Like the smoke that billows from the mill’s smokestacks, uncertainty hung in the air for much of 2012 when it came to the future of Catalyst Paper and the Crofton pulp and paper mill.
The year started with stories of labour deals and creditor protection, but after months of bargaining and voting, Catalyst ended up restructuring and no jobs were lost at the Crofton mill.
In fact, our sister paper in Duncan, the Cowichan News Leader Pictorial, reported in mid-October that the Crofton division of Catalyst Paper has hired 70 new employees this year.
Sixty of those are replacing departing workers or positions that remained vacant as the company struggled to remain viable, the paper reported. But 10 positions are new.
“The last five years with the consolidation of the industry and Catalyst itself, we’ve hired virtually no one,’’ explained Robert Belanger, general manager of Catalyst’s Crofton division.
Employment at the mill has rebounded to 573, a number expected to reach at least 600 in the near future, according to the article.
After months of labour talks and votes, Catalyst Paper stakeholders approved the company’s complex financial restructuring plan June 25.
“Ninety-nine per cent is very good,” North Cowichan Mayor Jon Lefebure said of balloting in Richmond by stakeholders of Crofton paper mill’s parent firm.
That vote, about Catalyst’s complex rejigging, followed one held May 23 when stakeholders voted, by a thin margin, to basically let the paper giant go to the highest bidder.
“They failed by one vote to get the two-thirds of unsecured creditors to vote in favour,” said Lefebure.
“In the meantime some pension holders became unsecured creditors in danger of losing pension funds and they became (court approved) voters on the restructuring.
“People realized the (revamped) restructuring plan was in their best interest. This was about keeping the mill operating,” said Lefebure. “The restructuring plans reduced the debt load the company will carry and allows it to carry on with its current management dedicated to keeping the plant running.”
Plan approval was necessary under the Companies Creditors Arrangement Act.
“We have received support from a majority of stakeholders since we began the reorganization process and today’s vote of support by creditors for the second amended plan of arrangement sets out a clear path forward,” Catalyst CEO Kevin J. Clarke said in a media release.
Catalyst successfully completed its restructuring in September, reducing its debt by $390 million.
Catalyst Paper’s first financial restructuring vote had failed May 23.
Paul Zarry, spokesman for Crofton’s union, signalled Crofton’s 380-some members of the Pulp, Paper, and Woodworkers of Canada (PPWC) union were worried after the vote failed by just 2.7 per cent.
With the failed vote, Catalyst entered what is called the SISP, or Sales and Investor Solicitation Procedures.
“Basically, we’ve put the company up for sale — it’s very complex,” Clarke said.
Complexities include a $275-million “stalking-horse bid” for Catalyst’s mills and assets at Crofton, Port Alberni and Powell River. The stalking horse is an initial bid chosen by Catalyst and designed to set the bar for takeover.
The restructuring vote was delayed a number of times in April and May, which actually gave Catalyst time to fine-tune the financial restructuring plan.
On the labour front, PPWC union members at Crofton’s mill accepted a new tentative agreement in March.
PPWC Local 2 members voted 55 per cent in favour of the new contract offer.
The local, which represents approximately 380 employees at the local mill, had previously rejected a contract offer that had been crucial to Catalyst Paper’s financial restructuring, which Catalyst bosses said contributed to the firm having to apply for creditor protection.
Catalyst also reached five-year labour agreements with five Communications, Energy and Paperworkers (CEP) locals representing 700 employees at three mills. Combined, the agreements meant a 10-per-cent reduction in hourly rates, along with various adjustments to vacation, health benefits and work rules, and annual savings in the range of $18 to $20 million.
“There are some differences (between the rejected and the approved contract) but basically it’s still a concessionary offer,” said Zarry.
The major difference this time around was Catalyst’s move into creditor protection.
“The last scenario you want to have is the mill going down, and from my perspective, the most important thing is maintaining the work for my members,” said Zarry. “And the spin-off effect from the failure of this company means huge devastation for all our communities. That’s what the membership had to weigh. I believed this was the last kick at the can to be able to do that.”
Catalyst spokeswoman Lyn Brown noted the new labour agreements are crucial in the company’s successful restructuring.
“I think it’s important to recognize that everyone who voted in support of the new agreements is helping our company reposition, and that’s helping save jobs and keep mills running,” she said.
Catalyst Paper had announced Jan. 31 that its board of directors approved filing for creditor protection in B.C.’s Supreme Court.
That announcement came three days after Crofton’s 400 members with the PPWC union Local 2 rejected Catalyst’s contract offer by a 58 per cent vote.
Local 2 was the sole holdout in recent contract ratification with Catalyst, Clarke said in a Catalyst media statement. Crofton’s 100-member CEP union Local 1132 joined four other CEP locals in Powell River and Port Alberni in ratifying a deal with Catalyst, he said.
But under Catalyst’s complex restructuring terms, all six of it B.C. unions needed to reach a deal with the pulp-and-paper giant by Jan. 31. Catalyst also needed two-thirds support of all its 2014 and 2016 noteholders.
The uncertainty over Catalyst’s future motivated North Cowichan council to shift its tax burden away from the industrial class.
In early May, council voted 4-3 to pass a controversial $275 tax shift to residents in one year instead of spread across two years, as had been suggested as an option in earlier budget meetings.
On April 2, North Cowichan residents heard about tax options aimed at reducing North Cowichan’s dependence on the mill.
Councillors eventually recommended a complete overhaul of the municipality’s tax structure to reduce the tax rate for heavy industry, light industry, forestry and farming.
Heavy industry and residential would be the areas facing the most significant change. A decrease of about $2.7 million for heavy industry (mostly the mill) would be paid for by an increase of $275 to the average homeowner.
North Cowichan faced many challenges as it prepared its 2012-16 Financial Plan, mainly the vulnerability of the municipality should its major industrial taxpayer, Catalyst, be unable to continue to pay its annual property taxes, stated a press release from the municipality in late January.
“In 2011, Catalyst paid North Cowichan $5.6 million in general municipal property taxes,” it noted. “This represented 26 per cent of all property taxes used in North Cowichan to fund the valuable core services provided to our residents and businesses.”
