The paper market's long-term decline has now spread to the fictional Dunder Mifflin Paper Company: "The Office" had the worst premiere in its nine-year history last night.
The episode had the show's second-lowest audience ever, attracting "just 4.32 million viewers, down 46 percent among 18–49-year-olds from its premiere last year," reports Vulture.com. In other words, the once-hot comedy centered around a dysfunctional paper company (Aren't they all dysfunctional?) is dropping as fast as newsprint demand.
It's not just newsprint that's shaky. A deal to restart the NewPage supercalendered machine in Port Hawkesbury, Nova Scotia fell through today (Sept. 22 update: and then was resurrected); its shaky status means that North America's only world-class, magazine-quality paper machine is in danger of being shipped to another continent or scrapped. And North America's second-largest player in the magazine category (Verso Paper) is at a competitive disadvantage not because it may be on the verge of bankruptcy reorganization but because several competitors have already been through or are in the Chapter 11 debt-cleansing process.
Declining demand means fewer paper machines are needed, but fortunately some of the idled machines are being put to good use. Several that once made copy paper have been converted recently to producing fluff pulp, the main ingredient in diapers.
Here's how to understand the trends: The bad news for pulp and paper companies is that Baby Boomers are reaching senior-citizen status, leaving fewer dinosaurs in the workplace who still print out their emails to read them. The good news is that the aging of the Baby Boom means more people on the continent are incontinent, which is boosting demand for hygiene products that rely on fluff pulp.
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Showing posts with label Port Hawkesbury. Show all posts
Showing posts with label Port Hawkesbury. Show all posts
Friday, September 21, 2012
Monday, February 27, 2012
A Glimmer of Hope for the Port Hawkesbury Mill
The potential purchaser of the idled Port Hawkesbury paper mill has almost worked out an electricity deal and has contacted the union to start labor negotiations, the bankruptcy monitor revealed today.
Extensive negotiations between Pacific West Commercial Corporation and Nova Scotia Power Inc. have been "constructive," and the companies "are working toward finalizing an agreement on the supply of energy to the Company," Ernst & Young said in a report today to a Canadian bankruptcy court. PWCC has said that obtaining favorable electricity rates was a major condition of it buying the mill and restarting its world-class supercalendered paper machine.
PWCC and Ernst & Young believe that the power negotiations "have reached a sufficient level that it is appropriate to seek the implementation of next steps in this proceeding." Those next steps include starting the formal process of identifying creditors, working out an agreement with the province for wood to supply the mill, and labor negotiations with the Communication, Energy, and Paperworkers Union.
Extensive negotiations between Pacific West Commercial Corporation and Nova Scotia Power Inc. have been "constructive," and the companies "are working toward finalizing an agreement on the supply of energy to the Company," Ernst & Young said in a report today to a Canadian bankruptcy court. PWCC has said that obtaining favorable electricity rates was a major condition of it buying the mill and restarting its world-class supercalendered paper machine.
PWCC and Ernst & Young believe that the power negotiations "have reached a sufficient level that it is appropriate to seek the implementation of next steps in this proceeding." Those next steps include starting the formal process of identifying creditors, working out an agreement with the province for wood to supply the mill, and labor negotiations with the Communication, Energy, and Paperworkers Union.
Wednesday, September 21, 2011
Seven Losers and Four Winners in the NewPage Bankruptcy
The recent bankruptcy court filings by NewPage have been blessings for some and curses for others. Here's a look at the scorecard two weeks after the big U.S. paper company went Chapter 11:
LOSERS
Loser #1) Port Hawkesbury employees: NewPage has basically deep-sixed its money-losing Canadian mill, walking away from severance obligations and an underfunded pension plan, not using any of its debtor-in-possession funds to keep the mill running, and leaving many suppliers holding the bag. NewPage has put the mill up for sale but also revealed that it loses $4 million per month on the operation. Unless the muscle-bound Canadian dollar suddenly goes into the tank, a new owner won’t be able to make a go of the mill unless it can avoid NewPage’s pension obligations, reduce labor costs, and perhaps keep part of the operation (two paper machines and a pulp mill) idle.
Loser #2) Nova Scotia: It’s not just the mill’s employees who are suffering; the whole province seems to be getting sucked into the Port Hawkesbury vortex. The provincial government is shelling out $15 million to prop up logging operations that are getting stiffed by NewPage, the power company (owed nearly $10 million) says the loss of such a big customer will force it to raise rates for everyone else, and rail service to part of the province may no longer be viable.
