By JEFF NAGEL

REPAP founder George
Petty says he feels badly
about what’s happening to
norlhwestermers, -but he
refuses io take the blame for
the crisis threatening the
reglon’s mills and jobs,

He denies the suspicion of
many northwesterncrs that
money . from Repap B.C.
went east to bankroli other
projects — thereby con-
tributing to the staggering
$620 million debt of opera-
tions in B.C.

“'That’s absolutely false,’
Petty told the Standard in a
telephone interview Satur-
day from his home in
Montreal.

“There's no truth to that
whatsoever, We've invested
over 300 million dollars in
the Repap B.C. operations
— we modernized the pulp
mill; we built the uew state
of the art sawmill in Ter-
race, Which has done well.
We bought Camaby and

George Petty

modernized Smithers.

"We've suffered losses of
over 250 million dollars
over the last few years.

“It’s absolute nonsense to
look at it from that point of
view. 1 think what you have
to recognize is that we’ve
been there. 10 years trying to
turn that situation around,’’

The Terrace Standard, Wednesday, March 12, 1997 - AS

| Petty denies blame for collapse

Repap founder refutes accusations, points to unions, government policies

If there's any blame to be
laid, Petty said, it’s at the
feet of the union in Prince
Rupert, which he says
crippled Repap B.C. with a
long strike in 1995-96 —
just when pulp prices were
peaking.

“T feel very badly about it,
but we ran into a very tough
labour = siluation,’’ Petty
said. ‘‘The 110-day strike
cost us greatly im 1995 at a
time when we should have
been making some money.
We never recovered from
that strike. Let’s call a spade
a spade. It came at a bad
time when we were in a
weakened condition.”

In addition to the strike,
Petty says the B.C. govern-
ment imposed “exorbitant’
increases in stunapage costs
that were ‘‘completely out
of proportion and unfair in
the way they were applied
to pulp wood.”’

“That sucked a iot of.

money out of us,’’ be said.
The increased costs of the
Forest Practices Code im-
posed by the provincial
goverment contributed lo
the cost problems, Pelly

’ added,

The government is now
beginning to recognize the
need to change — thase
policies, Petty sald:

. "It’s mo secret that B.C.
has been hit pretty hard with
these costs. This siluation
probably highlights that.
That’s the way I see it.
There's not a lot more I can
say in my own defence.” —

“We came up there and
tried to do what was the
right thing, We built it up.
We modemized operations.
We added fibre supply. We
invested very, very heaviily
over a period of time.”’

Petty said the company
recognized its key role in

the northwest and continued
to run as best it could
despite mounting losses.
“We recognized that the
eulire viability of that north-
west sector is heavily ‘de-
pendent on our operations,”
he said. ‘'That’s one of the
reasons we had to sit there

nomic hands, The banks are
committed to* runing the
operation and protecting the
jobs.”

“Tf some conpetitiveness
can be realized in the cost
structure, the mills will be
able to be competitive as we
march forward under a dif-

“{ feel very badly about it, but we ran
into a very tough labour situation. The
110-day strike cost us greatly in 1995 ata
time when we should have been making
some money. We never recovered from

that strike.

and take a 110-day strike.”

‘But that’s crying over
spilled milk. We have to
deal with what's happening
today. I think the revised
Structure is in strong eco-

ferent capital structure.’’
The Standard asked Petty
what he has to say to :the
1,100 employees of logging
contractors in the region that
are now on the verge of

bankruptcy.

‘Iv's extremely difficult,”
Petly responded. ‘I believe
the government is going to
take a look at that Forest
Renewal fuad and come up
with some financing for the
people affected. It seems to
me that would be ap-
propriate.”’

Asked if its fair to at-

“tributeany of Repap B.C.'s

$620 million debt load to in-
itialives . outside of BC,
Petly said: ‘I don’t believe
it is.”

He said that anyane who
takes the time to analyze the
situation. Will conclude that
millions of dollars flowed
into Repap B.C,, rather than
the other way around.

Of his B.C. employees,
Pelly said: ‘‘They’re a ter-
rific workforce, They’ve
done a great job. I’in really
proud of what they’ve ac-
complished.”

Loggers talk
of suing Petty

Repap chairman and founder
blamed for debt disaster

LOGGING contractors want to sue the man they blame

most for Repap’s meltdown — company chairman George

Petty. .

“Ti started oul at a contractors mecting,’’ said Alm-wood
Contracting spokesman Justin Rigsby. ‘I stood up and

" said ‘Why don’t we just sue George Petty.’ Everybody
laughed, And then a lot of guys stopped laughing.”

Rigsby said no definite plans have been made, and says
someone would have to research the legal arguments of the
idea before anything scrious could happet.

He said contractors firmly believe Petly loaded extra
debt on Repap B.C.’s operations to help bankroll Repap
projects elsewhere.

One of the biggest and most costly endeavors was an ¢n-
vironmentally friendly Alcell pulping technology Petty
tried to pioncer at a mill in New Brunswick. Repap finally
abandoned the idea aud suffered heavy losses. ;

_— Repap B.C.’s $480 million bank debt now threatens to
undercut other northwest creditors’ ability to get paid.

