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Fraser Papers in deal to buy Katahdin Holdings

March 30, 2007 (Press Release) - Fraser Papers Inc. announced today that its Board of Directors, on recommendation of a Special Committee of the Board, has approved the acquisition of Katahdin Holdings LLC from a subsidiary of Brookfield Asset Management Inc.

Acquisition Cost and Financing

Total cash consideration for the acquisition is estimated to be $80 million, subject to an adjustment based on working capital at the time of closing. In addition, Fraser Papers will pay distributions to Brookfield contingent on the generation of distributable cash flow generated by the super-calendered business.

In support of the transaction, Brookfield has agreed to provide a secured credit facility to fund the cash flow requirements of the super-calendered operations. Recourse under the facility will be limited to the cash flows of the super-calendered business. Reflecting this amendment to the original purchase agreement which further limits Fraser Papers' at risk capital, the distributions to Brookfield will start at 90% of cumulative distributable cash flow and decline over time as certain thresholds are reached. No distributions will be paid until the Brookfield facility has been repaid in full.

In addition, the Board of Directors approved a bridge loan facility to finance the acquisition. The $40 million, 120 day facility is being provided by CIT Business Credit Canada Inc. on substantially the same terms as the Corporation's existing $90 million facility. The Corporation plans to refinance the bridge facility through an expansion of its working capital facility or an equity rights offering to shareholders subsequent to closing the acquisition.

Benefits to Fraser Papers

The acquisition represents an attractive investment for Fraser Papers on the basis that it fits the Corporation's strategy to grow its specialty papers business in market segments where the Company can establish competitive advantage. The agreed consideration reflects an attractive valuation and has been validated by an independent review. The transaction structure enables Fraser Papers to reduce capital at risk as payments for the super-calendered business are based on the future performance of those operations.

Approval Process

The acquisition of Katahdin Holdings is being recommended to shareholders for approval at the Corporation's annual and special meeting to be held on April 25, 2007. The acquisition must be approved by a simple majority of shareholders who are unrelated to Brookfield. If approved by shareholders, the acquisition is expected to close on or about April 30, 2007, subject to satisfaction of all remaining conditions. Details of the proposed acquisition and information about the operations of Katahdin are contained in an information circular which will be mailed to shareholders and filed on SEDAR on April 4, 2007.

As the acquisition of Katahdin is a related-party transaction under Canadian securities legislation, a Special Committee of the Board of Directors was established to review the transaction. After reviewing the details of the proposed acquisition and overseeing the completion of a formal valuation and fairness opinion, the Special Committee recommended to the Board of Directors that the acquisition be approved by the Board.

Information about Katahdin

Katahdin owns a directory paper business with leading market share in the North American directory segment and a technologically advanced super-calendered paper business serving customers in the retail insert, catalogue and magazine market. In addition to production capacity of 250,000 tons per year of directory papers and 180,000 tons per year of super-calendered grades, Katahdin has integrated pulp facilities with capacity to produce 215,000 tons per year of groundwood pulp and 110,000 tons per year of recycled pulp. These manufacturing facilities are complemented by a 30 megawatt biomass cogeneration facility. Fraser Papers has managed these operations on behalf of Brookfield since 2003.

Fraser Papers is an integrated specialty paper company which produces a broad range of specialty packaging and printing papers. The company has operations in New Brunswick, Maine, New Hampshire and Quebec.

SOURCE: Fraser Papers




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