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Jolina announces details of proposal for recapitalization of Tembec


February 4, 2008
By Pulp & Paper Canada

Montreal, QC – Jolina Capital Inc. has presented the terms of its proposal for the recapitalization of Tembec Inc. …

Montreal, QC – Jolina Capital Inc. has presented the terms of its proposal for the recapitalization of Tembec Inc. at a meeting of the holders of Tembec Industries Inc. unsecured senior notes due, respectively, June 2009, February 2011 and March 2012.

The meeting was convened following Tembec’s rejection of the Jolina Proposal and Tembec’s invitation to Jolina to make the details of its proposal available to Tembec’s stakeholders through a public announcement. The key elements of the Jolina Proposal are as follows:
The Jolina Proposal would provide noteholders and preferred shareholders (collectively, “Bondholders”) a recovery equal to 55 cents on the dollar. The Bondholders would receive cash, secured debt, and common shares, with potential to make an election as to a mix of consideration (all cash versus debt and equity) received.

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The cash portion of the Jolina Proposal would be fixed at C$370.8 million and provided by Jolina; it would take the form of C$150.0 million of secured debt and C$220.8 million of common shares. Jolina would also provide for a C$250 million secured financing which would be undrawn at closing and would be in addition to Tembec’s existing credit facility.

Under the Jolina Proposal, existing shareholders would receive 5% of the shares of Tembec at the outset, and cashless warrants for 15% of the shares upon a full recovery to Bondholders. At close, Jolina would receive 50% of the equity, existing noteholders would receive 44.1%, existing preferred shareholders would receive 0.9%, and existing equity holders would receive 5%. On a fully diluted basis upon exercise of the warrants, Jolina would own 42.5% of the equity, noteholders would own 37.4%, preferred shareholders would own 0.8%, and existing equity holders would own 19.3%. Jolina is in advanced discussions with potential financial partners in connection with this proposal.


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