“The contractors and suppliers say they’re now being
“made to pay the price for Petty’s ambition.

“They think he’s responsible,” Rigsby said, “People are _

ery a TG PPPS

really pissed off (7) 0S
Petty’s role in leveraging Repap’s debt was even fin-
gered by forests minister David Zirnhelt in a CBC Radio
phone-in show Friday.
..“"Yes, it’s true George Petty, the guy who runs Repap, is
a high-wire artist,’ Zimbelt said. “They played it right to
the wire in their abilily to take on debt.”’
_-» Repap B.C. vice-president Rudy Schwartz, who toured
‘the. northwest Jast week with court-appoitited monilor
David Bowra, said he frequently fields the question of
whether Repap B.C.’s debt is a result of money thal went
east,
‘The, question comes up with a certain degree of [re-

quency,’ Schwartz admitted last weck.

“Funds move back and forth in any or-

_ ganization. | don’t think it serves any pur-

‘pose to point fingers as to where the
money’s gone.”

‘Funds move back-and forth in any organization,” he
said. ‘1 don’t think it serves any purpose to point fingers
as 10 where the money's gone.”’
Schwartz noted that Repap B.C. has at times been a ben-
eficiary of moncy transferred in from the parent compaity.
“Money flowed in both directions,’’ Schwartz said.
~ Money has flowed cast to west as well.”
~ He said Repap B.C. lost $128 million last year. Over the
Jast' six yeats the company has rung up $312 million in
debts.
- Repap B.C.’s debt servicing charges climbed from $21.8
-million in 1992 to $50.2 million in 1996.
‘Last year’s purchase of Orenda Forest Products and its
timber supply was supposed to allow Repap B.C, to bor-
“row agains! Orenda’s assets to get $250 millioa for a mas-
sive renovation of the aging Prince Rupert pulp mill.
"That project never materialized and Repap B.C. officials
concede the money that could have been generated was in-
“stead consumed in recent months by the mounting debt.

THEY CALLED it the Starship when Repap 8.C.'s highly modernized sawmill in

Terrace came on line «lmost a decade ago. It's still a state of the art mill, but the
company's debt load and recent move to get protection from creditors has left a
dark cloud over employees, contractors and suppliers here. .

Unions brace for trouble

IT’S TOO early to talk about wage conces-
sions from unionized workers employed by
Repap, says a spokesman for the TWA-
Canada,

IWA-Canada Local 171 business agent
Surinder Malhotra said the prospect of
wage cuts or other impacts on workers has
yet to come up. .

There’s been nothing said,”’ said Mal-
hotra. ,

Local 171 in the Terrace area represents
about 270 people employed in Repap’s
sawmill here or in the woods cutting trees
to feed the mill.

That’s aboul 20 per cent of the local’s
membership here aad a reason to be
worried now that debt-ridden Repap has
temporary protection from its creditors in
order to revive ilself, said Malhotra.

He made the comments last week after
the IWA and the three other unions
representing Repap workers issued a slate-
ment saying they want in on any plans to
restructure the company. . -° -

“We believe that Repap B.C.’s opera-
tions are productive and profitable. We
urge the new owners of Repap B.C. to mect
their contractual obligations to employees,
contractors, suppliers. and the  com-

munities,”! the statement said.

In the meantime, the [WA is telling its
mentbers to save money.

That's not only tied to the Repap situation
but to the province-wide wage talks coming
up this year when TWA contracts run out in
June.

TWA-Canada president Dave Haggard
last week announced thal one of ifs
demands is going to be a reduction in the
standard 40-hour work week.

The new work week demanded could be
as low as 30 or 35 hours but without a cut
in wages from the 40-hour level, said Hag-
gard.

Malhotra said the work week reduction is
justa proposal to be presented to employe.s
as part of the bargaining process.

“We 'don't even know yet what the
employer is going to present,”’ be said.
‘And the members will have the final say
in the contract,'*

The other Repap unions are the Pulp and
Paper Workers of Canada and the B.C.,
Government and Service Employees Union
at the Prince Rupert pulp mill and the Com-
wunicattous, Energy and Paperworkers
union at the Carnaby sawmill near
Hazelton.

Bring wood control home, say Nisga'a

. THE FAILURE of Repap is further
proof that northwest resources
should be controlled by the people
who live here, says a member of
the Nisga‘a Tribal Council.

-Nelson. Leeson. said. northwest
ownership of wood would bring
stability and employment to the
area.

The Nisga’a, scheduled to receive

’ a healthy amount of wood under a
proposed. land- claims agreement
and the ability to buy more, will

se thé.resource for economic de-
velopthent, he added.
"There'll bean opportunity for
>Nisga’a and other people to get
‘working,”” said Leeson, ‘“There’ll
be an opportunity to create new. in-

He said the Nisga’a plan to log

“the wood ‘they’ll receive under a
treaty and that it will have to be
processed at a mill or mills in the
area,

Leeson pointed out that what hap-
pened lo Repap bad nothing to do
with the resource here or the people

-Who live in the rorthwest.

