SFK Pulp says it will take a $2.8-million (U.S.) hit in the second quarter related to the problems at Fraser Papers Inc., which has filed for court protection from its creditors.
The figure represents all of the amounts owed to SFK Pulp by Fraser Papers.
SFK also says it's in breach of a provision in its own credit agreement, related to the interest coverage ratio, and is in discussions with its lenders to negotiate an amendment.
The fund says it's “reasonably confident” that it will reach a satisfactory agreement with lenders in the near term.
The two companies have been part of a broad downturn in the Canadian forestry industry that has affected many lumber, pulp and paper producers due to slowdowns in the construction and newspaper industries.