BD White Birch Acquires White Birch Paper

A group of funds led by Black Diamond Capital Management LLC (“Black Diamond”) concluded their acquisition of the assets of the White Birch Paper Group, representing the successful culmination of a more than two year restructuring process. White Birch Paper Company was part of a large group of companies (collectively, White Birch) involved in the paper product sector. White Birch owned and operated three pulp and paper mills and a saw mill in Québec, and a fourth pulp and paper mill in the US through its affiliate, Bear Island Paper Company LLC.

On February 24, 2010, all of the White Birch entities filed in Quebec under the Companies' Creditors Arrangement Act (“CCAA”) and concurrently Bear Island filed Chapter 11 in Virginia under the US Bankruptcy Code (the “Code”). Ernst &Young Inc. was appointed as monitor. The White Birch entities also filed for Chapter 15 protection in the Virginia Court. The sale was concluded pursuant to the CCAA and the Code. Various affiliates of the purchaser, BD White Birch Paper Investment LLC (“BD White Birch”), continue to operate the business at all four mills.

The sale was the culmination of a Sale and Investment Solicitation Process undertaken by White Birch under the CCAA and the Code with the approval of both the Canadian and US courts. A stalking horse bid was made by BD White Birch, which had been formed by members of the first-lien lenders group holding about 65 per cent of the first-lien loan – Black Diamond, Credit Suisse Group AG (“CS”), and Caspian Capital Advisors LLC (“Caspian”). This bid was approved as a stalking horse by both the Canadian and US courts in August, 2010. Members of the first-lien lenders group holding about 10 per cent of the first-lien loan submitted a qualifying offer through Sixth Ave. Investment Co., LLC (“Sixth Ave”). Sixth Ave became a qualified bidder and an auction was held in New York on September 21, 2010, between BD White Birch and Sixth Ave. BD White Birch was declared the winning bidder with a bid for total consideration of approximately US$236 million. The bid contained a cash amount of US$94.5 million and a credit bid of US$78 million allocated to the fixed assets in Canada, plus certain assumed liabilities and cure costs, and was approved by both the Canadian and US courts.

The closing of the transaction was delayed due to a number of conditions in the sale agreement, the most significant of which was the entering into of new collective agreements and pension arrangements with the Communications, Energy and Paperworkers Union (“CEP”) union, who represented workers and retirees at each of the three Quebec mills.

Debtor-in-Possession financing during the restructuring process was provided by a group of first-lien lenders led by Black Diamond, CS and Caspian, in the form of a $122 million term loan. This financing was repaid in full on the closing of the transaction.

BD White Birch was represented in Canada by Goodmans LLP with a team led by Joseph Latham (restructuring) and assisted by Brendan O'Neill and Chris Armstrong (restructuring); Allan Goodman, Gail Jaffe, Geoff Cowper-Smith, and Rob Kallio (corporate); Susan Rowland and Jana Steele (pensions); Glenn Ernst and David Veneziano (tax); Mark Surchin, Victor Liu and Brian Savage (finance); Richard Annan (competition); Tom Macdonald (environment); Amalia Berg (IP) and Michael Koch (communications); and by Lavery, de Billy, L.L.P. with a team led by Jean-Yves Simard (restructuring) and assisted by Jonathan Warin (restructuring); Catherine Maheu, Josée Dumoulin and François Parent (labour and employment / pension and benefits); Dominique Bélisle, Brigitte Gauthier, Chantal Joubert and Étienne Guertin (financing / real estate); Jean-Sébastien Desroches, Guillaume Lavoie, Ariana Lisio and Maxime Bergeron (corporate); Yvan Biron and Sophie Prégent (environment) as well as Philippe Asselin and Audrey Gibeault (tax). BD White Birch was represented in the US by Skadden, Arps, Slate, Meagher & Flom LLP with a team led by Kimberly deBeers (corporate).

The White Birch Group was represented in Canada by Stikeman Elliott LLP with a team led by Kevin Kyte (corporate) and Jean Fontaine (restructuring); assisted by Matthew Liben (restructuring); Elizabeth Labrie, Jeremy Sculnick and Marc Miller (corporate); Bertrand Ménard and Nathalie Duceppe (real estate); Jeff Brown (competition); Luc Bernier, Michel Legendre and Corine Di Maria (tax) and Myriam Fortin (environment); and in the United States by Kirkland & Ellis LLP with a team led by Christopher Marcus and Richard Cieri (restructuring).

The Monitor, Ernst & Young Inc., was represented in Canada by Norton Rose Canada LLP with a team led by Sylvain Rigaud (restructuring) and assisted by Christian Roy (restructuring); Martin Rochette (pensions) and Philippe Giraldeau (restructuring); and in the United States by Allen & Overy LLP with a team led by Ken Coleman (restructuring) and assisted by Amélie Baudot.

The DIP Lenders and First Lien Lenders were represented in Canada by Osler, Hoskin & Harcourt LLP with a team led by Marc Wasserman, Martin Desrosiers, and Sandra Abitan (restructuring) and assisted by Michael De Lellis and Julien Morissette (restructuring) and Scott Horner and Etienne Massicotte (financial services); and in the US by Latham & Watkins LLP with a team led by Keith Simon (restructuring).

The Unsecured Creditors' Committee in the Bear Island proceedings is represented in Canada by Borden Ladner Gervais LLP with a team led by Marc Duchesne (restructuring) and including François Gagnon and Isabelle Desharnais; and in the United States by Hunton & Williams LLP with a team led by Tyler Brown (restructuring) and assisted by Jason Harbour, Benjamin Ackerly, Shannon Daily and Henry “Toby” Long III.

The CEP Union is represented by Trudel Nadeau Avocats s.e.n.c.r.l. with a team led by Louise-Hélène Guimond (litigation).