Article in Financial Post detailing Repap B.C. situation.
Wednesday, April 9, 1997
Coopers & Lybrand details Repap's woes
By KEITH DAMSELL
Vancouver Bureau The Financial Post
ÿRepap British Columbia Inc. needs an "absolute minimum" of $34 million to survive 1997, Coopers
& Lybrand Ltd., the ailing pulp and paper company's monitor, says.
ÿThe company's dire financial straits are detailed in the accounting firm's 66-page first report to the
B.C. Supreme Court. The report lists hundreds of creditors owed more than $600 million by Repap
and its subsidiaries, Orenda Forest Products Ltd., Orenda Logging Ltd. and Buffalo Head Forest
Products Ltd.
ÿOn March 3, Montreal forestry giant Avenor Inc. revised its takeover offer for Repap Enterprises
Inc., excluding the company's B.C. operations. The move forced debt-heavy Repap B.C. to file for
court protection from creditors. The revised takeover deal was rejected by Avenor shareholders
March 26.
ÿThe $34-million lifeline to continue operations for the remainder of the year is expected to come
from cash flow, said Rudy Schwartz, Repap B.C.'s vice-president of finance and business
operations.
ÿAbout $15 million is needed to operate the company's pulp mill in Prince Rupert, B.C., and an
additional $19 million is needed to maintain sawmills and logging roads.
ÿThe company has only $3 million left in its operating line of credit. The company has a $99.8-million
borrowing line with secured creditors Toronto Dominion Bank and Royal Bank of Canada. As of
March 28, the line of credit was at $96.8 million.
ÿThe report also reveals:
Repap B.C. has total liabilities of $611 million. The two banks are owed $464 million and are due
to take control of the Vancouver company's assets. The remaining $147 million is owed to local
government and hundreds of small suppliers and contractors across northwestern B.C.
The company has a total book value of $756 million. But court documents filed last March reveal
that the liquidity value of the company is less than the amount owed to secured creditors.
Losses continue at the rate of $10 million a month. For the two months ending Feb. 28, the
company lost $20 million before taxes on revenue of $74 million. In 1996, it reported a loss of $126
million before taxes on revenue of $452 million.
Despite a record of inconsistent earnings, management fees and sales commissions over the past
10 years have averaged $16 million annually.
Forest Renewal B.C. has established a $15-million fund to extend loans to Repap's cash-strapped
creditors.
ÿThe $800-million provincial fund is comprised of stumpage fees and royalties that forest companies
pay to harvest timber on Crown land.
The provincial Ministry of Forests has agreed to defer company debt of $10 million in stumpage
fees. The government is considering boosting the deferral figure to $15 million.
ÿSuppliers want some formal representation during the reorganization process. A final restructuring
plan for Repap must be in place by September.
ÿ |
