Fraser: OK contract or mill closes

Posted Feb. 03, 2010, at 2:09 p.m.
Last modified Jan. 30, 2011, at 11:35 a.m.

MADAWASKA, Maine — Fraser Papers Inc. might close its paper mill here, idling about 680 employees, if unions don’t help the company escape bankruptcy by accepting a three-year contract that includes $4 million in concessions, a company official said Wednesday.

Expecting to resume contract talks with United Steel Workers Union Locals 365, 291 and 1247 Wednesday afternoon, Fraser Human Resources Director Bill Peterson said before the session that the new deal is among three conditions the re-formed, post-bankruptcy Fraser company, temporarily called Newco, must meet to pre-vent closing the specialty papers mill.

“In my entire career, this is the first time where the deal could actually be the absolutely final offer,” Peterson said Wednesday.

Duane Lugdon, Maine’s international representative for the United Steelworkers Union, which represents about 12,000 paper workers in the state, did not return several messages seeking comment on Wednesday.

Telephone calls to union leaders at the mill also were not returned.

The unions, which have about 460 members, voted against a proposed contract on Nov. 22. Lugdon and Peterson declined then to discuss details of the contract or its rejection, citing a confidentiality agreement. It was the unions’ first vote on a new contract after talks began in August.

Lugdon did say that 98 percent of the voting members rejected the deal.

“The terms of the contract were not advantageous for employees,” he said. “The task now is to go back to the table and build a contract to benefit everyone.”

A credit group of Brookfield Asset Management, CIT-Canada and the New Brunswick provincial government won’t proceed with a proposed $180 million bailout of Fraser without the contract. Other investors also backed away from the company, feeling the risk of taking over the mill too great without a deal with workers, Pe-terson said.

Fraser Papers sought bankruptcy protection in Canadian and U.S. courts in June.

According to Peterson, the three unions voted a second time on a contract proposal last weekend and again turned it down. Peterson would not say how closely this deal resembled the one voted on in November.

The unions’ chief objection was the lack of concessions from the mill’s salaried workers and management, Peterson said. The salaried workers haven’t had a salary increase in two years, he said.

Peterson made no bones that he was engaging in saber rattling — sending a strong message to the unions through the media that it was time to make the deal. He said he was entering negotiations Wednesday afternoon and didn’t plan to leave until an agreement was reached or it became obvious that one never would be.

“If this doesn’t go through, this could put Fraser in a position where all of Fraser’s assets could be at risk,” he said.

In December, Lugdon said the locals at the company’s Madawaska mill realize that the bankruptcy process is ongoing as they negotiate the contract.

“The company has gone public with a plan to reorganize and build a future for the Madawaska mill,” he said. “Everyone in Madawaska realizes that the future of the mill is what we need to ensure. That is why we are negotiating in good faith, and we will continue to bargain as we move forward.”

Fraser Papers Inc. is trying to restructure while under court protection from creditors. Under a bankruptcy proposal on the table, Brookfield, which owns 71 percent of Fraser Papers’ shares, would swap its debt for a 51 percent stake in a new company that would buy the integrated paper operations in Edmundston, New Bruns-wick, and Madawaska. The new company, temporarily called Newco, also would acquire lumber mills in Plaster Rock, N.B., and Juniper, N.B.

Unsecured creditors, who include pension plan workers, would share $40 million in promissory notes, 49 percent of common shares in the new company and proceeds of the sales of nonspecialty papermaking assets in Quebec, Maine and New Hampshire. Fraser Papers’ pension liabilities amount to $172 million.

Fraser’s Madawaska mill is the company’s largest paper mill and is capable of producing a variety of specialty packaging, publishing and label papers. Headquartered in Toronto, Ontario, Fraser has operations in Maine, New Hampshire, New Brunswick and Quebec.

In August, union workers at Fraser’s Edmundston, New Brunswick, mill ratified a three-year contract. Fraser said it provided for a more competitive labor cost structure with future wage increases tied directly to the profits.

Writer Rebecca Penty of the New Brunswick Telegraph Journal contributed to this report.

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