open New Skeena’s books If liquidated, most money goes to the secured creditors - Veniez and Petty By JEFF NAGEL THE LATEST move into creditor protection last week ranks as fair- ly small potatoes in the normal scale of Skeena insolvencies, Court documents show New Skeena Forest Products has total liabilities of $50.4 million. _ That's just a tenth of the $400 to $600 million the operations owed in 1997 and 2001 —the pre- vious two times Skeena was shielded under the Companies Creditors Arrangements Act. New Skeena is described as “relatively debt free when com- pared to other firms in the forestry products sector,” in the docu- ments filed in court Nov. 19, Another crucial difference this time. is New Skeena’s owners and ils main secured creditor are one and the same. New Skeena owes $10.5 mil- lion to parent company NWBC Timber and Pulp Ltd., also owned by George Petty and Dan Veniez, That’s for money NWBC has in- vested in New Skeena. , Another $6 million in secured ‘debt is owed to Cellmark, a Swedish pulp marketing company. It has a deal to sell New Skeena’s pulp at favourable terms in ex- change for covering $50 million worth of working capital financing that New Skeena would otherwise have to find elsewhere. Cellmark extended the loan in August. It’s backed by a first charge against the Terrace sawmill, In a liquidation scenario — which the court could order if it decides there’s no chance at or justification for a third restructur- ing — those two secured creditors get money ahead of unsecured ones. Court documents indicate the company’s mills and other assets, if liquidated by a receiver, would probably not fetch enough to cover the $16.5 million owed to Skeena carries — history of pain By JEFF NAGEL THIS IS the third time in less than seven years that the operations now called New Skeena Forest Products have fallen into creditor protection. Here’s a summary of Skeena’s history: @ £951: A pulp mill in Prince Rupert and affiliated sawmills start production as an integrated forest products company. It under- goes a series of name and owner- ship changes and a government intervention in the 1980s. @ 1986: Operations are bought for $100 million by Repap Enter- prises, led by Montreal entrepre- neur George Petty. @ i988: Repap rebuilds and modernizes the Terrace sawmill in a phase it calls Project Star- ship. It marks a rebirth of Skeena Cellulose amid a good run of pro- fitable years. » M1995; A strike at the Prince Rupert pulp mili leaves Petty un- able to take advantage of record pulp prices. Profits from that per- iod would have helped weather the impending downturn. Debt piles up on Skeena, Repap's B.C. arm, as rising costs. outstrip pro- ductivity gains. Repap is also ac- cused of steering money away from Skeena to eastern ventures with better prospects. @ 1996: Avenor Inc., another Montreal forest company, begins George Petty NWEBC and Cellmark, That would leave other unse- cured creditors with nothing, _ Topping the list of those who stand to lose in liquidation are northwest towns, whose seizure of equipment triggered court protec- tion, The towns are owed.$12.8 mil- | lion — most of that to Prince Ru- pert ~ for Skeena Cellulose’s un- paid property taxes leading up to 2001 that were deferred in the re- structuring of two years ago, Because it's covered by a spe- cial agreement that Prince Rupert and Port Edward voted for over Terrace's objections, it’s simply money awed to the towns over the next eight years, rather than taxes tied to land. That money, includ- ing $576,000 for Terrace, disap- pears in liquidation, , A further $9.8 million owed to the towns for 2002 and 2003 prop- erty taxes, including $1.8 million for Terrace, is alsc on the list but the normal rules still apply. ” In liquidation, million is for pension liabilities. The company also owes $569,000 in fees to the province for its forest licences, And New Skeena is about three months behind in payments for leased equipment, totalling around $400,000, The filing says the threat of towns to seize every- thing “not nailed down”: has spooked equipment owners, who had agreed to give the company more time. Other financial details revealed in court: M New Skeena has been un- able to pay fire insurance on any of its mills except the Terrace sawmill. Insurance there was a condition of the loan from Cell- mark, , M The company has been spending up to $1 million per month on salaries, rent, taxes, in- surance and utilities. OO M Long-term liabilities include $11.8 million for reforestation; Although New Skeena is de- scribed as insol- the land would be sold with pro- ceeds going first to secured credi- tors. New land owners would then have to pay vent and out of This time New Skee- °Sh. it is poised ha’s owners and its main secured creditor nwsc to cary are one and the same. to get money more from on its efforts, The company’s the taxes or face an eventual tax sale by the towns, with proceeds going toward un- paid taxes. Assorted unpaid bills to various unsecured creditors total $5.9 mil- lion. That's a small fraction of Skeena’s $25 million owed to un- secured creditors in 2001 and more than $75 million in 1997. Other liabilities include $950,000 in holiday pay and an- other amounts due employees, in- cluding the final payment to Ter- race IWA members triggered by New Skeena's failure