ninety-nine per cent is very good," North Cowichan Mayor Jon Lefebure said of balloting in Richmond by stakeholders of Crofton paper mill's parent firm.
That vote, about Catalyst's complex rejigging, followed one held May 23 when stakeholders voted, by a thin margin, to basically let the paper giant go to the highest bidder.
"They failed by one vote to get the 2/3 of unsecured creditors to vote in favour," he said.
"In the meantime some pension holders became unsecured creditors in danger of losing pension funds and they became (court approved) voters on the restructuring.
"People realized the (revamped) restructuring plan was in their best interest. This was about keeping the mill operating," said Lefebure.
"The restructuring plans reduced the debt load the company will carry, and allows it to carry on with its current management dedicated to keeping the plant running."
Plan approval was necessary under the Companies Creditors Arrangement Act in Canada.
"We have received support from a majority of stakeholders since we began the reorganization process and today's vote of support by creditors for the second amended plan of arrangement sets out a clear path forward," Catalyst CEO Kevin J. Clarke says in a media release.
A sanction hearing under the CCAA process is set for Thursday in the Supreme Court of B.C.
Pending court approval, a confirmation hearing in U.S. court is expected in mid-July.
"The plan that received creditor approval today puts Catalyst on a stronger financial base to compete and adapt as the marketplace for our products continues to change," Clarke said. "We're now turning our attention to securing our exit financing and satisfying the remaining conditions of the plan with a target timeline to emerge from creditor protection."
Catalyst has also got court approval to extend the period of CCAA protection to Sept. 30.
"As long as they're operating," said Lefebure, "they're paying the taxes and keeping suppliers running."
Crofton mill will pay North Cowichan some $3.2 million in taxes this year, down from $5.2 last year after council's unpopular tax shift to homeowners.
Council is also trying — through a tax holiday, smoother development-approval processes, and more — to lure more business in to North Cowichan's tax base while lowering its reliance on Crofton mill's taxes, he explained.
Lefebure also cited some $100 million the mill adds to his municipality annually.
"Jobs are number one," he said of Crofton's approximately 600 workers.
"There was also a chance under the sales process for Catalyst to survive, but there was lots of risk, and pensioners stood to lose 32 per cent of their pension income."
That's why Port Alberni mill pensioner Peter Finch was relieved by Monday's vote.
"I looked forward with optimism that the vote would go this way and it did. I'm delighted," the 35-year employee and benefit-class pensioner said.
The restructuring vote means the existing plan is preserved.
Had Catalyst been sold, its new owners wouldn't have been obligated to inherit the pension plan.
Under the new plan, pensioners surrendered their health benefits and extended the time Catalyst can replenish the plan — underfunded by about $120 million — to 15 years.
"If the vote went the other way I'd have lost 35 per cent of my income from pension," Finch said.
Catalyst also received B.C. regulatory approval of its modified salaried pension plan, allowing pensioners to not roll their funds into an annuity. Instead, they can pull them out and invest them themselves.
The company estimates it will save about $7 million annually with the modified plan still needing more provincial government approval.
— with file from Wawmeesh G. Hamilton