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Abitibi pulls the plug on SFK Pulp fibre supply agreements

SFK Pulp has received notice from Abitibi-Consolidated Company of Canada (Abitibi) terminating the fibre supply agr…

SFK Pulp has received notice from Abitibi-Consolidated Company of Canada (Abitibi) terminating the fibre supply agreement and the bark supply agreement, effective immediately. Under these agreements, Abitibi supplies about 80% of the fibre requirements of SFK’s pulp mill in St. Felicien, Que.

SFK Pulp reports that it has been working with Abitibi to secure its wood fibre and bark supply and to minimize the impact on operating costs, but the two companies have not yet reached a mutually satisfactory agreement. Both parties have agreed to meet in the coming days to continue discussions.

“Our objective, while trying to secure the optimal fibre supply for our Saint-Félicien Mill, is to mitigate as much as possible potential negative impacts for our stakeholders, says Pierre Gabriel Côté, SFK president and CEO. “Our intention was to resume operations at the Saint-Félicien Mill in early May. We are currently reassessing our plans in light of these new circumstances.”

“SFK Pulp has great assets and a low debt level, and can count on a proud group of employees to continue seeking the most efficient and economic ways of operating its business and exit these historic times in an even stronger position,” he adds.

SFK Pulp will also be working closely with its lenders over the next few days to assess the impact of the termination of its fibre and bark supply agreements on its credit agreement, including the possibility that this event may constitute a default under the credit agreement. SFK Pulp is also currently evaluating with its external counsel the possibility of contesting the termination of the fibre and bark supply agreements.

“We are also currently working with the Québec government in order to identify potential solutions which would adequately support SFK Pulp in times where it is already facing important challenges, greatly magnified by Abitibi’s situation,” says Côté.

In connection with filing for creditor protection, Abitibi was granted the right to terminate all of its contracts, subject to obtaining consent from the court or the court-appointed monitor, Ernst & Young Inc.