LONGUEUIL, QC, April 27 /CNW Telbec/ - SFK Pulp announces that on April
24, 2009, at the end of the day, it received a notice from
Abitibi-Consolidated Company of Canada (Abitibi) terminating, effective
immediately, the fibre supply agreement and the bark supply agreement entered
into between SFK Pulp and Abitibi on August 1, 2002 at the time of the
creation of SFK Pulp by Abitibi. Pursuant to a court order issued by the
Québec Superior Court on April 16, 2009 in connection with Abitibi's filing
for protection from its creditors, Abitibi was granted the right to terminate
all of its contracts, subject to obtaining consent from the court or the
court-appointed monitor, Ernst & Young Inc.
Pursuant to the terms of these agreements, Abitibi has committed to
supply fibre and bark to SFK Pulp's Saint-Félicien Mill for a period of 20
years. The Saint-Félicien Mill currently purchases approximately 80% of its
wood fibre and bark requirements from Abitibi. Under the fibre supply
agreement, Abitibi is required to supply certain wood fibre volumes pursuant
to a price formula based on the market price of wood fibre in Québec. This
formula increases or reduces the price of wood fibre purchased by SFK Pulp
based on the price of NBSK pulp.
Although SFK Pulp has been working closely with Abitibi over recent days
to identify solutions to secure its wood fibre and bark supply and to minimize
the impact on operating costs, SFK Pulp and Abitibi have not yet reached a
mutually satisfactory agreement. Both parties have agreed to meet in the
coming days to continue discussions.
"Our objective, while trying to secure the optimal fibre supply for our
Saint-Félicien Mill, is to mitigate as much as possible potential negative
impacts for our stakeholders. Our intention was to resume operations at the
Saint-Félicien Mill in early May. We are currently reassessing our plans in
light of these new circumstances. SFK Pulp will also continue balancing
inventories with its order book and closely monitoring its liquidity until
demand for its products firms up. SFK Pulp has great assets and a low debt
level, and can count on a proud group of employees to continue seeking the
most efficient and economic ways of operating its business and exit these
historic times in an even stronger position," stated Pierre Gabriel Côté,
President and Chief Executive Officer of SFK Pulp.
SFK Pulp will also be working closely with its lenders over the next few
days to assess the impact of the termination of its fibre and bark supply
agreements on its credit agreement, including the possibility that this event
may constitute a default under the credit agreement. SFK Pulp is also
currently evaluating with its external counsel the possibility of contesting
the termination of the fibre and bark supply agreements.
"We are also currently working with the Québec government in order to
identify potential solutions which would adequately support SFK Pulp in times
where it is already facing important challenges, greatly magnified by
Abitibi's situation," added Pierre Gabriel Côté.
About SFK Pulp
SFK Pulp (TSX: SFK.UN), a leading producer and marketer of premium virgin
and recycled kraft pulp, operates three mills in Saint-Félicien, Québec,
Fairmont, West Virginia, and Menominee, Michigan. SFK Pulp employs
approximately 550 people, including 306 in its Saint-Félicien Mill, and has a
total annual production capacity of 745,000 metric tonnes. The Saint-Félicien
Mill supplies northern bleached softwood kraft (NBSK) pulp to various sectors
of the paper industry in Canada, the United States and Europe for use in
specialty products. The Fairmont and Menominee Mills manufacture air-dried
market recycled bleached kraft (RBK) pulp and primarily supply manufacturers
of uncoated freesheet, commercial and away-from-home tissue and coated paper
in the U.S.
For further information:
For further information: Investors and Analysts: Mrs. Patsie Ducharme,
SFK Pulp, Vice-President and Chief Financial Officer, (450) 677-7857 ext.
2225; Media and others: Mr. Dany Paradis, SFK Pulp, Vice-President, Change
Management and Public Affairs, (450) 677-7857 ext. 2227; Mr. Rick Leckner,
MaisonBrison, (514) 731-0000, ext. 222