to restart the mill by Sept. 15. Another $1.9 affidavit’ says NWBC is prepared to provide $2.3 million in interim financing, backed by a first charge on the assets. That's projected to cover: the next three to four months of losses while the firm tries to finalize a financing deal. A deal-is also in the works to sell Kitwanga lumber to an undis- closed buyer, New Skeena's court filing states. The deal would be for a combination of wood chips and cash, The first $1.3 million from the mill sale would pay off a loan from Northern Savings Credit Union, the filing says, That would leave about $1.2 million that NWBC would agree to make available to New Skeena. The filing also indicates New Skeena has been in advanced talks with a potential investor that has put forward a draft agreement to provide sufficient financing to restart the operations in exchange _ for shares, The negotiations aren’! finished, it says, and have been frozen as a result of the towns’ seizure of equipment. The investor would take on what New Skeena president Dan Veniez, in a separate interview with the Standard, called a signif- icant minority ownership position. The filing states New Skeena has invested $40 million in the operations. Veniez said that con- sists of $10 million he and Petty have injected personally plus a remaining $30 million raised within the company by the sale of logs, assets and property — such as the sale of the Smithers sawmill to West Fraser. The documents also show New Skeena has been using a provin- cial government $30 million fund for environmental remediation at the pulp mill. The court filing argues liquida- tion of the company would deya- state the northwest economy and mark the loss of a huge opportun- ity to put an estimated 600 direct employees back to work and more through contractors. It says the company needs im- mediate. protection from its credi- tors in order to get time to com- plete its refinancing. An estimated total of $55 mil- lion is needed to restart the opera- tions, the documents say. Reforms will make New Skee- na.one of the lowest cost pulp producers of its kind, according to ~ reports commissioned by the ow- ners. LOGGING CONTRACTORS protested at the TD bank and sawmill here in 2001. They were owed money when Skeena Cellulose got creditor protection after the bank stopped honouring cheques. to close in on Repap as a take- over target. It intends to sell off the debt-heavy Skeena operations. @ 1997: Repap cuts loose the B.C, operations on the demands of Avenor shareholders, who threaten to scuttle the merger if Repap comes with Skeena and its debts. Skeena immediately files for cre- ditor protection under the Compa- nies Creditors Arrangements Act with $620. million in debt, most ' held by the TD and Royal banks, A restructuring sees the provincial government inject fresh money, along with the banks, for capital upgrades in exchange for the pro- vince taking some shares, That deal nearly unravels and the pro- vince buys out the Royal Bank and takes majority ownership of Skeena. Unsecured creditors, in- cluding logging contractors, get 10 cents on the dollar for unpaid bills, H 1998-2000: Substantial but incomplete upgrades go ahead at the pulp mill. The NDP govern- ment is stymied in efforts to sell ihe operations, Mills run sporadic- ally. Victoria injects more and more government money Inta Skeena, It continues to bleed cash because bank debts weren'( com- pletely erased in the previous re- m structuring, .. : 2001: New Liberal: govern- ls ment plans quick sale of opera-— Dan Veniez tions as Skeena maxes out its lat- est line of credit. Victoria puts the operations back into CCAA credi- . tor protection in September after the TD bank begins bouncing Skeena’s cheques. Debt load is more than $400 million, Opera- tions shut down, Possible buyers begin to inquire, They include Da- nlel Veniez, a former Repap vice- president backed by Pelty. Aisa circling is Mercer: International, Swiss-based firm critics denounce: “as a corporate scavenger. that will : liquidate the operations. =. ‘Ml 2002:- Liberal. government opts to sell to Veniez and Petty, who pay $6 million plus $2 mil- lion for unsecured creditors. Offi- cials reject Mercer, which they say wanted unacceptable govern- ment subsidies. Veniez embarks on a series of reforms and cost- cutting measures, culminating in a deal. with Prince Rupert pulp mill workers to cut their pay by 20 per cent in exchange for profit sharing. A similar deal is elusive at the Terrace sawmill, Mi 2003: Renamed New Skeena Forest Products, locals begin to call it NSF (Not sufficient funds) as frustration mounts over the company’s inability to raise finan- cing, A deal is finally struck with Terrace sawmill workers deliver- ing a 20 per cent pay cut and flexibility, Veniez sells the Smi- thers sawmill to West Fraser, Prince Rupert residents vote 70 per cent to barrow $20 million to buy and lease the back to New Skeena to help start the opera- tions, Veniez eventually abandons that plan to concentrate on more conventional options. Northwest towns. begin to place liens on as- sets. When towns send bailiffs in to seize mobile equipment, New a Skeena- places liself. in CCAA ‘protection again. Except-for Kit- _wanga, the New Skeena mills - have. now beén “down for ‘more than two years. The Terrace Standard, Wednesday, November 