Catalyst Paper Enters Agreement with NewPage, Rumford Paper to Buy Mills in Wisconsin and Maine
Catalyst intends to finance the acquisition through a combination of advances under its revolving asset-based credit facility (the “ABL Credit Facility”), the maximum amount of which is to be increased in connection with the Transaction. To provide additional working capital following the consummation of the Transaction, Catalyst also intends to effect a US$25.0 million offering of additional PIK Toggle Senior Secured Notes (“Additional PIK Toggle Notes”), which would form part of the same series as Catalyst’s outstanding PIK Toggle Senior Secured Notes (the “PIK Toggle Notes”).
Completion of the Transaction is subject to customary closing conditions, including the completion of the previously announced acquisition by Verso Paper of NewPage Holdings (the “Verso Transaction”), the execution of a transition service agreement, materials and service supply agreements, and certain other ancillary agreements relating to the Transaction, and certain regulatory approvals. There is no financing condition to Catalyst’s obligation to consummate the Transaction. The Agreement may be terminated by the Sellers and Catalyst in certain circumstances, including upon or at any time following the final uncontested termination of the Verso Transaction.
“With this Transaction, Catalyst will be better able to serve new and existing customers through operational synergies and a more diversified and higher value suite of products,” said Joe Nemeth, president and CEO of Catalyst.
“Our acquisition of these U.S. pulp and paper mills, once complete, will support our efforts to improve our balance sheet and enhance the Company’s long-term competitiveness,” added Nemeth.
If the Transaction is completed, the addition of the Paper Mills is expected to increase Catalyst’s production capacity by approximately 65 per cent or 995 thousand tonnes per year. The Biron Wisconsin mill has 355 thousand tonnes capacity for lightweight coated and ultra-lightweight coated paper. The Rumford Maine mill has 510 thousand tonnes paper capacity for coated specialty, coated freesheet and coated groundwood paper, and 130 thousand tonnes Kraft market pulp capacity to produce both hardwood and softwood pulp. Efficiencies are expected to be gained as overhead costs will be distributed over a larger production base. Access to new markets and business opportunities is anticipated.
Based on unaudited historical financial summaries prepared by the Sellers, the Paper Mills achieved total sales of US$782.2 million for the 12 months ended Sept. 30, 2014 and US$787.1 million for the 12 months ended Dec. 31, 2013. Total mill contribution was US$29.5 million and normalized mill contribution was US$45.6 million for the twelve months ended Sept.30, 2014, compared to US$72.4 million for mill contribution and normalized mill contribution for the twelve months ended Dec. 31, 2013. Mill contribution is a non-U.S. GAAP measure of mill operating performance defined as total sales minus the cash cost of goods sold. Mill contribution was normalized for the 12 months ended Sept. 30, 2014 for the adverse impact of extreme weather conditions and market curtailment. These figures do not include sales, general and administrative expenses which are estimated to be approximately US$10.0 million per year. Capital spending for the two mills is expected to be similar to that of our Canadian mills, approximately US$7.0 million per facility per year.
Transaction and Financing
Under the terms of the Agreement, Catalyst will acquire the Paper Mills for consideration of US$74.0 million, subject to certain adjustments, and assumption of certain ongoing obligations related to the Paper Mills. Pre-closing environmental and pension liabilities will be retained by the Sellers.
To assist in financing the acquisition and provide additional working capital, Catalyst has received a Letter of Commitment from Canadian Imperial Bank of Commerce and Wells Fargo Capital Finance Corporation Canada to increase the Company’s ABL Credit Facility by $50.0 million, from $175.0 million to $225.0 million, the maximum amount of credit available under the ABL Credit Facility. Catalyst has received the requisite consent from holders of PIK Toggle Notes to give effect to the increase in the ABL Credit Facility. The availability of the proposed increase in the ABL Credit Facility is subject to the satisfaction of certain customary conditions, including the entering into by the relevant parties of required amendments to the credit agreement governing the ABL Credit Facility.
To provide additional working capital following the completion of the Transaction, Catalyst also intends to issue US$25.0 million of Additional PIK Toggle Notes. The Additional PIK Toggle Notes will be offered by Catalyst to eligible holders of PIK Toggle Notes, with eligible offerees being permitted to subscribe for their pro-rata share of Additional PIK Toggle Notes based on the aggregate principal amount of PIK Toggle Notes held by such holders relative to the total aggregate principal amount of outstanding PIK Toggle Notes. The Additional PIK Toggle Notes will be issued at a 20 percent discount to face value. When issued, the Additional PIK Toggle Notes are expected to form part of the same series of notes as the PIK Toggle Notes. Catalyst and certain holders of its PIK Toggle Notes have executed a definitive term sheet to backstop the issuance of Additional PIK Toggle Notes. The offering of Additional PIK Toggle Notes is expected to close concurrently with the consummation of the Acquisition or shortly thereafter. As the terms of the offering of Additional PIK Toggle Notes have not been finalized, there is no certainty that such a financing will be completed or completed on the terms described above. Completion of any such offering will be subject to receipt of any required third party, regulatory and exchange approvals.
