December 28, 2014 10:58 PM ET

Paper and Forest Products

Company Overview of Catalyst Paper Corporation

Company Overview

Catalyst Paper Corporation, together with its subsidiaries, produces and sells mechanical printing papers in western North America. The company operates through three segments: Specialty Printing Papers, Newsprint, and Pulp. The Specialty Printing Papers segment provides coated mechanical, uncoated mechanical, directory, and soft-calendared mechanical papers for retailers, commercial printers, and telephone directory publishers, as well as magazine and catalogue publishers. This segment sells its products through marketing personnel in North America, as well as through distributors and agents in other geographic markets. The Newsprint segment provides newsprint primarily for newspaper publis...

3600 Lysander Lane

2nd Floor

Richmond, BC V7B 1C3

Canada

Founded in 1946

1,550 Employees

Phone:

604-247-4400

Fax:

604-247-0512

Key Executives for Catalyst Paper Corporation

Chief Executive Officer
Age: 49
Total Annual Compensation: $157.0K
Chief Financial Officer
Age: 47
Total Annual Compensation: $290.0K
Compensation as of Fiscal Year 2013.

Catalyst Paper Corporation Key Developments

Catalyst Paper to Indefinitely Curtail Paper Machine at Powell River

Catalyst Paper announced the decision to indefinitely curtail the No. 9 paper machine, one of three machines at its Powell River operation. This decision is fully market-related as the company is facing a lack of orders and a declining market for the paper manufactured on paper machine No. 9, which was temporarily curtailed on October 27. It is anticipated that this change will result in the loss of 50 jobs at the Power River operations and the Surrey Distribution Centre, Catalyst's product distribution hub. The company will be working with employees and the Union locals on a transition plan to mitigate the impact of this decision.

Catalyst Paper Corporation Announces Terms of a Private Placement of USD 25.0 Million Aggregate Principal Amount of PIK Toggle Senior Secured Notes

Catalyst Paper Corporation announced the terms of a private placement of USD 25.0 million aggregate principal amount of PIK Toggle Senior Secured Notes, which will form part of the same series as Catalyst's existing PIK Toggle Senior Secured Notes of which there are presently USD 235.5 million aggregate principal amount outstanding. Upon completion of the offering, the offered notes will represent approximately 9.6% of the USD 260.5 million aggregate principal amount of outstanding PIK Toggle Senior Secured Notes. The offered notes will be issued at a 20% discount to face value, a price that was determined by Catalyst with reference to, among other things, the trading history of the existing notes. As with the existing notes, the offered notes will be due October 30, 2017, bear interest at a rate of 11% per annum in cash or, at the option of the company, 13% per annum (payable 7.5% in cash and 5.5% payment-in-kind) and are not convertible into equity securities of Catalyst. Catalyst expects to receive gross proceeds from the offering of USD 20.0 million. The offered notes will be offered by Catalyst to eligible offerees that hold existing notes on December 5, 2014, with eligible offerees being permitted to subscribe for their pro-rata share of offered notes based on the aggregate principal amount of existing notes held by such holders relative to the total aggregate principal amount of outstanding existing notes. Certain holders of existing notes have agreed to backstop the issuance of offered notes. Under the offering, all eligible holders of existing notes will be entitled to participate in such backstop on a pro-rata basis. Based on Catalyst's records, as at November 24, 2014 Cyrus Capital Partners L.P. held 6,291,561 common shares of Catalyst representing 43.31% of the issued Shares and Mudrick Capital Management L.P. held 2,860,473 Shares representing 19.69% of the issued Shares. Cyrus and Mudrick are consequently insiders of Catalyst by virtue of each holding over 10% of the issued shares of Catalyst. Cyrus and Mudrick also held USD 39,883,621 and USD 54,455,123 aggregate principal amount of Existing Notes as at November 24, 2014, respectively, and intend to subscribe for their respective pro-rata share of Offered Notes in the Offering and backstop the purchase of Offered Notes that are not purchased by other holders of Existing Notes in the Offering. As a result, the Offering constitutes a "related party transaction" within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") insofar as it involves the Related Parties. As the Offered Notes would constitute a loan from the Related Parties to Catalyst an exemption from the minority shareholder approval requirement under MI 61-101 is available as Catalyst has determined that the terms of the Offered Notes constitute reasonable commercial terms that are not less advantageous to Catalyst than those terms that could have been obtained from a person dealing at arm's length with Catalyst, and the Offered Notes are not convertible into or repayable in equity or voting securities of Catalyst. To the knowledge of Catalyst, the Related Parties do not have knowledge of any material information regarding Catalyst or its securities that has not been generally disclosed. As all eligible holders of Existing Notes will have the opportunity to subscribe for Offered Notes on a pro-rata basis, the Offering (leaving aside the backstop) will not impact the percentage of PIK Toggle Senior Secured Notes held by the Related Parties. Based on their respective holdings of Existing Notes as of November 24, 2014, Cyrus and Mudrick would have the initial right to subscribe for 16.94% (USD 4,235,000 principal amount) and 23.12% (USD 5,780,000 principal amount) of the Offered Notes, respectively. The Related Parties along with another significant holder of Existing Notes, which based on the Company's records as at November 24, 2014 collectively hold approximately 78.63% of the Existing Notes, have agreed to backstop the Offering. In the event that no holders of Existing Notes other than the Backstop Parties subscribe for Offered Notes, Cyrus and Mudrick would be required under the backstop to subscribe for approximately an additional USD 1,150,775 and USD 1,571,229 principal amount of Offered Notes, respectively. The Offering will have no impact on the direct or indirect voting interest of the Related Parties as shareholders.

