Repap close to sale; prices improving
MONTREAL (CP) - A new owner for failing Repap Enterprises should be announced in July,
executives said Wednesday at what was probably the company's last annual meeting.
George Petty, chairman and founder of the Montreal-based paper company, said last Monday's
deadline for bids had been extended for two days to allow in one or two more offers.
Analysts expect the coated paper specialist, now composed of three operations in New
Brunswick, Manitoba and Wisconsin, will be sold in pieces.
The question remaining is whether the price will be high enough to leave something for
shareholders.
The stock, which rose as high as $5.85 in the last year, closed Wednesday up two cents at 62
cents.
Meanwhile Petty and president Steve Larson painted a positive picture of Repap at the meeting.
Paper prices are increasing, and shipments are well up so far this year, reaching record levels in both
the first and second quarters.
"We're off to an excellent start," said Larson.
Petty added that the second quarter "will be cash positive."
Repap lost $32 million in the first quarter, plus an additional loss of $89 million on discontinued
mills in British Columbia and Atholville, N.B.
A price increase of $80 US a tonne announced for July will bring coated freesheet paper to $955
US a tonne. Demand is also strong for the kraft paper made in Manitoba, Larson said.
Convertible debentures worth $130 million US comes due on Aug. 1, while two banks - the Royal
and Toronto-Dominion, hold standby credit lines of $270 million US.
Petty said the banks have given no promises they will extend the credit line, but they are reassured
with the company's improvement.
Analyst David Tait believes Repap's three operations will probably be sold separately, and the
banks, the Royal and Toronto-Dominion, will likely offer bridge financing to the new owners.
It's not in their interest to see the company go under, said Tait.
"They have already taken a first hit on Skeena," Tait said, referring to Repap's pulp and sawmill
operations in British Columbia, Skeena Cellulose, that filed for bankruptcy in March.
Failing to get union concessions, Skeena Cellulose began this week to shut down, starting with a
pulp mill in Prince Rupert.
Tait said the stock market has already indicated that shareholders, including Petty who owns 23
per cent, can expect to get little for their investment.
Repap was thrown into a crisis after Avenor Inc.'s offer of $2.7 billion was sunk by Avenor
shareholders in March.
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