Fortress Paper signs agreement to sell Quebec pulp mill and sawmill assets

MONTREAL (Scrap Monster): The wholly owned subsidiaries of Fortress Paper Ltd. has entered into an asset purchase agreement with Nexolia Bioenergy Inc., subsidiaries towards sale of assets of Lebel-sur-Quevillon, Quebec pulp mill and sawmill. The agreement was entered between Fortress Global Cellulose Ltd.  and Fortress Lumber Corp. with LSQ Energy, L.P.  and LSQ Development, L.P. As per the deal, the aggregate purchase price stands at $15.36 million. The transaction is expected to close by first week of July this year.

The purchase deal covers buildings, equipment and other ancillary property belonging to the mill facility. The sale also includes the energy generation, connection and transmission plant and related equipment.

The purchase price is to be comprised of the following:

(i)                 $7 million secured note issued by Energy LP in favour of the Vendor

(ii)               $0.86 million, by the assumption by the Purchaser of property tax liabilities of the Vendor

(iii)             the assumption by the Purchaser of up to $7.5 million of the Vendor 's liabilities under a trust agreement among BMO Trust Company, 9109-3294 Québec Inc.,Domtar Inc. and Fortress Global dated June 13, 2012.

The Vendor intends to assign the Note to Investissement Québec("IQ") immediately following closing in consideration for an equivalent set off against the indebtedness owed to IQ by Fortress Specialty Cellulose Inc. ("FSC"). The Note will be guaranteed by FSC, subject to a deferred payment obligation of up to five years, if necessary.

The closing of the deal is subject to several conditions including:

(i)                 receipt of third-party financing by the purchaser

(ii)               receipt of required authorizations from governmental authorities

(iii)             execution of an amended Trust Agreement and release of the Vendor from all obligations under the existing Agreement

(iv)             the execution of the amended superficies and servitudes agreements between 9109 and the Purchaser

(v)               release of letters of credits deposited by Fortress Global with Hydro Quebec Distribution in relation to its power supply contract

(vi)             signing of non-production agreement providing for the non-production of dissolving pulp and paper grade pulp using the purchased assets at the mill.

According to Yvon Pelletier, the sale is part of the company’s restructuring efforts by diluting its non-core assets. The transaction is expected to reduce the company’s future obligations significantly and to focus on constructive steps to grow its core business.

About Fortress Paper

Fortress Paper operates internationally in two distinct business segments: dissolving pulp and security paper products. The Company operates its dissolving pulp business at the Fortress Specialty Cellulose Mill located in Canada, which has expanded into the renewable energy generation sector with the construction of a cogeneration facility. The Company operates its security paper products business at the Landqart Mill located in Switzerland, where it produces banknote, passport, visa and other brand protection and security papers.

About Nexolia Bioenergy Inc.

Nexolia Bioenergy Inc. is a private company focused on investing in natural resources, renewable energy and other projects that could result in a sustainable economic development and job creation, provide services and resources to northern communities while operating in a transparent and respectful manner towards the communities and the environment.