CATALYST PAPER WINS APPROVAL OF DEBT RESTRUCTURING PLAN TO AVOID A SALE

Catalyst Paper Corporation won Canadian court approval of a debt restructuring plan that swaps out $390-million in first-lien debt for a majority stake in the company and $250-million worth of new first-lien notes. Approval came Thursday following a 99% vote of support from creditors who had rejected an earlier version of the restructuring plan. The earlier version of the plan would have left the specialty-paper maker with about US$120-million more debt than it will be carrying under the approved plan. Failure of the first plan in May pushed Catalyst toward a forced sale, in a deal that posed a threat to the pensions of former salaried workers. Cut adrift after the proposed sale with an underfunded plan, the salaried retirees would have seen their monthly checks shrink by about one-third, court papers say. “A sale would have been devastating. The average pension is not huge — C$19,000 to C$20,000 per year,” said Koskie Minsky LLP’s Andrew Hatnay, attorney for the retired workers. Having been shut out of the voting on the first plan, the salaried retirees found a way to have the group’s votes recognized. Former salaried workers agreed to give up their extended health benefits, which would have been lost anyway in the event of a sale. That C$22 million sacrifice qualified them as unsecured creditors entitled to vote, pledging support for a plan that had earlier been defeated on a narrow margin.