Northern Pulp granted creditor protection until the end of 2020

A judge in British Columbia has granted Northern Pulp creditor protection until the end of 2020 and approved an interim financing agreement that will see the mill receive $15 million from third-party lenders.

Justice Shelley Fitzpatrick delivered her decision Thursday in B.C Supreme Court via teleconference following two days of arguments.

The hearing was held in B.C. because that's where Northern Pulp's parent company is based.

The ruling means the mill, which was facing a cash crunch, now has the liquidity to get it to the end of the year as it works toward completing environmental cleanup work required by the Nova Scotia government at a site in Pictou County and works on a restructuring effort in hopes of eventually reopening the operation.

The mill has been shut down since the end of January, after failing to secure approval to build a new effluent treatment facility. Fitzpatrick ordered the monitor, Ernst & Young, to provide an update on the company's progress by October.

The third-party financing is being provided by Pacific Harbour North American Resources and Paper Excellence Canada, the mill's parent company. They are splitting the financing 80-20, respectively.

The mill was originally seeking a financing arrangement worth $50 million. However, that was reduced to an initial instalment of $15 million in the face of opposition by the provincial government and other parties. Lawyers for the mill will have to return to court to apply to access further capital and be able to prove the company has made meaningful progress toward restructuring and environmental cleanup requirements.

The Nova Scotia government opposed the entire arrangement for a variety of factors, not the least of which is because the financing agreement means they are bumped down the line in terms of preferred creditors, behind the new lenders.

Mill owes N.S. government $85M

The mill owes the government $85 million and lawyers for the province expressed concern that the arrangement could lead to the government not getting its money and losing a position of strength in any future legal dealings with the mill. The company has talked openly in court documents about exploring its legal options after its lease on the Boat Harbour effluent treatment facility was ended 10 years early.

One ask the judge did not approve was pre-filing claims, including for retirees and mill workers that were laid off after Northern Pulp shut down at the end of January. They are owed a little less than $2 million.

A lawyer for the unionized workers asked the court to consider the economic climate in Pictou County following the closure of the mill and allow the mill to use some of its new financing to pay the outstanding balance on severance costs and retiree benefits to former mill employees. All parties involved in the proceeding — including the mill and its parent — supported the ask, with the exception of the provincial government, which was opposed to any non-secured creditors being paid.

Salary continuation for people still working at the mill was approved.

link: https://www.cbc.ca/news/canada/nova-scotia/northern-pulp-boat-harbour-court-creditor-protection-1.5677445?fbclid=IwAR2OtzFwbCtP8Cj8Mw1hmFzFqRsVNMHDSuYhHjcbQ_x8qXxmy1rhXr5bVb0