BUSINESS

Creditors prepare to vote as closing date for NewPage sale draws near

08/14/2012 04:42 EDT | Updated 10/14/2012 05:12 EDT
HALIFAX - Creditors are preparing to vote on a proposal that is considered a crucial step towards finalizing the sale of an idle Cape Breton paper mill to a Vancouver company, the first of several hurdles to be cleared before a proposed Aug. 31 closing date.

The meeting Wednesday in Port Hawkesbury will give creditors a chance to accept a settlement on what they're owed from NewPage Port Hawkesbury.

The Point Tupper mill closed last September, throwing some 600 employees out of work and affecting another 400 forestry contractors. But it has retained about 115 workers to keep the facility in a so-called hot idle state so it can restart operations quickly once a sale is complete.

Pacific West Commercial Corp., an affiliate of Stern Partners Inc., has offered to buy the plant for $33 million. The firm has said it wants to restart one of the mill's two machines by Sept. 1.

Shaun Scott, the manager of a former Nova Scotia-based supplier to the mill, said his company lost 90 per cent of its business when NewPage shut down.

He said Scott and Stewart Forestry Consultants Ltd. will vote in favour of the deal because "a reduced mill is better than no mill."

"We've been in business for almost 30 years and we have a lot of people depending on work from that mill," Scott said Tuesday from the company's office in Antigonish.

The court-appointed monitor handling the sale has said it's estimated that about $2.5 million will be available for more than 300 general creditors, including unsecured creditors, under the plan. Mathew Harris of Ernst & Young said their claim is more than $200 million.

Harris has also said that another $31 million will be given to U.S. noteholders. The total claim of the creditors in that class is about $3 billion.

Scott would not say how much his company is owed, but said it is a "significant" amount.

"We're all owed money in this thing, and some of us a fair amount of money," he said. "But ... at the end of the day, there's not much choice. We have to move ahead."

If the plan is approved, the court is expected to sanction the deal on Aug. 28.

In a report last week, Harris recommended that creditors vote in favour of the sale.

He said the alternative — a liquidation of the mill's assets — would likely be less than the $33 million that Pacific West has offered.

"It is unlikely that the recovery from such liquidation proceedings would result in greater recovery to the creditors of (NewPage) and it is likely that general unsecured creditors will receive no distribution in such a scenario,” Harris said in the report.

Another step toward finalizing the sale is approval of a complex partnership agreement between Pacific West Commercial and the province's privately owned electric utility, Nova Scotia Power Inc.

That matter is currently before the province's Utilities and Review Board, though it's unclear when a decision will be released. Even if the board approves the agreement, it requires further approval from the Canada Revenue Agency.

Under the proposed 7 1/2-year deal, the mill would make a contribution of $2 per megawatt hour to the utility's fixed cost, as well as pay fuel costs while the utility would also receive dividends if the mill is profitable.

Pacific West Commercial has said it is eager to get the deal wrapped up by the Aug. 31 closing date to avoid missing a lucrative season for paper orders. The company could not be reached for comment Tuesday.