River Road tipped to buy Repap
By KATHRYN LEGER
Montreal Bureau Chief The Financial Post
U.S. hedge fund River Road LP would not comment yesterday on reports it is set to become one of
the new owners of Repap Enterprises Inc. after a massive share issue tomorrow.
"I'm not going to talk about that" was all Bob Poile, general partner of the secretive Greenwich,
Conn.-based firm, would say yesterday when asked about the forest products company. River Road
has a history of buying into distressed Canadian companies, usually through convertible debentures.
It pushed its weight around with troubled retailer Dylex Ltd. more than two years ago with its 13%
stake, and is known to have been in and out of Repap stock and debentures in recent years. In
1993, it cut its stake to 6.1%.
River Road is said to be one of four U.S. hedge funds that will control 83% of Repap from
tomorrow when the financially troubled company issues about 619 million shares as part of a debt
settlement.
Repap was unable to renegotiate US$130 million in convertible debentures set to mature tomorrow,
so the debt is now being converted into shares.
It is still not clear who the hedge funds will support when Repap holds a shareholders' vote Sept. 25
on the proposed US$674-million sale of its coated-paper mill in Kimberly, Wis., to Consolidated
Papers Inc.
Repap founder and chief executive George Petty, whose majority stake has shrunk to about 23% as
he tried to grow the company through debt financing, will see his holding reduced to about 4% after
the issue.
Yesterday, some analysts were wondering if Petty had decided to throw in all his chips after 31
million shares, almost 25% of those outstanding, changed hands at 19.5› in four large block trades
crossed by Gordon Capital Corp.
Informed sources rejected this scenario, suggesting instead the hedge funds, and perhaps other
investors, were short selling or covering their positions, in preparation for tomorrow's issue.
Repap spokeswoman Kathleen Cornish said yesterday the names of the new owners will only be
made public through disclosure filings once the conversion takes place. The "major holder" has
requested anonymity until then.
Repap shares (RPP/TSE) closed down 1› yesterday at 18.5›.
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