GPA Introduces New Ultra Print Coated C1S and C2S Boards Digital Presses
Ultra Print C1S and C2S Coated Boards have a specially engineered surface that provides the perfect backdrop for vivid colors, beautiful contrast and sharp image reproduction. Made with light-fast pigments, these sheets have a clean white shade that resists fading, allows for richer colors, and provides a longer life for printed pieces. Their robust construction and superior strength guarantee a flawless performance from the pressroom through the finished application. They also boast FSC certification and are also FDA approved for direct food contact.
Because of their versatility, these boards are being used in a wide variety of industries, including consumer packaged goods, short-run publishing, high-end cosmetics, entertainment, retail and restaurant.
Popular applications include:
- Heavyweight Postcards
- Packaging and Folding Cartons
- Book Covers
- Point-of-Purchase Displays
- Trading Cards
Ultra Print Coated C1S and C2S Boards are available in a wide assortment of weights for many converting processes and end uses. These boards are stocked and ready to ship same day in weights ranging from 10-pt. through 18-pt. in 20.8125×29.5 sheets. To provide maximum postpress versatility, they are compatible with most finishing processes including laminating, UV coating, diecutting, scoring, folding, gluing, embossing, debossing and foil stamping.
These sheets are the answer to the demand for high quality boards that offer the ultimate in versatility and print performance.
Thirty Leading North American Companies Remove ‘Go Paperless – Save Trees’ Claims
Today, Two Sides North America has announced that over 30 leading North American companies have committed to remove “anti-paper” based claims being used to promote electronic billing and other e-services as more environmentally-friendly.
The Two Sides campaign is engaged with top Fortune 500 organizations in the banking, utilities and telecommunications sectors, as well as digital service companies. Alan Anglyn, Sprint’s Director of IT Care & Billing Services Business Management noted, “One of the benefits of our relationship with Two Sides has been the opportunity to reflect on how we communicate our efforts. This caused us to review Sprint’s messaging about electronic media across multiple touch points.”
“Many in the graphic communications industry, from family forest owners to paper mills, printers, mailers and related businesses, are tired of seeing misleading environmental claims about print and paper,” stated Two Sides North America President Phil Riebel. “Our campaign has been focused on educating corporate marketers on the unique social and environmental benefits of print and paper, and to ensure that claims used to promote e-services are based on credible science and facts.”
Two Sides’ main reasons for challenging “Go Paperless – Save Trees” claims are:
- They do not meet guidelines for environmental marketing established by the U.S. Federal Trade Commission (FTC) and the Competition Bureau of Canada.
- They are damaging to the North American economy and threaten jobs. In the United States alone, a total of 8.4 million jobs that generate $1.3 trillion in sales revenue depend on the U.S. mailing industry, which includes paper production, printing production, related suppliers, graphic design and the handling and distribution of mail (Envelope Manufacturers Association, 2013).
- The income landowners receive for trees grown on their land is an important incentive to maintain, sustainably manage and renew this valuable resource. If the market for their wood products is lost, there is little incentive for owners to maintain their forest land (which is then sold to developers and converted to non-forest use).
- Print on paper originates from a renewable resource—trees grown in responsibly managed North American forests, is recyclable, and is the most recycled commodity with recovery rates of 63 percent or higher (American Forest & Paper Association, 2014).
- In North America, we grow more trees than we harvest. Over the last six decades, total net U.S. forest area has increased by over 3 percent and the net volume of trees on timberland has increased by 58 percent (U.S. Forest Service, 2012). In Canada, the forest cover has remained stable over the last two decades and harvest has been 44 percent of annual growth (Conference Board of Canada, 2014).
- The environmental and social impacts of switching from paper to e-media are not properly or adequately considered – and they are far from negligible. The trade‐off between the two platforms depends on conditions such as use frequency, source of energy, and end‐of‐life management of the products (P. Arnfalk, 2010).
- Consumer surveys found that 50 percent or more of U.S. respondents don’t believe, feel misled or question “Go Paperless – Save Trees” claims, and that over 80 percent agreed that e-billing and e-statements are being promoted to save costs (Toluna and Two Sides, 2013).
Alison Moodie, a writer for The Guardian – Sustainable Business covered the Two Sides campaign in February 2014 (Is Digital Greener than Paper?) and noted, “Manufacturing electronic products also leaves a carbon footprint, as well as the energy needed to power them. And a growing concern is the rapid growth of discarded electronics, especially in developing countries. E-waste is on the rise, with a global increase of 40 million tons per year, especially in third world countries.” She concluded that, “Until more research has been done on the life-cycle and environmental impact of electronics, pitting paper and e-media against each other is somewhat futile. It doesn’t need to be an “either/ or” situation. There is a place for both paper and e-media.