OTTAWA - Canada's largest forestry union wants to preserve the pensions of about 1,000 retirees at Fraser Papers, under bankruptcy protection, rather than having the company wind them up.
The Communications, Energy and Paperworkers Union of Canada said Wednesday that Fraser Papers' restructuring plan must ensure its financial obligations to pensioners.
"Fraser is using the bankruptcy process to take pensioners' money to pay off investors and then continue to operate profitably under a new name," union president Dave Coles said.
About 1,000 pensioners from Canadian paper mills could lose up to 40 per cent of their pensions, Coles said in a news release.
Coles said the company owes $171 million to its pension plans and it's seeking approval to wind up the pension plans.
Fraser Papers filed for bankruptcy protection last June, citing weakness in the pulp and lumber markets and a cash shortfall. It produces specialty packaging and printing papers with operations in New Brunswick, Maine, New Hampshire and Quebec.
An Ontario Superior Court is overseeing its restructuring and has approved the company's plan, including the sale of specialty paper assets in Madawaska, Maine, and Edmundston, N.B., as well as the two New Brunswick lumber mills located in Plaster Rock and Juniper, to a new company.
Under the terms of the offer, Brookfield Asset Management Inc. (TSX:BAM.A), a secured creditor, has agreed to convert its claim against the company into a 51 per cent sake in a new company. The New Brunswick government has also agreed to convert its $35 million secured loan plus accrued interest into equity in the form of preferred shares of the new company.
CIT Business Credit Canada Inc., the company's existing working capital lender, has agreed to provide a $50 million revolving credit facility from which its existing secured loans to the company will be repaid.
The new company will also issue common shares, representing a 49 per cent stake and promissory notes to the unsecured creditors of Fraser Papers.
The second stage of the plan will involve the sale of the company's remaining assets including the Gorham paper mill in New Hampshire, two lumber mills in Maine the Thurso pulp mill in Quebec, that is currently shutdown.
Coles accused Brookfield Asset Management of selling part of the company to itself and divesting itself of its pension obligations, as well as severance and other obligations to workers at the Thurso, Que., mill.
Corporate restructurings have taken their toll on pension plans.
At bankrupt Nortel, there was an estimated $1.8 billion shortfall in its pension, meaning that the company's former employees will, at best, receive a fraction of the money they were originally owed.