Fortress Paper to Sell Lebel-sur-Quevillon Pulp Mill and Sawmill Assets for $15.36 Million
Fortress Paper's pulp mill and sawmill in Lebel-sur-Quévillon, Québec, Canada.
June 23, 2016 - Fortress Paper Ltd. ("Fortress Paper" or the "Company") is pleased to announce that it has, through its wholly owned subsidiaries, Fortress Global Cellulose Ltd. ("Fortress Global") and Fortress Lumber Corp. (together with Fortress Global, the "Vendor"), entered into an asset purchase agreement (the "APA") with LSQ Energy, L.P. ("Energy LP") and LSQ Development, L.P. (together with Energy LP, the "Purchaser"), each a wholly-owned subsidiary of Nexolia Bioenergy Inc., providing for the sale of the buildings, equipment and other ancillary property relating to the non-operating pulp mill and sawmill, as well as the energy generation, connection and transmission plant and related equipment, located in Lebel-sur-Quévillon, Québec (the "LSQ Mill") for an aggregate purchase price of $15.36 million.
Pursuant to the terms of the APA, the Company has agreed to guarantee certain limited representations and warranties of the Vendor.
The transaction is expected to close on or before July 8, 2016.
The purchase price is to be comprised of: (i) a $7 million secured note issued by Energy LP in favour of the Vendor (the "Note"); (ii) $0.86 million, by the assumption by the Purchaser of property tax liabilities of the Vendor; and (iii) the assumption by the Purchaser of up to $7.5 million of the Vendor's liabilities under a trust agreement among BMO Trust Company, 9109-3294 Québec Inc. ("9109"), Domtar Inc. and Fortress Global dated June 13, 2012 (the "Trust Agreement"). The Vendor intends to assign the Note to Investissement Québec ("IQ") immediately following closing in consideration for an equivalent set off against the indebtedness owed to IQ by Fortress Specialty Cellulose Inc. ("FSC"). The Note will be guaranteed by FSC, subject to a deferred payment obligation of up to five years, if necessary.
The closing of the APA is subject to various conditions, including:
- (i) the Purchaser having obtained third-party financing in respect of a portion of the purchase price and working capital;
- (ii) the governmental authorizations required for the consummation of the transactions contemplated in the APA;
- (iii) the execution of an amended Trust Agreement and the release of the Vendor from all obligations under the Trust Agreement;
- (iv) the execution of amended superficies and servitudes agreements between 9109 and the Purchaser, permitting the transfer of certain LSQ Mill assets to the Purchaser;
- (v) the release of the letters of credit in the aggregate amount of $1.125 million which had been previously deposited by Fortress Global with Hydro Québec Distribution ("HQD") in connection with its electricity supply contract; and
- (vi) the Purchaser entering into a non-production agreement with the Company providing for the non-production of dissolving pulp and paper grade pulp using the purchased assets at the LSQ Mill. The Purchaser has deposited approximately $1.98 million into trust with its legal counsel, which amount will be used to pay on closing the property taxes owing by the Vendor and to allow the Purchaser to deliver to HQD the security necessary in order to release the letters of credit previously deposited by Fortress Global.
Yvon Pelletier, President and Chief Executive Officer of Fortress Paper, commented: "The sale of the LSQ Mill represents a divestiture of a non-core asset which will release the Company from a number of future obligations and allow it to focus on other value enhancing transactions to grow its business."
About Nexolia Bioenergy Inc.
Nexolia Bioenergy Inc. is a private company focused on investing in natural resources, renewable energy and other projects that could result in a sustainable economic development and job creation, provide services and resources to northern communities.
Fortress Paper operates internationally in two distinct business segments: dissolving pulp and security paper products. To learn more, please visit: www.fortresspaper.com.
SOURCE: Fortress Paper Ltd.