N.B. converts $35M loan into share of Fraser Papers

New Brunswick taxpayers are now co-owners of a forestry company that's struggling to emerge from bankruptcy.

The provincial government has turned $35 million worth of loans to Fraser Papers into an equity stake in the troubled company.

Last Thursday, Premier Shawn Graham toured the reopened Fraser Papers mill in Plaster Rock, which was modernized thanks to a provincial government loan negotiated over the summer even though the company was in bankruptcy protection.

Graham didn't mention the province was about to convert that $35-million loan into a preferred share of the forestry company.

Business New Brunswick Minister Victor Boudreau was reluctant to explain the new financial arrangement because the restructuring plan goes before a judge later this week.

"It's limited how much detail we can get into other than to say we're obviously doing everything we can as a province to maintain those hundreds of jobs in northern New Brunswick for Fraser Papers," he said.

Loan was due in 2011

Peter Gordon, the president and chief executive officer of Fraser Papers, said the company must buy back the share at the same price plus interest within 10 years.

The loan was due starting in 2011, which means Fraser gets more financial breathing room.

"What the government has agreed to is to provide the company the additional time with which to repay the obligation and on more flexible terms," Gordon said.

The preferred share also means the province is ahead of common shareholders if Fraser pays a dividend to investors or has to liquidate its assets.

Fraser has mills in Edmundston, Plaster Rock and Juniper.

Under the company's restructuring, it will sell off its non-New Brunswick operations in Maine, New Hampshire and Quebec with the exception of a mill in Madawaska, Me.

The New Brunswick government entered into a similar agreement with the Royal Oaks Golf Course last year when it transitioned its $5 million in outstanding loans into shares in the company.

However, the Moncton company still foundered and went into receivership.

A receiver began the process of selling off parts of the golf course last week, but a broker said that it's unlikely the eventual proceeds of the sale will go toward repaying the nearly $5 million that New Brunswick taxpayers invested.