Good morning, ladies and gentlemen. My name is Tina and I will be your conference operator today. At this time, I would like to welcome everyone to the Mercer International second quarter 2009 earnings conference call. (Operator instructions) Ms. [Tramont], you may begin your conference..

Thank you. Good morning and welcome to the Mercer International 2009 second quarter earnings conference call. Management will begin with formal remarks, after which we will take your questions. Please note that in this morning's conference call, management will make forward-looking statements that were made in the press release. According to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, I would like to call your attention to the risks related to these statements, which are more fully described in the press release and with the company's filings with the Securities and Exchange Commission. Joining us from management on today's call are Jimmy Lee, President and Chairman; and David Gandossi, Executive Vice President, Chief Financial Officer, and Secretary. I will now turn the call over to David Gandossi. David, please go ahead.

Thanks, Alex and welcome, everyone, to Mercer International’s second quarter earnings conference call. As always, I will begin with some prepared comments on the key financial aspects of the quarter and then I will pass the call to Jimmy who will speak about the particulars of the market, our operating performance, and some of our strategic initiatives. As always, we will be pleased to answer any questions you may have following our remarks. If there are any questions related to our exchange offer, we would ask that you save those until after the earnings and market related questions so we don’t get bogged down. Let me begin with a few comments about our financial results. As we expected, the pulp markets tightened up nicely during the quarter and while our production is not yet back to the record levels of 2008, we nonetheless had an acceptable production result in the quarter. But while the upward pressure on pulp pricing is returning, the volatility of currency markets has [been punishing]. As you will have seen in our press release, we reported a net loss of EUR11.5 million in the quarter, or EUR0.32 per share, compared to net income of EUR0.9 million, or EUR0.02 per share in the same quarter in 2008. And as you know, our earnings are sometimes heavily influenced by the mark-to-market gains and losses on our interest rate swap held by our 75% owned Stendal operation. The swap is designed to fix the interest rate on the Stendal debt at 5.28%. Our earnings in the quarter included a pretax accounting again of EUR7.5 million on this instrument compared to a gain of EUR2.06 million in the same quarter in 2008. Often one of the accounting indicators that the bottom of the pulp market has passed is when there…

Thank you, David. Good morning, everyone. As David mentioned, after a pretty discouraging quarter of bad economic news in Q1, there is some good reason for optimism as we go into Q3. While we clearly have some considerable difficult times ahead, there are indications that the worst has passed. I know the comfort is limited here and the past four quarters have been punishing on our earnings and our share price. I can tell you that it is much easier to move forward knowing that the bottom has indeed been reached. As you would expect, the condition of the financial markets and its impact on our customers and us has dominated our focus during the quarter, but we are also growing more confident in the pulp market’s ability to return to normal and support price increases, so marketing has returned to the forefront on our strategy as well. And like our marketing efforts, we remain committed to bringing our high return strategic projects to conclusion. The most prominent of these, of course, is the Celgar Green Energy project. I will talk about this in a moment but let me first comment about the mills. While improved from the first quarter, productivity at our mills has not yet returned to the record levels of 2008. Rosenthal had a strong quarter with production within a few hundred tons of record levels. The two larger mills both had less than perfect quarters. At Celgar, we were forced to take the mill down for almost five days when we experienced the unusual failure of a very critical valve. At Stendal, we also lost several thousand tons due to upset conditions. In total, we produced 349,000 tons of pulp compared to 346,000 tons in Q1, and almost 357,000 tons in the second quarter of 2008.…

(Operator Instructions) Our first question will come from the line of Paul Quinn with RBC Capital Markets.

You mentioned fiber prices up in Germany in the upcoming quarters -- maybe you could try to quantify what we are going to see in terms of cost increase there.

Well, we’re not really able to say in terms of Euros per cubic meter exactly but it’s just an upward pressure we are feeling, maybe having to procure logs from a little further away, you know, as supply tightens up with our buying pressure. You know, we might look in Poland, Czech, the Baltics, those kind of areas. So it could add a few Euros to the transportation cost. So it’s not significant but it is just general upward pressure as a result of the volumes.

