TAM and Catalyst commitments

To Powell River Legacy group:

Could you please tell me how Catalyst paper is associated with Third Avenue Management from New York?

Is the company committed to keeping our mill open for the thirty plus years that the landfill permit covers, or could they just use the boilers and the landfill to dispose of mill waste from other places, and close our mill down?

Reply 1 from the PR Legacy group:

Third Avenue Management (TAM) has a 38% controlling interest in Catalyst. This was a forced take-over bid that followed Norske selling its ownership shares in Catalyst Paper Corporation in early 2007 (Jan-Feb). Most of the former Executive and Board of Catalyst is gone, replaced by TAM's chosen Executive and Directors. (A notable exception is Gary Collins, former BC Minister of Finance forced to retire after the RCMP raids on the BC Legislature. His name continues to be mentioned in the on-going Birk, Vasi, Birk trial into the privatization of BC Rail, etc.) There is information on the takeover in the newsroom on the Catalyst website if you are interested in reading these documents.

You can see the new Board here.
3 members are from Vancouver, 2 from New York, 1 from Atlanta (Georgia), 2 from Quebec, and 1 from Ontario

You can see the Executive team here and read their backgrounds here.

A word about hedge funds/private investment funds. We responded earlier (below) to your question with a quote from the TAM website that included the statement:
"Third Avenue Management's research approach is opportunistic and not constrained by market capitalization, industry sector, or geographic location."

"Opportunistic" is the operative word for these funds, in that managers of the funds often look for failing companies from which they can wring money for their investors.

It doesn't matter where they are located, what industry they are in, or how much debt they are carrying.
As Investopedia (investopedia.com) says ," You can think of hedge funds as mutual funds for the super-rich." 

Quick facts about TAM:

• they are largely American (90%).
• the number of hedge funds has increased dramatically in recent years.
• they are high risk ventures.
• they are unregulated so no information can be obtained unless you are an investor.
• only accredited investors (the rich) are allowed.

The main thing for us to keep in mind in Powell River, is that TAM has little interest in the business per se. Despite assurances from local mill management that TAM "cares" about the mill and the community, nothing could be further from the truth. TAM is interested in creating wealth for it's investors. Full Stop. Their portfolio turnover in one of their investment funds was 15% in the first 3 months of 2007. This means they jettisoned 15% of the companies in the fund and replaced them with new ones.

They will keep Catalyst on their books as long as they can make money at it. For example, as you can see in the recent news release on their website, they recently bundled up a bunch of the Catalyst debt and sold it. That's one way to make money!

As to your question regarding the boilers. As long as they can make money at making paper they will continue. Of course they aren't making money from paper-making so far, so we will just have to see what they will do next. The concern that the boilers in all the Catalyst mills may be used to produce energy is very real. Just like Alcan, the aluminium smelter in Kitimat, the company may make more money selling energy than producing a product.

If I were a big investment firm in New York, I'd be looking at the Catalyst mills and saying, "Gee, energy sales is where it is at! Energy prices will only continue to go up in the foreseeable future. Those big boilers can burn anything to produce energy. Gordon Campbell has labeled municipal waste as green energy, so we can get into green energy production. Get paid to take the garbage. Use it as fuel. Dump the industrial waste generated (i.e., flyash) in landfill sites. Sell the end product--electricity".

They win at both ends of the BIG INVESTMENT equation: Get paid to take the garbage, and get paid to burn it.

We lose at both ends of the LOCAL COMMUNITY equation:  Neighbours get poisoned, and millworkers still face layoffs.


It may well be a few years before we see this come to full fruition in Powell River. But the fact that both Campbell River (Elk Falls) and Powell River are seeing their landfill sites double (or more) in size is ominous in and of itself. And we are not alone.

The pulp and paper industry in Canada is in trouble. And the layoff numbers just keep rising.

• Between 2000 and 2005, 10,000 workers have lost their jobs in Canada (Vancouver Sun, Jan 2006, Section H, page 5.)

• In 2006, the pulp and paper workers union (CEP) reported that "in the preceding two years in the paper sector alone, 34 full, partial, or permanent mill closures had occurred, costing 7,000 jobs."

• June 2007, Speaking at the New Brunswick Federation of Labour’s convention in Edmonton on the day that UPM broke the news, 5 June, CEP President Dave Coles said, 'These communities are a microcosm of what is going on in more than four dozen communities (across Canada).' He said that “over the past three years, more than 12,000 pulp, paper, and sawmill workers have lost their jobs in Canada.”

The mill is being downsized before our eyes. I only expect this trend to continue.

And I do not for one moment believe that TAM is not as aware as I am of the trend shown by the above statistics.  So how they can actually make money from the all the Catalyst mills in BC? It is very unlikely to be through the manufacture of paper.

As TAM clears the way to full scale energy production, increasing the size of the landfill is just as likely to guarantee job loss in the long run as it is to protect jobs in the short run.

Reply 2 from the PR Legacy group:

Third Avenue Management is the new majority shareholder of Catalyst Paper Co.

The following is taken directly from Third Avenue Management website:

Since our founding in 1986, Third Avenue Management has utilized a disciplined fundamental, bottom-up approach to identify appropriate investments with the sole objective of delivering superior returns with limited investment risk, over the long term.

We are guided by one proven value philosophy, which focuses on the strength of a company's balance sheet and the discounted price of its securities. Our belief is that a strong, well-managed company can survive difficult environments, and the price of its securities will eventually reflect its true intrinsic value.

Third Avenue Management's research approach is opportunistic and not constrained by market capitalization, industry sector, or geographic location.

As far as I know, Catalyst has made no commitments to keeping the mill open here. But that is only to the best of my knowledge. We are checking this question further.

The current permit is entirely unclear on the question of what can and can't be dumped on the landfill. And there is no wording in the permit amendment application regarding dumping restrictions. So it looks like they could indeed close the paper operations and dump anything they like there. I believe we badly need a public hearing to ask this question directly of Catalyst.