Leaving a paper trail: Sault Ste. Marie's St. Marys paper goes into receivership.
Alex Morrison, a senior vice-president with the firm, said Ernst & Young was to seek approval for a sale process in early January, and expected the procedure to get under way quickly.
After going public with the receivership, the firm had fielded some early interest in the mill, but Morrison couldn't say whether that interest would lead to a sale.
"We've had a number of parties calling and making inquiries, but it's very early stages," he said. "We really haven't gone too far with any one at this stage."
According to court documents, St. Marys went into receivership at the behest of stakeholder International Forest Productions Corp. after the mill was unable to retain insurance.
"The company's been in financial difficulty for a while, and the plant's been idled for a quite a number of months, so the company was in financial distress," Morrison said. "I'm not sure exactly the circumstances around the insurance coverage issue, but I think it was probably more of an issue of its financial condition and the insurance carrier being concerned about continuation of coverage."
The mill has been closed since April, when, in a letter to employees, management said repairs were being made to its No. 5 supercalendar paper machine, and indicated efforts were being made to recapitalize the operation. A financing partner was being sought out to construct a co-generation plant for the mill, and a July startup date was cited.
A document prepared by Ernst & Young outlining the mill's financial holdings reports a total of 371 creditors are owed $9,632,394.49. In addition, International Forest Products is listed as holding a security interest against the property with a value of $7,442,000, while the provincial government is listed as holding a security interest worth $19,750,000.
The mill's assets, including inventory, property and equipment, and investments, are valued at $15,094,000.
It's the third time in less than five years the mill has undergone restructuring. In 2007, the provincial government provided $17 million in loans to pull the operation from bankruptcy protection, and, in 2010, provided another $8.8 million, for a total of $25.8 million.
The mill has additionally benefitted from the government's Northern Industrial Energy Rate Program and struck a deal with the Ontario Power Authority to build a $175-million co-generation biomass plant, which, were it to be built, would be the largest in Ontario.
Sault Ste. Marie MPP David Orazietti said about $6 million of the original $17 million in loans has been repaid, while the rest remains outstanding:
He said he's hopeful that a solution can be found this time around.
"The province is committed to continuing to work with the existing ownership or, should there be new ownership at the mill, to work with them to see the mill restarted," he said. "We'd like to see someone that is able to carry through with a successful restart."
Orazietti maintains the federal government should play a role in assisting the forestry industry, but isn't optimistic.
"It's an important industry, and an important business, and the jobs are important to the city, which is why we've been working with them for the last number of years, trying to get programs in place to support them," he said.
Should the mill go under, the lost jobs would number 300. Going into receivership has been a hard pill to swallow for members of the Communications, Energy and Paperworkers Union of Canada, said Kim Ginter, the union's Ontario regional vice-president. The union had given the mill a deadline date of Jan. 31 before it planned to file a claim against the company to receive money owed.
"Our people were owed severance and termination pay, and a lot of our people have vacation there too that is still in the bank," Ginter said.
Ginter said the union would file claims on behalf of its members, but felt it was unlikely they would see any restitution. The fallback is the government's Wage Earner Protection Program (WEPA), which would result in about $3,100 for each employee, Ginter estimated.
Workers would not be supportive of a move to run the co-gen plant, without the operation of the mill, he added.
He's critical of the way the current owners ran the mill, suggesting they sought to recuperate their capital quickly, without reinvesting into the operation.
"We thought there was light at the end of the tunnel when we had some local investment, but obviously it showed that they weren't very sincere," he said. "My understanding was they took their money out very quickly, make sure they got their money back and quit investing in it, and that's been the downfall since that day."
Ginter is hopeful that a buyer can be found to return the mill to operations, but he's also trying to being realistic.
"I'd like to see somebody buy it and run it," he said. "They'd have to get it relatively cheap, and with the market, I'm not sure there's a lot of investors looking at getting into the paper industry right now."
By LINDSAY KELLY Northern Ontario Business
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|Publication:||Northern Ontario Business|
|Date:||Feb 1, 2012|
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