So like year over year, something like 5% kind of number?

Don’t know yet. That order of magnitude, 5% to 10%, I would guess.

But it was trending down last year, so you know, if you compare it to last year’s wood prices versus what our expectations for this, it’s still going to be lower cost. But I think what we are seeing clearly is that the continued reduction of wood prices in Germany has stopped because of the withdrawal of the wood from the forest owners because of course the demand from the sawmilling side is such that it doesn’t make sense for them to continue to harvest at the rates that they would have in the past, and this is restricting the volume and therefore we have to look towards the other Eastern European markets where as you know, because of the global economic crisis, of course the wood activity there has been impacted a lot, the currencies have dropped a lot and therefore there is room for us to be able to source wood from areas which clearly were not our traditional sourcing grounds.

In terms of the Canadian green transformation program, has that gone through treasury board approval yet?

Our information is that is expected to go through treasury board this week, and the industry has been invited to a conference call on August 6th. We will learn more about it. In the invitation, they indicated there would be an active website that would have the methodologies for measuring [black liquor] and its energy equivalents, as well as the forms that were necessary to make the applications and notifications regarding [black liquor] usage and so on. So it’s quite a positive signal, I think. We’ll know more within a very short period of time, I’m sure.

Your expectation the cash from that program would come at the earliest at the end of the year, or --

Well, the government has said, has left the door open for money to flow in December and that was some time ago when the last industry conference call occurred. That was their view of timing. There’s been a lot of discussion and pressure to speed that up, so we should expect them to move as quickly as they can but so far, their committed timeline is by December.

Okay, and in terms of your Celgar project, is there a penalty coming from B.C. Hydro? You’ve got a signed contract with them, for not delivering the project on time? Or what happens there?

Well, the contract had some wiggle room in it for what we call our COD date, which was May 1st, and so we are in discussions with Hydro to move that COD date out a few months, possibly mid- to late summer. And I wouldn’t expect there to be a penalty. These are the kinds of things that power projects get delayed fairly regularly and ours is a good project for them, so -- further discussion yet to come but we are optimistic we won't have penalties and if there are penalties, they won't be overly material.

And just lastly, I guess you got commitments out there with equipment suppliers for that project. Are you in negotiations with them to delay or what’s the status of that?

We’re in discussions with them because, of course, our expectations are that the amount of funds available under the green energy transformation program is significantly higher than what we had originally envisioned in terms of power generation at the Celgar mill. So because of the clearly more available funding as a result of this, we have undertaken a significant amount of studies to further increase the amount of energy efficiency, as well as energy production and of course when you have more money available, there’s a lot more things you clearly can do and make a more efficient project and so as part of that process, it is going to expand over the given time more work which, as well as more equipment purchases from the suppliers which are presently involved. So I think it isn’t just a discussion which is limited clearly to the green energy project that was initially envisioned but really an expansion for the future which will provide additional revenue and income to our suppliers. So I don’t think this is a -- how you would call a limited discussion where we are just talking about the delay of the project but really an expansion of additional potential work and clearly that results in delays because we would be looking to further improve the overall economics based on the larger available pool of money.

Okay, but in terms of the size of the generation, it’s still going to be limited to 48 megawatts?

At this time for the turbine but you know, it gives us an opportunity to look at tying in and doing work which would allow us to further expand potential power generation.

Just to add for you, Paul, we are buying a 48-megawatt turbo generator and our commitment in our power purchase agreement is, depending on whether you are in the winter or the summer, 30 to 35 megawatts of power, so it was sized for the mill to grow. You know, we’ve got incremental capacity we are working to achieve, so there are things within the mill that we can do that will speed up our ability to deliver more megawatts than the 30 or 35, and that’s what Jimmy is talking about. There’s -- it’s a scope review of the entire project because several of the contracts that are in place will be expanded for additional work that will produce more power.

And just so I’m clear -- any additional power generated over the 30 to 35, B.C. Hydro is taking in at the same rate?

There is a certain percentage which would allow us to sell at the same rate.