Loser #3) Paper buyers: Spot deals for supercalendered paper disappeared almost overnight when the Port Hawkesbury closure was announced. Contract prices for SCA and the closely linked lightweight coated (LWC) papers are also rising despite declining demand.
Loser #4) Bondholders: Owners of the junkiest of NewPage bonds will probably receive nothing, and even owners of more senior bonds who expected to come out OK might have to accept some equity in a restructured NewPage in lieu of cash.
Loser #5) Suppliers: At least 25 suppliers of such items as chemicals, energy, and timber to the American arm of NewPage got stuck holding more than $1 million each in accounts receivable when the company went Chapter 11. Their prospects are better than those that supplied Port Hawkesbury, but most are unlikely to receive full compensation.
Loser #6) Cerberus: The folks who brought us the Chrysler and GMAC bankruptcies can now add another turkey to their resumes. The Chapter 11 filing wipes out the big hedge fund's stake in NewPage.Cerberus now seems to be moving more toward simply investing in companies rather than trying to buy and run them.
Loser #7) StoraEnso: With NewPage defaulting on the lease of one of its Port Hawkesbury paper machines, StoraEnso is taking a $180 million hit because it is the guarantor of the lease. Stora had already written off its 19.9% equity stake in NewPage, which was a holdover from the sale of Stora's North American assets to NewPage.
WINNERS
Winner #1) Duluth employees: All of NewPage’s U.S. mills will probably continue running as long as the company is in bankruptcy court. (After three years of writing about ink-on-paper industries, I've seen this movie before. Can you say Tribune, Source Interlink, Quebecor World, AbitibiBowater, White Birch, etc.?) But the future looks especially bright for Duluth, the only NewPage mill besides Port Hawkesbury that can make supercalendered paper.
Winner #2) UPM: The Port Hawkesbury shutdown makes UPM’s recent purchase of the Madison, Maine mill look like a winner because of higher prices and a tight market for SCA paper. Although NewPage’s travails may cause investors to get jittery about other highly leveraged paper companies (which may be why Verso's stock price is down a bit), Finnish giant UPM seems to have the size, strength, and diversification to ride out the storm and to profit from NewPage's weakness.
Winner #3) The Katahdin region of Maine: Ever since the one-machine Millinocket, Maine supercalendered mill closed three years ago, there have been various attempts to reopen it that eventually petered out. But the latest investment plan already seemed to have legs before getting a shot in the arm from Port Hawkesbury's demise. Like Port Hawkesbury, Millinocket has one of the few machines capable of making an SCA for offset printing that rivals the quality and printability of more expensive coated groundwood papers.
Winner #4) Lawyers: Because NewPage filed for Chapter 11 without a “prepackaged” restructuring plan, a passel of lawyers will be kept busy for months sorting through the claims and interests of various creditors. Remember, the first rule of bankruptcy law is that, regardless of who else gets stiffed, the lawyers always get paid.
Related articles:
LOSERS
Loser #1) Port Hawkesbury employees: NewPage has basically deep-sixed its money-losing Canadian mill, walking away from severance obligations and an underfunded pension plan, not using any of its debtor-in-possession funds to keep the mill running, and leaving many suppliers holding the bag. NewPage has put the mill up for sale but also revealed that it loses $4 million per month on the operation. Unless the muscle-bound Canadian dollar suddenly goes into the tank, a new owner won’t be able to make a go of the mill unless it can avoid NewPage’s pension obligations, reduce labor costs, and perhaps keep part of the operation (two paper machines and a pulp mill) idle.
Loser #2) Nova Scotia: It’s not just the mill’s employees who are suffering; the whole province seems to be getting sucked into the Port Hawkesbury vortex. The provincial government is shelling out $15 million to prop up logging operations that are getting stiffed by NewPage, the power company (owed nearly $10 million) says the loss of such a big customer will force it to raise rates for everyone else, and rail service to part of the province may no longer be viable.
Loser #3) Paper buyers: Spot deals for supercalendered paper disappeared almost overnight when the Port Hawkesbury closure was announced. Contract prices for SCA and the closely linked lightweight coated (LWC) papers are also rising despite declining demand.
