Fraser Papers Announces Financial Results for the Fourth Quarter of 2008

During the first quarter of 2008, the Company issued 20,656,913 common shares under a rights offering for net proceeds of $59.7 million. The proceeds from the offering were used to repay outstanding debt, including $50.0 million which was due on January 31, 2008.

During the second quarter, the Company amended its revolving credit facility to increase the maximum borrowings under the facility to $115.0 million and extend the term of the facility through April, 2011. The increased borrowing capacity will provide the Company with the liquidity it needs to execute its 2009 business plan.

In addition, the Company secured a CAD$40.0 million term loan facility from the province of New Brunswick to support its capital investment plan in the province (see "Liquidity and Capital Resources").

During the third quarter, the Company entered into a $25.0 million one-year term credit facility with a Canadian chartered bank, which bears interest at prevailing market rates.

OVERVIEW

We are executing a comprehensive turnaround of Fraser Papers' financial and operating affairs. We continued our focus on operational improvement, implemented a number of energy and fibre efficiency initiatives and took downtime at our market pulp mill and lumbermills in an effort to reduce costs. Despite these initiatives to improve Fraser Papers' performance and improved shipments and prices of our paper products, weak market pulp and lumber markets led to negative EBITDA in the quarter.

During the last half of 2008, a worldwide credit crisis developed followed quickly by a meltdown in world equity values and reduced economic activity. As a result, it is expected that many of the world's largest economies are currently in a recession. Fraser Papers' lumber operations have seen a significant reduction in demand over the past 18 months as North American housing starts fell throughout 2007 and 2008. Additionally, in the fourth quarter of 2008, demand for certain of the Company's pulp and paper products also fell significantly. Specifically, demand for commodity grades of pulp and paper, certain label papers, lighter weight printing freesheet papers and high-bright groundwood papers fell as a result of reduced economic activity in the banking and manufacturing sectors. The Company's packaging papers appear to be less affected by the recent economic downturn.

Our specialty paper business at East Papers is benefiting from investments that have increased internal pulp and paper production, reduced energy consumption and developed and enhanced its specialty product offerings. Sulphite pulp production at the Edmundston, New Brunswick facility set a record daily production rate for the quarter surpassing the previous mark by 28 tons per day or 4%. The East Papers operations improved paper production by 49 tons per operating day from 2007. Energy efficiency projects in the paper operations reduced oil consumption by 55,000 barrels compared to the fourth quarter of 2007. With the economic slowdown, commodity paper markets began to decline during the fourth quarter. However, due to Fraser Papers' focus on specialty paper grades, representing 74% of our shipments, paper shipments and net revenue realized increased during the quarter. The Company did take market-related downtime in December of 2008 and January 2009 of approximately 21,000 tons of production to balance inventory needs.