BY PATRICK GARMOE
NEWS TRIBUNE STAFF WRITER
Ainsworth Lumber Co. Ltd. announced it is restructuring to eliminate its $823.5 million debt and help improve its long-term financial outlook.
As a part of the deal, the Ainsworth family, which founded the company 50 years ago, will give its nearly 60 percent stake in the company over to investors.
The restructuring of the company, whose chief product is oriented strand board that goes into new homes, is not expected to impact the current situations of its plants in Bemidji, Grand Rapids and Cook.
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The Cook plant shut down for parts of the last three months of 2007, operated in the first part of January, then shut down Jan. 16. It remains closed.
The Grand Rapids plant shut down temporarily in September of 2006 and remains idle.
The Bemidji plant, with 150 employees, continues to operate.
Some Canadian plants the company owns also have been closed or experienced work stoppages.
Under the restructuring agreement, the Ainsworth family, which until now held 58 percent ownership in the Vancouver, British Columbia-based company, will give that up in exchange for eliminating $823.5 million in current debt and the infusion of $150 million to be repaid by 2015.
Investors would own 96 percent of the company.
The plan would replace the current 10-member board, half Ainsworth family members, with a new management team, allowing those investors to run the company.
"The management and board of directors of the company believe that, in view of the challenges and risks to the company's ongoing viability created by the current oriented strand board market and the company's existing capital structure, the recapitalization is the best alternative available to the company and its lenders, note holders, shareholders and other stakeholders," the company said in a statement.
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The question is whether the recapitalization ultimately will improve the future of a company struggling because slowdowns in new home construction have contributed to poor market conditions for OSB manufacturers.
During the first quarter, ending March 31, the company lost $88.2 million as sales plummeted.
Despite bringing in more than half a billion in sales last year, the lumber company reported a net loss of $216.5 million for 2007, almost double the company's loss of 2006.
Assuming the deal is approved by two-thirds of the vote by common shareholders and the courts, Ainsworth hopes the recapitalization will be done by July 30.
Bill Meehan, Cook's plant manager, said the deal doesn't mean much, if the economy doesn't improve.
"The situation in Cook is based on the market, and the market is still rather poor," Meehan said. "We're hoping that after this, that we may get more concrete answers and some projections for a start date."
A skeleton crew of 30 has been doing maintenance on the plant, while 119 workers continue to hope and wait for it to reopen.
"It's hard on people. It weighs on them," Meehan said.
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PATRICK GARMOE can be reached at (218) 723-5229 or pgarmoe@duluthnews.com
