Pulp and paper company Fraser Papers Inc. is seeking bankruptcy protection in Canada and the United States, the company said Thursday.

"Continued operating losses, weak demand and selling prices for pulp and lumber, impending debt repayments and significant pension funding obligations" drove the filing, Fraser said in a news release.

Fraser's mills

  • Pulp mill, Thurso, Que.
  • Integrated pulp and paper facility (East Papers) in Edmundston, N.B., and Madawaska, Me.
  • Paper mill in Gorham, N.H.
  • Lumber mills in Plaster Rock, N.B., Juniper, N.B., Ashland, Me; and Masardis, Me.

The company hopes to restructure under creditor protection "in order to emerge with a sustainable and profitable specialty paper business," said Peter Gordon, the CEO.

The paper business is profitable, "particularly the specialty packaging and printing segments," he said, but  the pulp and lumber businesses "have drained our limited resources."

Fraser, based in Toronto, operates mills in New Brunswick, Quebec and New England.

The company said it has been working with employees, suppliers, customers and governments for months to cut costs, get better access to fibre supplies and improve its operations.

But the markets and financial pressures have been too tough.

Fraser reported a loss of $16.7 million US on sales of $156.1 million for the first quarter. It hasn't made a quarterly profit since the third quarter of 2007, a regulatory filing showed.

Pension, black liquor issues

Like other forest products companies, it has a large pension liability. "Our pension and other employee benefit obligations are material and are expected to require approximately $32.3 million in funding over the next 12 months," it said earlier this year.

It has also complained about the U.S. government tax credit paid to black liquor, a pulp byproduct that can be used to make energy.

The U.S. credit "will only serve to subsidize the production of kraft pulp in an oversupplied market at a cost to U.S. taxpayers in the billions of dollars.

"We have advised the provincial and federal governments that this tax loophole threatens the viability of non-U.S. based hardwood and softwood pulp mills, including our own in Thurso, Quebec and Edmundston, New Brunswick," the company said.

The federal government announced a black liquor subsidy to Canadian pulp mills Wednesday, but the main forest products union said it wouldn't stop mills from closing.

On Thursday, the Communications, Energy and Paperworkers Union blamed the government for ignoring its plan to save mills by giving them loan guarantees.

"The responsibility for Fraser Paper's bankruptcy protection application lies squarely at the feet of the Harper government," said union president Dave Coles.

"Instead of meaningful action, we get empty promises of financial aid, such as yesterday's $1-billion Pulp and Paper Green Transformation Program," he said.

The government program will give mills producing black liquor this year 16 cents a litre of black liquor, up to a total of $1 billion. Producers that participate in the program will have to invest the money in energy efficiency or environmental performance over the next three years.

Brookfield Asset Management Inc. of Toronto owns approximately 70.5 per cent of  Fraser's stock.