Catalyst Paper Corp. Debt

[Enterprising Investor]

CTLFQ records near $1-billion loss after writedown of mill values (3/01/12)

Catalyst Paper has written down the value of its four pulp and paper mills from over $1.2 billion in 2010 to $386 million, an $824 million drop that pushed its 2011 loss to almost $1 billion, the Richmond-based papermaker stated in its 2011 financial report.

The $824 million writedown is the main factor in Catalysts 2011 loss of $974 million.

Catalyst has been under court-ordered creditor protection since Jan. 31 and in its financial report, released earlier this week, company president Kevin Clarke laid out a grim list of troubles Catalyst was facing going into 2012 that led to the writedown and ultimately to the decision to seek protection under the federal Companies' Creditors Arrangement Act.

"We faced formidable economic and currency headwinds through 2011, made worse by the fourth-quarter drop-off in pulp prices and a weaker five-year paper and pulp industry forecast released in February 2012," Clarke said.

"We expect little if any improvement over the short-term in what are persistently difficult markets. With a challenging debt load, cash constraints and difficult trade credit terms to contend with, filing for creditor protection became inevitable when a consensual recapitalization agreement with noteholders could not reached by January 31, 2012."

The 2011 writedown is the latest but most severe of writedowns and accelerated depreciation on its assets the company has been undertaking for several years. The company lists the cost of its mills at Crofton, Port Alberni, Powell River and Snowflake, Arizona, at $4.2 billion.

In contrast to the current value of its mills, Catalyst's long-term debt totals $811 million, according to documents filed in B.C. Supreme Court. Senior noteholders account for $686 million of that debt.

The 2011 loss of $974 million is in contrast to a 2010 loss of $397 million. That loss included almost $300 million in writedowns and closure costs.

Catalyst's net loss in 2011, before unusual items was $126.3 million, compared to $87 million the year before.

The company cites an orderly exit from creditor protection as its main priority for 2012.

"In keeping with this financial goal, operations are keeping a tight rein on costs," the financial report states.

Catalyst employs 2,123 people, most of them, 1,300, at its mills on Vancouver Island and at Powell River.

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