Fraser Papers Announces Financial Results for the Fourth Quarter of 2008

Market Wire, February, 2009

Financing

During 2008, the Company completed a number of financings required to fund its continuing operations and pension deficit. In January, 2008, the Company raised $59.7 million in common equity from a rights offering to shareholders. In April, 2008, the Company increased the maximum borrowings under its working capital facility to $115.0 million and extended the term to April 2011. In September, 2008, the Company finalized a one-year, $25 million term facility. These three transactions were supported by Brookfield Asset Management, the Company's largest shareholder.

In addition to these transactions, the Company received a six and one half year, CAD$40 million secured term loan from the province of New Brunswick to support its investment plans in the Province.

EXECUTIVE ANNOUNCEMENT

The Board of Directors approved the appointment of Jeff Dutton, currently Senior Vice President, Operations and Chief Operating Officer, as President and Chief Operating Officer, effective immediately, reporting to Peter Gordon, Chief Executive Officer. Mr. Dutton joined Fraser Papers in June, 2006 as General Manager of the Company's East Papers operations and has been actively involved in improving the Company's operating platform.

OUTLOOK

The Company expects a number of challenging quarters ahead as the effects of a global recession play out in the U.S. economy and in the Company's market segments in particular. Business activity slowed sharply toward the end of last year and led to reduced demand for all Fraser Papers' products. The pulp and lumber markets were particularly impacted with market prices dropping to extremely low levels. Prices for the Company's paper products were more stable, but as order files declined, the Company took downtime across a number of machines, in addition to shutdowns at Thurso and the lumbermills.

The Company's sales are largely focused in the United States, therefore the outlook for a recovery in the Company's business will be partly dependent on the success of the recently announced stimulus package and the availability of liquidity to restore both credit and confidence into the economy and, in particular, into the Company's customers and end markets. Despite taking downtime on paper machines to balance inventories against customer orders in December and January, the Company built inventories in excess of its near-term requirements. Subsequent to the year end, the Company sold approximately 10,500 tons of inventory to an affiliate of Brookfield Asset Management, on customary commercial terms. The proceeds of the sale were used to repay amounts outstanding on the Company's working capital facility. The Company believes that over the longer term, the specialty nature of its paper products will help to position Fraser Papers to benefit from an economic recovery sooner than many other companies.

The market for northern bleached hardwood kraft pulp produced at the Company's Thurso mill continues to be weak. By the fourth quarter, world pulp inventories had increased to unsustainable levels following a sharp decline in global demand from paper producers. It is expected that further capacity reductions will be required in northern Europe and North American to balance supply and demand, as low cost capacity in South America and Southeast Asia continues to operate.