09/09/2011 11:20 EDT | Updated 11/09/2011 05:12 EST

Nova Scotia judge grants NewPage protection against its creditors

HALIFAX - An embattled Nova Scotia paper plant won a last-minute reprieve Friday when the province's Supreme Court granted it protection from a long list of creditors who are owed millions.

Judge David MacAdam approved a settlement and transition agreement for NewPage Port Hawkesbury, freeing up much-needed funds that could help expedite the sale of the Point Tupper, N.S., mill.

Under the agreement, the parent company will give the mill US$25 million to help it complete remaining work and maintain equipment during a phased-in shutdown scheduled to begin Saturday.

The money will also help fund legal proceedings and assist with the search for a buyer.

"We're very satisfied with the outcome," John Stringer, representing NewPage, said outside court.

MacAdam stressed that he made the ruling because he feared employees would not get paid this week as NewPage would deplete its remaining $2 million by the end of the weekend.

A lawyer for unionized workers at the plant said he was pleased the judge's approval would allow the company to continue trying to sell the fledgling mill and keep it in a state of readiness for a new owner.

"Now there's a chance to find a buyer, to save the mill, to keep people employed and keep the community prosperous," Ray Larkin, representing the Communications, Energy and Paperworkers Union, said outside court.

"That's the important part."

But MacAdam didn't issue his approval without expressing reservations about the likelihood of a sale and questioning whether the parent company was acquiring the plant's inventory for rock-bottom prices.

He questioned the fairness of transferring NewPage Port Hawkesbury's inventory to NewPage Corp. in Ohio in exchange for US$25 million.

"Are we transferring assets to the parent company when in reality the company is going down the tubes?" MacAdam asked in court, saying the assets were worth more than that.

Former NewPage employees also filed into the Halifax court to watch the proceedings and find out about the future of their pensions.

Shirley MacDonnell, who worked at the plant for 26 years, and her husband both rely on the pensions and are concerned that the company wants to suspend special payments into the fund and could wind up the pension plan.

"If they terminate or wind up the pension plan, exactly how large is the cut going to be to the pensions? That's my biggest concern," she said outside court.

Stringer argued earlier in the day that the company needed approval of the agreement so it could quickly move ahead with a sale.

A monitor overseeing the sale of the plant said parties have expressed interest in it, but added it could be a tough sell since the facility is losing $4 million a month and has lost customers.

"I believe it's very realistic," Matthew Harris of Ernst & Young said outside court. "It's not assured. We've got a plant that's losing a huge amount of money on a monthly basis. ... So it's a tall order."

On Wednesday, NewPage filed an affidavit with the court that showed that the parent company has been trying since April to sell the paper mill, which has lost US$50 million over the last year.

While NewPage argued its case in court Friday, Premier Darrell Dexter announced a $15-million plan to help keep the mill's woodlands operation intact.

The seven-point plan includes stockpiling wood for future use, an expansion of the province's silviculture program, up to $3.5 million to develop specialized forestry training programs, and enlisting a world-market specialist to conduct a study on newsprint and high-gloss paper to ensure the mill's future viability.

Dexter said the plan will employ about 500 people in the Port Hawkesbury region.

"This seven-point action plan is designed to get us through the next three months as we prepare for the resale of this plant," Dexter said in a statement.

"I am confident and optimistic that a buyer will recognize this valuable asset and ensure its successful future."

The mill, which opened in 1962, is scheduled to indefinitely shut down its papermaking machines in phases on Saturday and Sept. 16.

A closure would affect about 1,000 workers. That includes 550 people who work at the mill and 50 who work for the company's woodlands operation. Another 400 forestry contractors feed the mill with pulp wood.