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SFK Pulp obtains temporary waiver for convenant breach


July 3, 2009
By Pulp & Paper Canada

Immediately following news of an interest coverage ratio breach, SFK Pulp announced that it had obtained from its l…

Immediately following news of an interest coverage ratio breach, SFK Pulp announced that it had obtained from its lenders a two-week temporary waiver while negotiating a

permanent amendment to its credit agreement.

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The Montreal Gazette reports that SKF wants a debt extension to help it over the current global softwood pulp market hump.

Longueuil-based SFK makes premium bleached Northern softwood kraft pulp at its 450,000 tonne/yr mill at St. Felicien, on Lac Saint Jean in Quebec’s Saguenay region, and also premium recycled pulp at two smaller mills in the U.S.

It’s not only the collapse in pulp prices, but also the proverbially high cost of Quebec’s wood fibre, CEO Pierre Gabriel Cote told the Gazette. SFK asked the Quebec government for financial help and was turned down – – ostensibly because of the Eastern Canada forest products industry’s high risk level as dramatized by the AbitibiBowater and Fraser Papers’ filings for court protection from creditors, the paper reports.

Cote also revealed at SFK Pulp’s annual meeting that the company must make a special U.S.$2.8 million provision in the quarter ending June 30 to cover payments owed by Fraser Papers.

Cote said SFK continues to negotiate with the banks (and indirectly the U.S. institutions) an amendment to the credit agreements. “We’re confident a satisfactory agreement can be reached in the short term.”

According to the Gazette report, Cote said the federal government’s $1 billion “green” investment program for forest products came too late for the current crisis but could help later by spurring more innovation at the mill St. Felicien.


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