08/15/2012 02:53 EDT | Updated 10/15/2012 05:12 EDT

Major hurdle in mill sale cleared as creditors accept NewPage settlement

PORT HAWKESBURY, N.S. - Creditors have accepted a settlement on what they're owed from an idle Cape Breton paper mill, a "critical" step towards finalizing the sale of the plant and resuming operations after nearly a year, the prospective buyer said Wednesday.

The court-appointed monitor handling the sale of the NewPage Port Hawkesbury paper mill said 99 per cent of general creditors voted in favour of the agreement during a meeting Wednesday in Port Hawkesbury. Mathew Harris of Ernst & Young said 88 per cent of U.S. noteholders supported the deal.

Pacific West Commercial Corp., an affiliate of Stern Partners Inc., has offered to buy the plant for $33 million. Marc Dube, a spokesman for the Vancouver-based company, said the deal draws the company one step closer to restarting the Point Tupper mill's operations since it closed last September.

"We're obviously very excited," Dube said from Port Hawkesbury. "It's one of the critical steps along the way of getting the mill restarted."

Under the deal, general creditors and U.S. noteholders both stand to receive much less than what they're owed from NewPage.

Harris has said it's estimated that under the plan, about $2.5 million will be available to more than 300 general creditors, including unsecured creditors, although 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.

The Supreme Court of Nova Scotia must now sanction the deal.

Although a significant hurdle has been cleared, another major step remains before the sale can be finalized ahead of a proposed Aug. 31 closing date.

The province's Utility and Review Board is currently reviewing a complex partnership agreement between Pacific West Commercial and the province's privately owned electric utility, Nova Scotia Power Inc.

It's unclear when a decision on that agreement will be released. If the board approves the deal, it will still require 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.

The mill's closure left some 600 employees without work and affected another 400 forestry contractors. But Pacific West Commercial has retained about 115 workers to keep the facility in a so-called hot idle state.

Although a previous target startup date of Sept. 1 has been nixed due to the pending decision on the electric rate agreement, Dube said the company still hopes to restart one of the mill's two papermaking machines sometime in that month.

He said about 300 workers will be employed at the mill when operations resume.

"We're positioning the mill so that it will take us a week to 10 days to restart after we get the ability to call all of our employees back," said Dube.

"We have to be prepared. As soon as the opportunity comes, we'll be calling employees back the next day. That's really what our focus is, to be ready to do that."

Archie MacLachlan, vice-president of the Communications, Energy and Paperworkers Union Local 972, said workers are anxious to get back on the job.

But he said the resumption of operations will be bittersweet.

"It's tough, there's no doubt about it," he said.

"There's a lot of people if we start up (who) are not coming back to work because it's going to be a much smaller operation, and those people have been dealing with that for a long time."

— By Aly Thomson in Halifax