Fraser Papers officials said Thursday that the company’s decision to seek bankruptcy protection in Canadian and U.S. courts will not have any immediate impact on operations at the firm’s Maine mills or other facilities.
But company officials acknowledged that Fraser faces “considerable challenges” as it tries to restructure to reduce costs in the face of a turbulent market.
“As we develop this restructuring plan, we have to put everything on the table,” said Fraser CEO Peter Gordon. “We have to figure out how to do things better, faster and smarter.”
The Toronto-based company on Thursday sought protection from its creditors by initiating a court-supervised restructuring through the Ontario Superior Court of Justice. The company was also filing in U.S. Bankruptcy Court in Delaware for Chapter 15 bankruptcy protection, which provides protection from creditors for companies that operate in more than one country.
Operations are expected to continue without disruption at Fraser’s mills in Madawaska and Gorham, N.H., and at the affiliated Katahdin Paper mill in East Millinocket owned by Brookfield Asset Management, Fraser’s parent company.
Fraser lumber yards in Ashland and Masardis also will continue operating at least until wood supplies last.
Gov. John Baldacci said he has been assured by Fraser officials that the filings will not affect workers at the Madawaska mill. Madawaska officials could not be reached for comment Thursday afternoon.
“My administration will continue to work with Fraser Papers and do everything possible to protect jobs in Maine,” Baldacci said in a statement. Members of Maine’s congressional delegation also pledged their support of Fraser’s Maine work force.
The Fraser facility just across the river and Canadian border from Madawaska in Edmundston, New Brunswick, was shut down earlier this month and may not be restarted unless the company can find $17 million in annual savings.
Gordon said in a telephone interview that Fraser’s paper business remains profitable. But the weak pulp and lumber markets, debt obligations and a controversial “black liquor” tax credit offered to U.S.-based mills are among the serious challenges forcing the company to restructure, he said.
The Canadian government earlier this week announced a more limited program to pay firms in that country which burn as fuel the byproduct of the pulping process known as “black liquor.” But Gordon said those subsidies are expected to be much less than those enjoyed by U.S. firms.
“Certainly, as we considered the outlook in the markets, there was no expectation that pulp prices are going to improve markedly in the next several months,” he said.
News of the bankruptcy filings drove Fraser’s stock price down significantly on Thursday, falling from 14 cents to 7 cents a share on the Toronto Stock Exchange.
Fraser’s actions Thursday were yet another troubling sign of the challenges facing the paper industry in Maine and Canada.
Mills across Maine have shut down papermaking or pulp machines in recent months, resulting in hundreds of layoffs and huge losses in tax revenues for local towns. Those shutdowns, combined with the recession-driven housing slump, have rippled throughout the logging and wood products industries.
“In the immediate term, I don’t know that it means a lot,” John Williams, president of the Maine Pulp and Paper Association, said of the Fraser filings. “But it’s certainly not good news that a company like Fraser has to file for bankruptcy.”
“It’s another upsetting piece of news,” added East Millinocket Administrative Assistant Shirley Tapley. “You just hope and pray that it doesn’t affect Katahdin Paper.” The East Millinocket facility employs approximately 400 workers.
In an indication of the frustrations with Fraser harbored by some, Millinocket Town Manager Eugene Conlogue chafed at Gordon’s comment that the paper industry is profitable.
The Katahdin region has waited since September for the Fraser-managed Katahdin Paper Co. mill in Millinocket to reopen. Fraser and parent company Brookfield Asset Management opted to close the mill, citing concerns about its long-term profitability given its almost total reliance upon No. 6 oil.
“If papermaking is so profitable for Fraser, why isn’t their premier machine operating in Millinocket since it has customers wanting their paper? I am very concerned that they shut down the mill indefinitely when they had customers last year and oil prices were decreasing,” Conlogue said.
“If his comments are correct, for Mr. Gordon to now say that the paper business is profitable is very concerning, because the Millinocket mill could have been running all these months had they opted to restart it.”
Conlogue called upon Brookfield Asset Management to consider a different operating partner for the mill.