Catalyst Paper files for Chapter 15 protection

Wed Jan 18, 2012 6:09pm EST
 
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(Reuters) - Canada's Catalyst Paper Corp CTL.TO filed for Chapter 15 protection in a U.S. court on Tuesday as the specialty paper and newsprint producer grappled with rising costs of raw materials and lower demand.

Catalyst is the latest in line of paper producers that have succumbed to higher costs, increased competition from Asia and Europe, and falling demand as more advertisers and readers move online.

Under U.S. bankruptcy laws, Chapter 15 grants a foreign company protection from creditors looking to seize its assets in the country.

Last week, Catalyst had said it had entered into a restructuring agreement, which will see its bondholders taking control of the company and includes an exchange of debt for equity.

The agreement said it would slash the company's debt by C$315.4 million ($311 million) and reduce its cash interest expenses.

Catalyst said it will continue to "operate and satisfy" its obligations to customers, trade creditors, employees and retirees in the ordinary course of business during the restructuring process.

The company listed both assets and liabilities of more than $1 billion in the court filing.

After the restructuring announcement, Moody's Investors Service downgraded the company's rating to "Ca" from "Caa3."

The Richmond, British Columbia-based company, which has posted losses for nearly two years, had deferred interest payments of $21 million in December and said it is reviewing alternatives to address its capital structure.   Continued...