Loser #4) Bondholders: Owners of the junkiest of NewPage bonds will probably receive nothing, and even owners of more senior bonds who expected to come out OK might have to accept some equity in a restructured NewPage in lieu of cash.
Loser #5) Suppliers: At least 25 suppliers of such items as chemicals, energy, and timber to the American arm of NewPage got stuck holding more than $1 million each in accounts receivable when the company went Chapter 11. Their prospects are better than those that supplied Port Hawkesbury, but most are unlikely to receive full compensation.
Loser #6) Cerberus: The folks who brought us the Chrysler and GMAC bankruptcies can now add another turkey to their resumes. The Chapter 11 filing wipes out the big hedge fund's stake in NewPage.Cerberus now seems to be moving more toward simply investing in companies rather than trying to buy and run them.
Loser #7) StoraEnso: With NewPage defaulting on the lease of one of its Port Hawkesbury paper machines, StoraEnso is taking a $180 million hit because it is the guarantor of the lease. Stora had already written off its 19.9% equity stake in NewPage, which was a holdover from the sale of Stora's North American assets to NewPage.
WINNERS
Winner #1) Duluth employees: All of NewPage’s U.S. mills will probably continue running as long as the company is in bankruptcy court. (After three years of writing about ink-on-paper industries, I've seen this movie before. Can you say Tribune, Source Interlink, Quebecor World, AbitibiBowater, White Birch, etc.?) But the future looks especially bright for Duluth, the only NewPage mill besides Port Hawkesbury that can make supercalendered paper.
Winner #2) UPM: The Port Hawkesbury shutdown makes UPM’s recent purchase of the Madison, Maine mill look like a winner because of higher prices and a tight market for SCA paper. Although NewPage’s travails may cause investors to get jittery about other highly leveraged paper companies (which may be why Verso's stock price is down a bit), Finnish giant UPM seems to have the size, strength, and diversification to ride out the storm and to profit from NewPage's weakness.
Winner #3) The Katahdin region of Maine: Ever since the one-machine Millinocket, Maine supercalendered mill closed three years ago, there have been various attempts to reopen it that eventually petered out. But the latest investment plan already seemed to have legs before getting a shot in the arm from Port Hawkesbury's demise. Like Port Hawkesbury, Millinocket has one of the few machines capable of making an SCA for offset printing that rivals the quality and printability of more expensive coated groundwood papers.
Winner #4) Lawyers: Because NewPage filed for Chapter 11 without a “prepackaged” restructuring plan, a passel of lawyers will be kept busy for months sorting through the claims and interests of various creditors. Remember, the first rule of bankruptcy law is that, regardless of who else gets stiffed, the lawyers always get paid.
Related articles:
- NewPage Files Chapter 11, Seeks Buyer for Canadian Mill
- NewPage Inc. 5000 Ranking Seems Like a Cruel Joke
- A 'Salmon Week' For North American Papermakers: Note the reference to Chapter 11 in this nearly two-year-old article
- List of NewPage Port Hawkesbury’s creditors: The latest NewPage article at ForestTalk, a Canadian site that is thoroughly documenting the Port Hawkesbury saga.
Wednesday, August 24, 2011
NewPage Inc. 5000 Ranking Seems Like a Cruel Joke
This is not a joke: NewPage, the shrinking paper-making giant that is teetering on the brink of bankruptcy court, was named yesterday to the Inc. 5000 list of the USA’s fastest-growing private companies.
This bit of odd news came out just as the country’s largest maker of magazine-quality paper was announcing the indefinite idling of its two-machine Port Hawkesbury mill in Nova Scotia.
The company earned the #3062 ranking on the magazine’s list by growing revenue from $2.17 billion in 2007 to $3.6 billion in 2010. What the magazine doesn’t mention is that the growth came solely from NewPage’s purchase of Stora Enso’s North American assets (including Port Hawkesbury) in late 2007.
NewPage’s sales dropped by 17% from 2008 to 2010 and are still declining because it has shut one-fourth of its production capacity. What was a 12-mill company in December 2007 is to become an eight-mill operation next month if the company follows through on its announced idling of Port Hawkesbury.
Making the Inc. 5000 list is typically a notable milestone for a growing American company, but the recognition seems like a cruel joke given what NewPage has already been through just this month, when it:
This bit of odd news came out just as the country’s largest maker of magazine-quality paper was announcing the indefinite idling of its two-machine Port Hawkesbury mill in Nova Scotia.