“There are big huge businesses
involved and that’s one af the
things peaple have to look at,’” he
said,

“The people of the northwest
should have mere say and contral,
With a trealy, that’ll: be a bonus to
everybody,’’ Leeson continued,

He said it was strange to have the
NDP government continue a policy
of having forest !ands controlled by
large corporations. ,

‘Before the NDP got in power
they talked about community con-

- tral (of forests) and having forests

for individual commiunities,’’ said
Leeson. 7

“We went along with that but
realized that there would be noth-
ing left for the Indians. That's why
a treaty is so important to us.”

Under the land claims agreement
in principal sigued last year, the
Nisga’a are to receive 200,000
cuble metres of wood a year.

The majority of the wood —
140,000 cubic mebes — to be
gratted under the treaty will come
from forest licences under control
of Repap.

The remainder will come from
other forest licence holders, includ-
ing West Fraser.

And the Nisga’a will have the

chance to buy up to 150,00 addi- -

tional cubic metres a year under the
proposed treaty,

Last year, Repap officials were
saying they’li seek compensation

- for the loss — as much as $80 mil-

lion. But there was also mention of

receiving other wood to replace ©

thal going to the Nisga'a.
And Repap did offer last year, as
part of the takeover of Orenda

' Forest Products and its licence, ta

turn over 49 per cent to the
Nisga’a.

It’s not yet known how Repap’s
claim for compensation or the pos-
sibility of doing a deal with the
Nisga’a will play out given that
control of the company now resis
with the Toronto-Dominion and
Royal banks. ~

The possibility of compensation
for wood Loss just might be an at-
tractive aspect for the banks who
are owed $480 tnillion by the com-
pany. ;

Trevor Proverbs, the province's
chief negotiator on the Nisga’a
claim, dogs’! fecl Repap’s situa-
tion will affect a. final Nisga’a
treaty. ; ,
- Wood will still, come from
whatever corporate entity takes
over from Repap and competisa-
tion, if payable, will be negotiated,
he sald. — ,

No easy fix
to crisis,
says Miller

Expect northwest casualties

DEPUTY PREMIER Dan
Miller is angry at the ii
financial mess left by
Repap yet he isn’t sure
that changing the way the
government manages its
forest resource is a solu-
tion.

In a Wide-ranging inter-
view last weck Miller
wouldn’t go as far as to
say Repap B.C.’s debt
was incurred to finance
ather campany projects
elsewhere.

“I think it’s a sentiment
people are expressing but
Jet’s not kid ourselves,
this company is bleeding
on an operational basis,”
said Miller who is also
the North Coast MLA and employment and invest-
ment minister.

“T don't know if that’s the only factor,” he said of
the debt theory. ‘“To be fair he company did spend
more than $100 million at the Prince Rupert mill (for
environmental improvements). ;

‘I don’t think there’s any purpose to start surmising
or speculating on what happened. The facts are the
$620 million debt and it’s got lo be fixed,”’ Miller
continued.

In responding to calls for northwest control of
northwest wood, Miller said the situation is more
complicated than what seems to be the case.

‘‘There’s an argument on that question. Not so
much on the solid wood side but on the pulp side,’
he said,

“We used to be in a pre-eminent position. But
that's really been eroded by the other countries as
they’ve improved their quality and created an over
capacily,’’

“It may be (hat in terms of competition (he anly way to
deal with that is to have greater concentration on the pulp
side. I’m not saying I agree with that but that’s one of the
arguments on how to succeed,”*

Dan Miller

“Let’s not kid ourselves. There may be
some failures here.”

The key is to have solid companies operating efficient

“tnills and nothing would be gained by selling wood under

local control to inefficient facilities, Miller continued.

To stay alive you have to turn a profit and that’s in cun-
iting efficient mills and selling at rate to achieve a return,”’
he said.

*'The bright side here is that we do have a good resource
base with a couple of good mills and a good mix of (solid)
wood and pulp,” he said,

Miller did warn there might be northwest casualties once
Repap B.C. reorganizes itself and deals with its debt load.

“Lets not kid ourselves. There may be some failures
here,” be said. , .

One way in which the government may have acted to
protect logging coutractors affected the most by Repap’s
failure was not acted upon.

That's the provision to lake back five per cent of a forest
licence when it changes hands.

This could have applied last week when Repap’s major
creditors, the Toronto-Dominion and Royal banks, moved
in. ;

Bul the idea of taking the five per cent aud using it as
cenaily for logping contractor payments didn’t fly, said

tr. ‘

“Taking the tive per cent wouldn't help — it would oaly
have conipounded the problem,'’ le said of a suggestion
the province take a hard-nosed approach.

“They asked and we had anticipated the request,’’ con-
tinued Miller of the five per cent. ‘We decided in the in-
terests of stability to do what we did.) |

Also waived was the requirement for Repap to supply lhe

tallve-owned Cged Forest Products in Gitwangak with

35,000: cubic metres of wood a year for the next three
years and a prowulse to create foresiry jobs in the Stewart
area, - mB SEO OS