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Tembec Industries Files Bankruptcy as Foreign Firm (Update1)

 

By Christopher Scinta

 

Sept. 4 (Bloomberg) -- Tembec Industries Inc., a unit of Montreal-based Tembec Inc., filed for protection from U.S. creditors to implement the debt restructuring approved by a Canadian court in February.

 

The company said in papers filed today in U.S. Bankruptcy Court in New York that its assets and debts exceed $1 billion.

 

Tembec Industries filed under Chapter 15 of the U.S. Bankruptcy Code, saying it wants the debt restructuring that was approved by the Ontario Superior Court of Justice to govern U.S. creditors. Chapter 15 allows foreign companies to reorganize outside the U.S. while protecting them from U.S. lawsuits and creditor claims.

 

Holders of more than 98 percent of the company's notes and 95 percent of its stock voted earlier this year in favor of the restructuring that swapped debt for new equity, Michel Dumas, the company's chief financial officer, said in a statement to the court.

 

Tembec had to restructure its debt due to the rising value of the Canadian dollar, declining U.S. home construction, a glut of timber because of a beetle infestation in British Columbia and falling newsprint demand, according to court papers.

 

Douglas Bartner, an attorney with Shearman & Sterling in New York that filed the petition, didn't immediately respond to a phone call seeking comment.

 

Tembec produces about 1.7 billion board feet of lumber, 1 million tons of paper and 2.1 million tons of pulp a year, according to court papers.

 

Virtually all of Tembec's assets are in Canada, so the reorganization plan approved by the Canadian court should govern, Dumas said. Tembec joins another Canadian wood-products company, Pope & Talbot Inc., in filing for U.S. Chapter 15 as a foreign entity.

 

The case is In re Tembec Industries Inc., 08-13435, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

 

To contact the reporter on this story: Christopher Scinta in New York at [email protected].

Last Updated: September 4, 2008 16:37 EDT

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