May 26, 2018
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Brookfield trying to sell interest in Madawaska paper mill

John Clarke Russ | BDN
John Clarke Russ | BDN
A view from Edmundston, New Brunswick, of the mill in Madawaska in February 2010.
By Matt Wickenheiser, BDN Staff

MADAWASKA, Maine — The majority owner of the Twin Rivers Paper Co. is seeking to sell its stake in the company.

Brookfield Asset Management confirmed Wednesday that it is looking for a buyer for its 51 percent share in Twin Rivers, which employs approximately 1,200 at its paper operations in Madawaska and Edmundston, New Brunswick, and at a sawmill in Plaster Rock, New Brunswick.

Twin Rivers Paper previously was known as Fraser Paper. That company filed for bankruptcy, emerging in April 2010 as Twin Rivers. Brookfield Asset Management, formerly known as Brascan Corp., emerged as majority owner. The New Brunswick government is a general partner and creditors own minority shares in the company, as they exchanged debt for equity as part of the bankruptcy deal.

Dan Whyte, senior vice president at Brookfield, said the business has stabilized out of bankruptcy, has secured customers and suppliers, hammered out a union contract, gotten additional financing and made capital improvements in the Madawaska mill.

“The company, though it’s stable, will need to establish a longer term financing plan for growth. Where do you get that capital? Brookfield Asset Management is not prepared to put any more capital in that company,” said Whyte. “Paper is no longer a core business of ours. We hold 51 percent interest in Twin Rivers and we’re looking to divest that interest to a purchaser who’s prepared to work with the minority shareholders, existing stakeholders and someone who can support the business in a strategic direction.”

Brookfield, said Whyte, is focused on four business platforms: power, properties, infrastructure and finance. Paper is not core to Brookfield’s business, he said.

Whyte said Brookfield has had discussions with several companies interested in the firm’s Twin Rivers share. He wouldn’t name companies nor disclose what sort of money Brookfield is seeking in the deal.

Broadly speaking, he said, a number of different types of companies could be interested in the majority share of Twin Rivers, from other paper companies to investment houses. Ownership in the pulp and paper sector has evolved in recent years away from true paper companies to most mills being owned by investment firms.

Whyte said a buyer potentially could seek to purchase all of Twin Rivers, working out a deal with the other minority shareholders. Whyte said Brookfield has not set a deadline for a sale.

Jeff Dutton, Twin Rivers’ CEO, said the sale shouldn’t affect day-to-day operations at the mill — it’s a sale of ownership stake, not a sale of the hard assets. New ownership is needed, said Dutton, to help with future capital improvements at the mill as it positions itself for future business opportunities.

“Quite honestly, we need an equity owner that’s prepared to finance the business and support the growth of the business with capital resources,” said Dutton. “In the end, it’s good for Brookfield and good for Twin Rivers — we’ll look forward to the process.”

In January, the mill secured a loan guarantee from Business New Brunswick and loan insurance from the Finance Authority of Maine. Canadian Imperial Bank of Commerce, the company’s current lender, also approved an extension and amendments to Twin Rivers Paper’s existing revolving credit facility.

The company made $23 million in “green” energy investments designed to improve the company’s efficiency and lower its energy costs. Workers also developed alkaline-free extraction from pulp that saves on pulp and paper bleaching and energy costs.

“The bankruptcy of Fraser is not that far in our rearview mirror, but I think we’ve come a long way,” said Dutton.

Dutton said the mill was in a “strong position” in its specialty publishing business, producing paper for pharmaceutical inserts and financial printing. The company also is doing well in its greaseproof papers, expanding its customer base to food service and other specialty packaging areas.

Brookfield’s Whyte noted that the company is stable, but “it’s not a big money maker.”

Changes in the industry came fast and furious in recent years, he said. Expansion of broadband Internet to homes, the growth of tablets and readers to replace traditional paper products and other trends have hurt the sector.

“I don’t think any of us could have predicted any of the changes we’ve seen over the last three to four years,” said Dutton.

At this point, the company needs to anticipate the needs of the market rather than react once the markets have changed, he said. Twin Rivers has deep relationships with its customers and has a sense of what’s on the horizon, he said.

Those market changes likely will mean the mill has to update processes, invest in new machines and technology, and that requires capital, he said.

“As we continue to grow, we need to invest to improve our capabilities,” he said.

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