The company earned the #3062 ranking on the magazine’s list by growing revenue from $2.17 billion in 2007 to $3.6 billion in 2010. What the magazine doesn’t mention is that the growth came solely from NewPage’s purchase of Stora Enso’s North American assets (including Port Hawkesbury) in late 2007.
NewPage’s sales dropped by 17% from 2008 to 2010 and are still declining because it has shut one-fourth of its production capacity. What was a 12-mill company in December 2007 is to become an eight-mill operation next month if the company follows through on its announced idling of Port Hawkesbury.
Making the Inc. 5000 list is typically a notable milestone for a growing American company, but the recognition seems like a cruel joke given what NewPage has already been through just this month, when it:
- Buried a reference to exploring “restructuring alternatives”, including a possible Chapter 11 bankrupt-protection filing, into a financial document, only to have some anonymous blogger spill the beans. (See NewPage Finally Says the B Word. ) The story has since been picked up by the the trade press as well as local news media covering the various NewPage mill towns. (Port Hawkesbury's mayor reportedly said last night that NewPage filed for Chapter 11 yesterday, but so far that claim cannot be verified.)
- Had to pay $600,000 in a settlement with former CFO David J. Prystash, whom the company said “has made certain allegations and threatened claims relating to or arising out of his employment and the termination of his employment with NewPage.”
- Ran into delays with asset sales that were supposed to generate much-needed cash.
- Had its credit downgraded once again.
- Announced the idling of Port Hawkesbury, which includes a world-class machine for making supercalendered paper. The move may be just an attempt to prevent an increase in the mill’s power rates, though every Canadian mill that sells primarily to the U.S. is on shaky ground these days because of currency rates. (For more about the mill's up-and-down fortunes, see Port Hawkesbury's Near-Death Experience.)
Saturday, January 3, 2009
Port Hawkesbury's Near-Death Experience
Last year was a disaster for many North American paper mills but saw a spectacular turnaround for one -- NewPage's Port Hawkesbury, Nova Scotia mill.
When NewPage bought the mill, along with seven U.S. mills, from Stora Enso just over a year ago, Port Hawkesbury's mayor said he was "scared to death" about the mill's future. Even before the NewPage deal was announced, some customers shifted business to other mills, not wanting to rely too heavily on an operation that was reportedly losing money and seemed likely to be shut.
Now both the supercalendered (SCA) and newsprint machines at the mill seem to be running close to full and the mill is actually doing something almost unheard of these days -- hiring new employees.
The change of fortune for the supercalendered (SCA) and newsprint mill can be explained largely with two words – loonie and Katahdin.
Shortly before NewPage completed the acquisition of the mill just over a year ago, it noted that Port Hawkesbury was unprofitable because most of its expenses were in expensive Canadian loonies but most of its revenue was in cheap U.S. dollars. Since then, the loonie has weakened about 20% versus the U.S. dollar.
The closure of Katahdin’s supercalendered (SCA) mill in Millinocket, Maine this past summer kept the North American market for SCA firm despite declining demand. Katahdin, controlled by Brookfield Asset Management, has said it would reopen the mill if it can retrofit its inefficient oil-fired burner with a biomass gasifier that would enable it to generate electricity for sale. (See "Katahdin may enter green energy business.") But unless Millinocket is sold to another paper maker, Katahdin’s erratic marketing and poor communication with customers will make restarting the mill difficult despite its modern technology, high-quality paper, and high labor efficiency.
Rising prices for coated groundwood paper pushed some users to look for savings this year by switching to SCA. Port Hawkesbury's world-class SCA machine is noted for heatset-offset products that look and perform like coated groundwood -- with similar inks, press speeds, and waste levels as coated #5 paper.
Unlike the SCA machine, Port Hawkesbury's older newsprint machine did not seem to have any competitive advantages. After a labor dispute and high energy costs idled the mill for most of 2006 and caused Stora to abandon the North American newsprint market, prospects for the newsprint machine seemed especially bleak.
But even that albatross is flying. NewPage has developed a high-bright newsprint that can run on heatset-offset presses, making it a competitor to the sort of soft-nip and low-grade supercalendered papers often used for fliers and newspaper inserts. Mill closures and changes – such as Irving Paper’s virtual abandonment of SCC and SCB to make higher-priced SCA – opened up opportunities for the Port Hawkesbury product.
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