Fraser Papers Files Restructuring Plan, Prepares to Emerge from Creditor Protection

(All financial references are in U.S. dollars unless otherwise noted)

Dec. 1, 2010 (Press Release) - Fraser Papers Inc. and its subsidiaries ("Fraser Papers" or the "Company") announced today that it has filed a consolidated plan of compromise or arrangement (the "Plan") with the Ontario Court overseeing its restructuring proceedings under the Companies' Creditors Arrangement Act ("CCAA"). These materials will also be filed with the U.S. Court in Delaware, which oversees the Company's ancillary proceeding under Chapter 15 of the U.S. Bankruptcy Code.

On December 3, 2010, Fraser Papers will seek an order (the "Meeting Order") authorizing it to hold a meeting of creditors on December 20, 2010, at which time the creditors of the Company will vote on the Plan. If the Plan is approved by creditors, the Company intends to appear before the Ontario Court on December 22, 2010 and the U.S. Court on December 23, 2010 to seek the necessary court approvals to implement the Plan.

A key component of the Plan is a commitment from the Company's largest shareholder, Brookfield Asset Management Inc., to serve as sponsor of the Plan (the "Plan Sponsor") by purchasing the Company's remaining operating assets through the acquisition of its U.S. subsidiaries and by continuing to provide debtor-in-possession financing to the Company during Plan implementation.

Based on the Plan Sponsor's support, the Plan contemplates the following benefits for the Company's creditors:

  • the repayment of all secured claims against the Company;
  • continuing employment for substantially all active employees of the Company's U.S. operations;
  • a cash distribution of up to $500.00 for each unsecured creditor claim against the Company; and
  • the pro-rata distribution of all proceeds from the sale of the Company's assets (including the sale of the U.S. operating assets) to trusts established for the benefit of unsecured creditors, in satisfaction of all outstanding unsecured creditor claims.

The Plan Sponsor has agreed to acquire the Fraser Papers companies through which the Company carries on its U.S. operations for cash proceeds of $15.0 million (the "Transaction"). In addition, the U.S. companies of Fraser Papers that are being sold to the Plan Sponsor will continue to be responsible for certain specified liabilities. All unsecured liabilities or claims that existed at the time the Company filed for protection under the CCAA ("Pre-filing Claims") will be compromised against all of the Fraser Papers companies under the Plan.

The Company's U.S. operations consist of two lumber mills in northern Maine (one of which is currently not operating) and a paper mill in northern New Hampshire (the "Gorham Mill") which has been closed indefinitely. The Company has entered into a separate agreement with a third party to sell the Gorham Mill. If that separate transaction or any other sale of the Gorham Mill is completed prior to the time of the closing of the Transaction, the cash proceeds payable on closing of the Transaction will be reduced by the proceeds received on the sale of the Gorham Mill, up to a maximum of $2.65 million. If the Gorham Mill is not sold to another party prior to the closing of the Transaction, it will be purchased by the Plan Sponsor as part of the Transaction.

Subject to completion of the Transaction pursuant to the Plan and sufficient cash being available to make such payment, the Plan provides for a cash distribution for each unsecured claim that has been accepted by the court-appointed Monitor, up to the lesser of: a) the amount of each unsecured claim, and b) $500.00.

The Plan contemplates the distribution of all proceeds of the Transaction and all prior sale transactions to three trusts that will be established for the benefit of unsecured creditors with Pre-filing Claims, once all secured claims are paid in full. The proceeds include:

  • a 49% percent interest in the common equity of Twin Rivers Papers Company Inc. ("Twin Rivers"), the company that purchased the specialty papers business of Fraser Papers;
  • unsecured notes issued by Twin Rivers with a face amount of approximately $44 million; and
  • any cash that is not otherwise required to repay secured creditors in full, or cover the costs of the CCAA proceedings.

The Company expects to schedule a webcast to communicate the Plan to all creditors upon the Meeting Order being issued by the Court.

SOURCE: Fraser Papers Inc.