Catalyst Paper Muddies the Water With Its Clarification and Its 443-Word Sentence

Today’s public relations tip: If you’re trying to clarify your company’s financial status, make sure your pronouncements are clear and that you don’t make people wade through a 443-word sentence that only a lawyer could love, or understand.

Catalyst Paper has generally been a leader when it comes to corporate transparency, especially on environmental issues. (See Ecologomania and Printed Products. No, the term "ecologomania" never caught on.) But it left readers dazed and confused when it issued a press release on Jan. 18 about its proposed recapitalization agreement.

“Contrary to certain media reports this is not a bankruptcy proceeding,” the statement said. “Further information concerning the recapitalization is contained in the Agreement, a copy of which is available on SEDAR (www.sedar.com), EDGAR (www.sec.gov) and the company’s web page (www.catalystpaper.com).”

But good luck finding the agreement on any of those sites without a lot of searching and clicking. Those who bothered were almost immediately confronted by this monstrosity of a sentence:



"WHEREAS, the Debtors and the Initial Supporting Noteholders are negotiating restructuring and recapitalization transactions with respect to the capital structure of the Debtors, including the Debtors’ obligations under: (i) the 11% Senior Secured Notes due December 15, 2016 (the “Senior Secured Notes”) issued by CPC pursuant to that certain Indenture, dated as of March 10, 2010 (as amended, restated, supplemented, or otherwise modified from time to time, the “Senior Secured Notes Indenture”), by and among CPC, as issuer, certain of its affiliates, as guarantors, Wilmington Trust FSB, as trustee (in such capacity, the “2016 Trustee”), and Computershare Trust Company of Canada, as collateral trustee (in such capacity, the “Collateral Trustee”); (ii) the Class B 11% Senior Secured Notes due December 15, 2016 (the “Class B Senior Secured Notes,” and, together with the Senior Secured Notes, the “2016 Notes”) issued by CPC pursuant to that certain Indenture, dated as of May 19, 2010 (as amended, restated, supplemented, or otherwise modified from time to time, the “Class B Indenture,” and, together with the Senior Secured Notes Indenture, the “2016 Indentures”), by and among CPC, as issuer, certain of its affiliates, as guarantors, the 2016 Trustee and the Collateral Trustee; and (iii) the 7.375% Senior Notes due March 1, 2014 (the “2014 Notes” and together with the 2016 Notes, the “Notes”) issued by CPC pursuant to that certain Indenture, dated as of March 23, 2004 (as amended, restated, supplemented, or otherwise modified from time to time, the “2014 Indenture”), by and among CPC, as issuer, certain of its affiliates, as guarantors, and Wells Fargo Bank, National Association, as trustee (the “2014 Trustee”), pursuant to the terms and conditions set forth in the Restructuring Term Sheet attached hereto as Exhibit A (the “Term Sheet”) and in this Agreement which are intended to form the basis of (i) a plan of arrangement (a “Plan” and, together with any Plan in a CCAA Plan Proceeding or the US Cases (each as defined herein) consistent in all respects with the Term Sheet and this Agreement, the “Plans”) in connection with proceedings to be commenced under section 192 of the Canada Business Corporations Act (the “CBCA”) and, subsequently, chapter 15 of title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) or, alternatively (ii) proceedings commenced pursuant to the Companies’ Creditors Arrangement Act (the “CCAA”) and the Bankruptcy Code, as set forth more specifically in this Agreement and the Term Sheet (collectively, the “Transactions”); NOW, THEREFORE, in consideration of the covenants and agreements contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Party, intending to be legally bound hereby, agrees as follows:"

I won’t try to translate the sentence, but here’s my quick-and-dirty layman’s interpretation of the Catalyst situation. (*Please note the legal disclaimer below):

As was announced on Jan. 14, the Canadian papermaker has worked out a proposed deal with many of its bondholders that would enable it to avoid bankruptcy but would turn up to 99.5% of its stock over to the bondholders in exchange for debt reduction. The announcement didn’t mention that, as a result of the proposal, Catalyst would file a Chapter 15 case in U.S. Bankruptcy Court asking that Canadian courts have jurisdiction over its recapitalization.

When that filing came on Jan. 17, some news reports referred to bankruptcy reorganization or bankruptcy proceedings, which led to Catalyst’s Jan. 18 “clarification” that failed to mention it had indeed filed a case in bankruptcy court. Catalyst is still in business and has not repudiated debts owed to vendors, employees, or retirees, but isn’t it splitting hairs to claim that a case filed in bankruptcy court is not a bankruptcy proceeding?

Then again, maybe the clarification was written by Catalyst's attorneys, who obviously have a bit of trouble with the English language.

*Legal Disclaimer: Dead Tree Edition, the Party of the First Part, makes no guarantee or warranty regarding the accuracy of this interpretation and is not responsible for any damages, whether consequential or inconsequential, resulting from reliance on said interpretation. The approximate retail value of this analysis is 0 cents -- excluding taxes, tags, title, and dealer-installed options and depending upon exactly what the meaning of “is” is. What? Did you, oh Party of the Second Part, really expect to receive free legal advice from a freakin’ blog when you (Party of the Second Part) are too cheap to support our advertisers and too lazy to recommend this blog to friends? No legal disclaimer would be complete without some incomprehensible Latin phrases, so here's a little ditty I learned from some an ambulance chaser: "Slippo, slippere, fallus, fractus, if you get hurt just call our practice." Illegitimi non carborundum.