Quebec judge okays Papiers Gaspésia sale

Pulp & Paper, Jan 2005

A Quebec judge in November put the Papiers Gaspésia project on track for an asset sale while continuing to protect the Chandler, Que., mill from creditors. In a ruling, Justice Paul Chaput gave the Gaspésia project's bankruptcy trustee until the end of December to invite offers for the mill property.

The assets of the mill have been broken up into 25 lots, and offers for each are due by Jan. 14. Initially, a few European companies, including UPM Kymmene and Stora Enso, were reportedly interested in investing in the mill to finish the conversion project at the former Abitibi-Consolidated newsprint mill.

The original backup plan was to find a company that was willing to fund the rest of the project. But UPM, Stora Enso, and a couple of other companies took a look at what it would take to finish the project, and all of them decided that it would not be feasible, a Canadian paper industry contact said.

In accordance with the process set out in the Companies' Creditors Arrangement Act, the trustee will be required to seek creditor approval prior to a transaction. An order protecting the company's assets from creditors has been extended until January, and in the meantime, the project's former operators have agreed to maintain the mill.

The court-appointed trustee, Ernst & Young executive Pierre Laporte, has spent months trying to interest Canadian and European companies in taking over and completing the Gaspésia project, a former newsprint mill run by Abitibi-Consolidated that had plans to be converted to make coated paper. Although several entities have expressed interest, none have made an offer.

"Hope is not large for the people of Chandler, but it still exists," Laporte said.

A group of Papiers Gaspésia contractors who are owed about C$37.5 million had earlier asked the court to lift the protection, believing that would give them a better chance of recouping their money than would be the case if they waited for bids to be opened. According to the French language news Web site MesNouvelles.com, the contractors are still hopeful that their case will be heard before the sale closes in two months.

The $500-million Gaspésia project called for converting one of the mill's two newsprint machines into producing about 220,000 tpy of coated paper. The project was funded mostly by the Quebec government and labor interests. The plan was to save about 230 jobs in an area of high unemployment. But the project foundered when cost overruns soared, and project manager and 25% stakeholder Tembec Inc. said it was unwilling to put more money into it.