© Geraldine Brophy
Newfoundland and Labrador Premier Tom Marshall speaks at the loan agreement news conference today between the province and Corner Brook Pulp and Paper.
The provincial government and Corner Brook Pulp and Paper have signed a loan agreement for up to $110 million and a power assets and water rights purchase agreement.
The announcement was made at 2 p.m. this afternoon.
"Our government's investment of $110 million supports the sustainability of Corner Brook Pulp and Paper Limited and helps secure the future of our forest industry for the benefit of the residents and communities of our western region and our entire province," said Premier Tom Marshall.
The loan is secured by a mortgage and company hydro assets, including the Deer Lake Power Plant and Watson's Brook Power Plant.
Approximately $85 million of the loan will be released at the beginning of the agreement to allow the company to refinance existing debt, and for working capital, says the government release. The remaining $25 million will be provided as planned capital improvements are completed. The loan will be repaid in 59 quarterly payments of $1.85 million with the first quarterly payment due March 31, 2019. The final residual payment is due December 31, 2033.
The interest rate is four per cent for three years, the release continues. After that, the interest rate will be the provincial government cost of borrowing plus 50 basis points (0.5 per cent). The default rate is the provincial government cost of borrowing plus 350 basis points (3.5 per cent).
The key requirements for Corner Brook Pulp and Paper Limited are to repay the loan, continue to operate the mill, and make planned capital expenditures in the mill and power assets, according to the release.
The company is required to contribute to employee pension plans and is responsible for environmental liabilities. It must file quarterly and annual financial statements and sustainability/capital plan progress reports. The company must also file an annual operating budget and business plan, pension and actuarial reports, among other reports.
Kruger Inc., the parent company of Corner Brook Pulp and Paper Limited, thanked the province for its support.
"This loan will enable Corner Brook Pulp and Paper to carry out capital projects that will reduce costs, improve productivity and, ultimately, increase the mill's competitiveness on the global newsprint market," said Daniel Archambault, executive vice-president, Industrial Products Division, Kruger Inc.