Northern Pulp files for voluntary creditor protection

Months after it was legislated to shut down, Northern Pulp has received an initial order giving it voluntary creditor protection, a step it hopes will lead to the eventual reopening of the operation.

The company's parent, on behalf of Northern Pulp Nova Scotia, Northern Timber Nova Scotia and other non-operating affiliates, said in court documents that without protection it would be broke by July.

"As a consequence of the mill's closure and the associated operational issues, the petitioners face immediate and multiple challenges to their continued viability and project that they will run out of cash and access to any further capital in late July, 2020," Paper Excellence Canada said in court documents filed in British Columbia Supreme Court. 

The company said it's taking this step to give it a chance to reorganize and restructure in order to find a way to eventually resume operations. Ernst & Young has been appointed as the monitor on the file.

Paper Excellence spokesperson Graham Kissack said the step was "an inevitability," and now is the right and responsible time to make the move.

Province declines comment

"We've lost all of our sources of revenue, yet we still have ongoing costs," he said in a telephone interview.

Although the company filed for creditor protection under the Companies' Creditors Arrangement Act, it has not sought relief.

While he would not say if creditors had already started calling, Kissack said the company knew that "from a medium-term perspective, that was going to start to become a larger pressure."

He would not say how many creditors the company has, nor if any are larger than the Nova Scotia government, which has outstanding loans to the mill of at least $85 million.

Officials with the province declined to comment on Friday's development.

Why the mill shut down

The mill shut down after Premier Stephen McNeil refused to extend the life of its effluent treatment plant in Boat Harbour, which had a legislated shutdown date of Jan. 31, 2020. Without a place to treat its effluent, the mill cannot operate.

Since then, Northern Pulp has been mothballing the mill and cleaning up the site, steps that would allow it to reopen if a proposed new effluent treatment facility is approved.

Although court documents says the company believes it has "various claims against the province relating to the forced closure of the mill," they also say the aim of this process is to resolve those issues and to restore the mill "and relevant forestry assets to an operational state and re-engaging their workforces as soon as possible."

"In sum, the petitioners seek a permanent and comprehensive solution to their fiscal challenges so as to improve liquidity and strengthen their financial position with a view ultimately to resuming operations at the mill and maximizing value for all stakeholders."

Despite still looking for a way to resume operations, the company recently put on hold the process of filing an environmental assessment report. It only has two years to complete that work before the current proposal, which included treating effluent on site at the Abercombie Point mill and then discharging it into the Northumberland Strait via a pipeline, can no longer be considered.

Kissack said the company is trying to find a way to operate that would be in step with its neighbours, such as the Pictou Landing First Nation and area fishermen, that addresses their concerns.

"I think it's fair to say that we recognize that we need to undertake an approach that is widely supported and understood," he said.