May 28, 2017
Provincial Government Accepts Corner Brook Pulp and Paper Ltd. Proposal for Pension Funding Arrangement
The Government of Newfoundland and Labrador has accepted a proposal from Corner Brook Pulp and Paper Limited (CBPPL) that will secure the future of the company’s pension plans, while allowing the company to focus its financial resources on maintaining the viability of its operations.
Under the terms of the proposal, CBPPL will obtain an irrevocable letter of credit from a financial institution, backed by a government guarantee, and government will take security interest in the company’s power assets at Deer Lake and Watson’s Brook. The letter of credit will be held by a Trust for the benefit of pension plan members, with government and CBPPL representatives as co-trustees.
Should CBPPL cease operations, the letter of credit would be called by the trustees to secure any outstanding pension obligations. Should the government have to pay under the guarantee, the amount would be deducted from the purchase price of the power assets and water rights. Government has a pre-existing obligation, under a 2014 Power Assets and Water Rights Purchase Agreement, to purchase the company’s power generating assets in the event of mill closure.
This arrangement was made possible because the employer was willing to work with the Provincial Government to find a way to meet its pension obligations, and the company had sufficient assets to obtain a letter of credit to address shortfalls in the pension plans.
An amendment to the Schedule of the Loan and Guarantee Act, 1957 is required and will be introduced during the current session of the House of Assembly. Amendments will also be necessary for the Pension Benefits Act Regulations to give effect to this arrangement.
“Our government is committed to protecting the interests of pension plan members and this arrangement helps ensure the sustainability of the pension plans into the future. This innovative solution will enable the company to meet its pension funding obligations, while allowing it to focus on meeting its commitments to capital investments and operations under agreements made in 2014.”
Honourable Perry Trimper
Minister of Service NL
- 30 -
Agreements Completed with Corner Brook Pulp and Paper Limited: www.gov.nl.ca/releases/2014/exec/0220n03.htm
2017 05 28 5:55 p.m.