White Birch Paper Co. Auction Set for Sept. 15

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By: E&P Staff

Bear Island Paper Co., Ashland, Va., and its parent, White Birch Paper Co., Halifax, Nova Scotia, will hold an auction Sept. 15 at the offices of the companies’ New York City lawyers. The auction was originally slated for Sept. 1. A bankruptcy judge approved the new date last week. Bloomberg reported a hearing for approval of the sale is scheduled for Sept. 22.

BD White Birch Investment LLC has offered $90 million in cash for the businesses. Holding 65% percent of first-lien debt, BD White Birch includes affiliates of Black Diamond Capital Management LLC, Credit Suisse Group AG and Caspian Capital Advisors LLC.

Early last week, however, Sixth Avenue Investment Co. LLC said it would pay $100 million cash. Sixth Avenue is a group that includes Blue Mountain Capital Management LLC, Lombard General Insurance Co. of Canada and Macquarie Bank Ltd.

Covering the fate of the local Bear Island Paper mill, The Richmond Times-Dispatch reported that Sixth Avenue claimed BD White Birch group members could take in $10.6 million in breakup fees and other payments if the property went to another bidder. Sixth Avenue said it would forgo a breakup fee, take $1.5 million in expenses, sign a contract with no financing condition, and complete the sale with no further financial investigation.

The bankruptcy judge sitting in Richmond rejected Sixth Avenue’s move to become the stalking horse bidder after Bear Island’s attorneys argued that a break-up fee was needed to induce a stalking-horse bid, according to the Times-Dispatch, which noted that the unsecured creditors committee also approved of the stalking-horse agreement.

North America’s second-largest newsprint maker, White Birch and its U.S. companies petitioned for bankruptcy reorganizations in both countries in February. With three pulp and paper mills in the Quebec, White Birch is controlled by Brant-Allen Industries, Greenwich, Conn. (Separately, SP Newsprint Co., owned equally by affiliates of Cox Enterprises, Media General and The McClatchy Co., was sold in 2008 to affiliates of Peter Brant, controlling shareholder of White Birch Paper Co. and CEO and Chairman of Brant-Allen Industries, for $350 million in cash. The former SP Newsprint consists of recycled newsprint mills in Newberg, Ore., and Dublin, Ga., as well as its Atlanta-based SP Recycling Corp. subsidiary, which supplied recovered newspapers.)

Bloomberg reported that secured liabilities include $438 million on a first-lien term loan, $104 million on a second-lien term loan, $50 million on an asset-backed revolving credit and $51.5 million on swap agreements. Trade suppliers are owed $9.5 million. Of the companies’ $667 million in 2009 sales, $125 million was attributable to Bear Island.

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