A2 - The Terrace Standard, Wednesday, November 7, 2001 Mercer picked over ex-Repap bid for final Skeena sale talks By JEFF NAGEL THE PROVINCIAL government has chosen Mercer In- ternational as its preferred buyer for Skeena Cellulose. The Swiss-based company with pulp and paper mills in the former East Germany was one of two final bidders after a four-month drive by the new B.C. Liberal govern- ment ta sell SCI. The other contender - NWEC Timber and Pulp Co. Ltd — has been told by Victoria its offer won't advance to the next stage of talks, says company president-and CEO Danie! Veniez. The province is expected to ask a B.C. Supreme Court judge tomorrow to give. Skeena Cellulose.90.days... more of creditor protection to conclude a final sale. NWBC Timber and Pulp had offered less than $20 million as a purchase price for Skeena but money. for working capilal, further upgrades and a contingency fund would have pushed its plan to $157 million, Veniez-told: . the Standard. He said NWBC was.a Montreal-based group that included as partners former Repap Enterprises chairman George Petty and Bill Turner, former CEO of Consolidated Bathurst. . “We were basically going to be putting $157 million From front City in on SCI purchase deal councillors here to assure locals no city tax money would be spent without a referendum. “We're not going to stick our bioady neck out here without knowing whe- ther the community is be- hind this concept,” Talstra said in an interview Satur- day from Vancouver. Prince Rupert, Port Ed- ward, Terrace, Hazelton, New Hazelran and Smi- thers agreed to form some- thing called the Northwest Community Investment Li- mited Partnership, court documents show. A court affidavit filed by Prince Rupert mayor Don Scott says the part- nership proposes to raise $15 ta $20 million. That would include $12 million from the city of Prince Rupert, $1 million from the district of Port Edward and $1 million from Northern Savings Credit Union. “From our point of view ivs a defensive move,” Northern Savings CEO Mike Tarr told the Stan- dard. “If the mill does not teopen, the impact on our members will be pretty se- vere and a lot of the equity in their homes would be seriously eroded or even destroyed.” But Tarr cautioned he has yet to see specifics of a buyer’s business plan or make a firm commitment. “If the business case isn’t there, or if we don’t see a reasonable exit strat- egy so our investment can be retracted over a fairly Short period of time, that would make it difficult for us to pursue this,” he said. Prince Rupert is owed $11.7 million in back prop- erty taxes that could form much of its contribution. Terrace councillor David Hull said he op- posed the city asking tax- payers permission to bor- tow $5 million to invest in Skeena Cellulose. “L don’t think it would get by the taxpayer on a referendum,” he said. Talstra said he’s pre- pared to explore any idea that might help protect workers’ jobs. He warned that a liqui- dation of assets under bankruptcy could result in the piecemeal sale and te- moval of equipment. “Then it would be just 10 times as hard to get it going again,” Talstra said. He said it may be better ta have a buyer of any sort than bankruptcy. Mercer has been de- scribed by some analysts aS a scavenger that takes advantage of troubled si- tuations. Talstea said he still has fears about that, but added his cantact with Mercer officials have given him increased comfort. “We don’t want Mercer ta be a Repap of the past or any of the others that have gone before,” he said. “We wanted Mercer to convince us it’s not one of those. I think they’ve come a long way.” Skeena MLA ‘Roger Harris said Mercer had the strongest bid, =. Harris also said NWBC Timber and Pulp would have raised local anxieties because its partners in- clude former Repap exec- utives who ran SCI leading up to the crisis of 1997. “The other party [NWBC] had too much history to it, plain and simple,” he said. Talstra said the towns’ plan. to buy a stake may depend on provincial ap- proval and a change to ex- isting laws. “The province may ‘come back and say muni- cipalities, you can’t do what you're proposing to do,” he said. “In which case we have to scrap the idea.” : into the business to keep it alive, to reinvest in it and to sustain it over the next year to 18 months, which we think are going to be tough times,” said Veniez, himself a former Repap executive. Part of the deal was another $75 million to complete capital upgrades of the Prince Rupert pulp mill; he said. Veniez said they would have cut staff at the pulp mill and reduce it from twa lines to a single 1,000-tonne per day line. They also planned to eliminate the Vancouver head office and shift staff to Terrace and Prince Rupert. ~The end-result, he said, would have been a new cast ‘structure allowing the company to break even in dawn markets. Veniez said. NWBC-lost-the-race for Skeena because it did not have all its financing in place. Veniéz said the company wanted Victoria to grant it exclusivity - it would be the only suitor chasing Skeena ‘for a set period ~ allowing it time to line up financing. “You have to have that or else an investment bank won’t touch your business,” he said. Despite the loss, Weniez said he respects how the “government -has handled efforts to sell SCI. “They've been under pressure to let Skeena go and they are doing © everything to make-sure that doesn’! happen,” he said. Veniez is confident that with the right ingredients — good leadership, a cooperative workfarce, a supportive Tegion-and reduced fibre casts —SCI can thrive... “T-know that the people of the region want this to happen and the community. is putting significant skin in.” the game,” he said, adding a municipal proposal to put up to $20. million in was a surprise and a solid demon- stration of the region’s commitment. Veniez also said former Repap chairman George Petty ~ one of the partners in the rejected proposal — wanted to be. part of the new venture to help improve the region’s fortunes. Petty has been villified by some in the northwest over the past five years for. severing Repap B.C. and allawing the debt-heavy subsidiary to falt into bankruptcy protection in 1997. But Veniez said Petty had resisted pressure for more ° than a year before that to cut off Skeena. The company boss had stubbornly refused and insis- ted the operations be kept together, he said, going dee- per into debt that would ultimately result in the loss of his main company as well. Repap was ultimately ‘forced: to drop Skeena when a buyer for Repap, Avenor Inc., insisted the B.C. operations be cut from the deal. “George never walked away from anything and he™ didn’t walk away from Skeena,” he said. “People sim- ply don’t believe it and I think it’s unfair and unjust.” -. Veniez said he and Petty saw and continue to see in . SCI a “a critical mass of deeply caring, committed, .’ my imaginative, creative people.” “A big piece of him is up in the northwest,” Veniez: - he would like to help fix it.” ci x eat =e x as RUM RRETe AUN ESTs . ‘ nine ba oath icon burnished’ » pee, 7m x o i ™ a an ee ear te ry H ° ha a ie a La Lo a 2002 Ranger Edge Regular Gab 4x2 2 Sts Saw ayres Sagi tale een . 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