White Birch Paper has completed a key step in a long path to restructuring after the newsprint producer's largest creditor won an auction for the company with its stalking horse bid of US$150-million, which included cash held by the insolvent company.
A consortium of creditors led by Black Diamond, a U.S.-based alternative asset manager, beat out another bidder during the auction held Tuesday.
Black Diamond had estimated the total purchase price for operations in Quebec and the U.S. would be US$178 million — including $90 million cash plus the repayment of certain obligations.
The other bidder was a group that collectively held about 10 per cent of the debt under a first-lien credit agreement.
It was comprised of BlueMountain Capital Management (as investment adviser to several funds managed by it), Steelhead Partners, Lombard General Insurance Company of Canada, Macquarie Bank Ltd. and MFP Partners.
The losing bid price wasn't included in the filing to the United States Bankruptcy Court for the Eastern District of Virginia. A court hearing to approve the sale will be held next Thursday.
Black Diamond Capital Management, which along with its partners own 65.5 per cent of White Birch's debt, said it plans to retain all of the insolvent company's current 1,200 employees provided that unionized workers amend existing collective agreements.
Renaud Gagne, Quebec vice-president of the Communications, Energy and Paperworkers Union, said the company's future could remain uncertain until next March while it files a restructuring plan and conducts union negotiations.
"The fact that the plants will continue with their operations and that there won't be a bankruptcy that's certainly good news, but there remains an enormous amount of work to finalize everything," he said in an interview from Toronto, where he was attending a national union congress.
The creditor's demands will determine whether there will be job cuts, he added.
Gagne said the union is willing to negotiate as long as the new owner's demands are in line with the model set by AbitibiBowater. Workers of the insolvent newsprint giant agreed to concessions totalling 17 per cent, including a 10 per cent wage reduction.
The auction was conducted by a group of creditors after being delayed by a Quebec judge following complaints from a dissatisfied creditor. Lawyers representing Service d'Impartition Industrial questioned whether the court had earlier been mislead about the dire financial condition of White Birch.
The company, which holds a $1.75-million construction lien on White Birch's FF Soucy plant in Riviere-du-Loup, Que., was unhappy that it won't recover any of its unsecured debt after the sale.
White Birch is the second-largest newsprint manufacturer in North America with newsprint mills in Quebec City, Riviere-du-Loup and Gatineau. It also has an operation at Bear Island in the United States in addition the Leduc sawmill, in Quebec City.
