Government Accepts Corner Brook Pulp & Paper Proposal for Pension Funding #nlpoli
The Government of Newfoundland and Labrador has accepted a proposal from Corner Brook Pulp and Paper Limited 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, Corner Brook Pulp and Paper 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 Corner Brook Pulp and Paper representatives as co-trustees.
Should Corner Brook Pulp and Paper 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.