Bankruptcy Chapter in Two Countries for Paper Producer

With the decline in newspaper sales and increased usage of internet it’s no surprise that many major paper companies are exploring their chapter bankruptcy options.

Take White Birch Paper Co., a Canadian company based out of Quebec, recently decided to file for bankruptcy in both the US and Canada. The company is is the second largest newsprint maker in North America.

White Birch outlined in Business Week a few of the major factors which led them to their bankruptcy decision.

They cited the declining demand for newsprint, declining prices and the increased strength of the Canadian dollar.

The company said that “the filing comes at the culmination of a year of detrimental economic conditions which negatively impacted the company.”

White Birch has four paper mills including one operation in Ashland, Virginia – Bear Island Paper Co. The other three operations are run out of Quebec.

Bear Island Paper Co. filed for Chapter 11 in the U.S Bankruptcy Court in Virginia. They listed their assets between $100 and $500 million. It listed its debt load of $500 million.

White Birch also filed for bankruptcy protection under Canada’s Companies’ Creditors Arrangement Act. This act allows big businesses with debt over $5 million to restructure their finances.

This is similar to Chapter 11 bankruptcy in the United States as it provides a way for businesses to reorganize their debt. The company filed in order to “preserve the value of its business and improve its capital structure.”

The Canadian branches also filed Chapter 15 in the U.S., which handles bankruptcies across the border.

White Birch said they will continue operations as normal in both the U.S and Canada. They are currently awaiting approval of $140 million for debtor in possession financing from its secured lenders.

White Birch sales totaled over $6 million in sales in 2009. But unfortunately it was not quite enough to cover their debts to its secured lenders. The company has not made any interest payments on its loans since September.

According to Associated Press, the president of Canada’s largest forestry unit blames this and other business bankruptcy filings on the current government. David Coles, head of the Communications at Energy and Paper Workers Union of Canada, said the government should have provided loan guarantees at commercial rates to prevent these bankruptcies.

“Bankruptcy filings by this and other forestry giants could have been avoided at no cost to the government,” he said.