26, 2003 - AS EON NE Creditor protection throws CORRESPONDENCE FOR THE TERRACE STANDARD The Mail Bag Aboriginal authority establishes services Dear Sir: This is in response to the Oct. 29 article concerning the creation of a new aboriginal social services authority for children and families. Since the fall of 2001, the Ministry for Children and Family Development (MCFD) has been involved in the process of transforming its service delivery and structure to a system that is effective, accessible, communily-based and makes sense to. vulnerable children, families, and adults with developmental. disabilities. As part of this initiative 11 regional authorities are in the planning stage and are targeted for implementation by September 2005. There are to be five non-aboriginal authorities, five aboriginal authorities and one community. living. services authority. The purpose. of these authorities will be to govern the delivery of child and family services in each of their respective regions. Currently there are 1] planning boards working to prepare for the transition of services to a community based governance.model. In the north region the 16 member aboriginal planning board, the Northern Aboriginal Authority for Families (NAAFF), is governed by the northern caucus of 50 First Nations, nine tribal councils, 15 Metis locals, five United Native Nations locals, nine friendship centres, five delegated aboriginal agencies, the Federation of Aboriginal Poster Parents and the Aboriginal -Youth in Care Network. Aboriginal people have long stated they have the inherent authority and responsibility for the well being, protection and development of their children and for the support of their families, parents and guardians, We believe the people who live within their communities best develop solutions in the. local communily with governments in a supporting rale, With this in mind the NAAFF board members and their transition support team are visiting communities across the north to hear. communities speak to a shared vision for future aboriginal services for children and families, Betty Patrick, Northern Aboriginal Authority for Families, Prince George, B.C, Playground a community effort” Dear Sir The Clarence Michiel Parent Advisory Council (PAC) wants to provide some additional -information to clear up any misunderstandings about the recent ‘addition to our play ground. \ Clarence Michiel School has been lacking in playground equipment for quite a long time. Last year, the PAC decided to replace an area. of pavement and create a new playground to add to the two swing sels. and one slimbing: apparatus. (hat, were available to the children, . Theresa Jensen, a parent, took on this monumental project and contacted the suppliers, got. quotes, consulted with the school, city, school board and many. others, to make the decision as to which medel was most desirabie. In the meantime, many students from Clarence Michiel and their parents raised funds to fund the project. Mrs. Jensen then coordinated the purchase, shipping, and storage of the equipment as well as the coordinating of volunteers and hiring of contractors in order to have equipment installed. There were many, Many volunteers that helped make the playground a more welcome play area. Some of the volunteers that contribuled to the playground are Theresa. and Jim Jensen, Parish Miller, Tamila and George DaCosta, Kevin Earl, David Jensen, Darryl and Lindsay Bjorgaard, Wayne Parsons Jr. and Wayne Parsons Sr., Kieran Campbell, Anita McColl Linda Huffman, Cheryl Sebastien, Grant Holkestad, Pat Campbell, Linda and Cliff Marshall, and Christine Foster as well as Ken's Trucking, McPherson Trucking, Twin River Power and Twin River Electric. The PAC is planning Phase II of the playground as a future project, as well as many other ideas of how to support our teachers 2nd students. [t is important to remember that Pareisw Advisory Council are comprised of parent volunteers that want to be informed about the activities in their children’s school and to help improve the learning environment of that school. A phrase often heard is “How can [help with that?” We welcome all Clarence Michiel parents to our meetings and work bees to share their ideas and give their support. Tracey McKinnon, Chair, Clarence Michiel PAC, Terrace, B.C. Skeena Junior memories Dear Sir: - I grew up in Terrace and until recently had no idea that my old junior high had been torn down. Even though I haven’t been back to Terrace for many years I was struck with a sadness at knowing I will never walk those halls and reminisce. The things you take for granted, It was my younger sister who gave me the link to your web site [www.terracestandard.com] where I could view the photos and see some old faces —. Danny Sheridan, whose kids [ grew up with, Mrs Timmerman, and Mr Papais. I'd like to thank you and the people of Terrace for sending Skeena off in such high style. | wish 1 was there, Nate Sabine, Vancouver B.C, About the Mail Bag The Terrace Standard welcomes letters. Our address is 3210 Clinton St., Terrace, B.C, V8G 5R2. You can fax us at 260-638-8432 or e-mail. us at newsrcom @ferracesiandard.com. No attachments, please. We need your name, , address and phone number for verification. Our deadline Is noon Friday of noon Thursday if it’s a iong weekend,