Catalyst Paper Reports Earnings and Production Results for the Third Quarter and Nine Months of 2014; Provides Capital Spending Guidance for the Full Year of 2014

Catalyst Paper reported earnings and production results for the third quarter and nine months of 2014. For the nine months, sales were CAD 829.4 million, operating earnings were CAD 7.7 million, net loss attributable to the company was CAD 32.6 million, basic and diluted net loss per share attributable to the company's common shareholders from continuing operations was CAD 2.25. Adjusted EBITDA for the year to date was CAD 40.8 million compared to CAD 27.0 million for the corresponding period last year. Operating results reflect the production and manufacturing cost impact of a total mill outage at the Powell River mill and annual boiler shuts at the Powell River and Port Alberni mills, and lower specialty paper pricing and paper sales volumes due to weakening North American paper demand. This was partly offset by record-setting pulp production in the quarter and significantly reduced pulp manufacturing costs. Free cash flow for the year to date was negative CAD 5.0 million compared to negative CAD 27.3 million for the corresponding period last year. Net loss attributable to the company before specific items was CAD 17.9 million. Capital expenditures were CAD 5.7 million. For the third quarter, sales were CAD 272.0 million against CAD 268.8 million last year. Operating loss was CAD 3.2 million against operating earnings of CAD 4.9 million last year. Adjusted EBITDA was CAD 8.0 million against CAD 16.4 million last year. Net loss attributable to the company was CAD 22.5 million against net earnings attributable to the company of CAD 5.2 million last year. Basic and diluted net loss per share attributable to the company's common shareholders from continuing operations was CAD 1.55 against basic and diluted net earnings per share attributable to the company's common shareholders from continuing operations of CAD 0.36 last year. Net earnings this quarter were negatively impacted by a settlement loss on a multi-employer pension plan carried over from the discontinued Snowflake mill of CAD 1.2 million and a foreign exchange loss on the translation of US dollar denominated debt of CAD 12.6 million. Free cash flow for the quarter was negative CAD 8.0 million. Net loss attributable to the company before specific items was CAD 10.8 million against CAD 3.5 million last year. For the third quarter, production was 355,700 tonnes against 357,600 tonnes last year. For the nine months, production was 1,058,200 tonnes. For the full year of 2014, the company continue to expect capital spending in the range of CAD 20 million.

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Recent Private Companies Transactions

Type
Date
Target
Private Placement
November 28, 2014
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