The contract allows us to up-size by 10% within the first year and beyond that, we’ll be in discussions with.

Okay. That’s all I have. Thanks, guys.

Your next question comes from the line of Bruce [Klein] with Credit Suisse.

Just on the Celgar project, could you just remind me what was going to be the CapEx dollars associated with that? And then I thought at some point there was a number for potential benefits or cost benefits each year. Are those numbers -- maybe you could remind us of those numbers and are those numbers still relevant in your view, or how might -- I guess they might change over the scope of the project but maybe you can talk on that?

Their original capital investment was expected to be CAD55 million. Of course, with the change in the scope which would be available based on what we think is going to happen under the green energy transformation program, that could expand but the original project was CAD55 million and there’s really no change expected based on those equipment and the services that we expect to be provided. And the income or the additional revenue that we expected was something in the order of about CAD25 million.

That was annual?

Yes, it was annual.

Okay, and then the new Rosenthal bank facility, are there any bank covenants in that facility?

There are covenants, things like debt-to-interest.

Are those maintenance, Dave?

Yes, they are.

Could you share what the tightest one is, or is --

No, we don’t normally disclose our covenants, Bruce. We are comfortable with them. We had similar covenants in the previous Rosenthal revolver as well.

Okay. Thank you.

Your next question comes from the line of Andrew Shapiro with Lawndale Capital. Andrew Shapiro – Lawndale Capital Management: A few questions -- regarding the Celgar project and the prospective financing, how much has the company invested so far in the project that could be subject to reimbursement from the governmental grant program. And based on Celgar’s black liquor production and the proposed rate to be paid for black liquor, and the scope of the program, do you have a range for how much in grant money Celgar would be qualified to receive if you have the appropriate reimbursable projects to get the grant money for?

The first question, how much have we invested in the project -- so up to June 30th, it was about CAD16.5 million and the answer to the second question -- and just further on that, so the conditions of a grant are that money spent prior to the announcement date typically is not covered, so it’s got to be incremental spending from the announcement. But they are expecting to allow certain soft costs. So we are -- we don’t have a number on that but I think it could be -- our engineering, a bit of site development, some of the legal work on preparing documents with vendors and those kinds of things, so it could be a few million, $2 million or $3 million of soft costs on the project that would qualify. But we are waiting for the final rules on August 6th to make our determination of that number. The range, a bit hesitant to put numbers out on the market. What we’ve said on our press release is that we expect our entitlement to be -- I think we used the word significantly in excess of the cost of the existing project, so maybe I could just leave that with you there. Andrew Shapiro – Lawndale Capital Management: You can’t give a wide range -- in other words, you produce a certain amount of black liquor, there’s $1 billion they are going to give out. The industry has already produced enough black liquor year-to-date to chew up that full billion. You are going to be entitled to between 50 and 80, or maybe 100?

We’ve decided with our board we just didn’t want to throw numbers around. There’s some calculations that need to be done and verified in terms of liquor intensity and all sorts of issues so we’ve got a view internally but we are comfortable enough to say it’s in excess of the size of the project as it’s designed. Andrew Shapiro – Lawndale Capital Management: Project as it’s designed is how much?

Fifty-five million Canadian. Andrew Shapiro – Lawndale Capital Management: Okay, so in excess of CAD55 million?

That we are comfortable with, yes. Andrew Shapiro – Lawndale Capital Management: Okay, that at least gives us a decent handle of the materiality of all of this. Can you tell us -- it looks like the due from unrestricted group, the money downstream from the parent company into Stendal, is up at 68.465 million, I think that -- I don’t know if that was Euro or dollars, but I think it was Euro -- that’s a little bit higher than the prior quarter. Is this an incremental capital injection that’s gone down from the holding company into Stendal or can you discuss what has caused that increase or potential future increases?

It’s the accrued interest on the loan, Andy. Andrew Shapiro – Lawndale Capital Management: So no new cash, it’s just the build-up of the loan?

That’s right. That’s the money that we pushed into Stendal to buy our interest in it initially. That was -- that’s what the convertible debenture was for and it accrues interest. Andrew Shapiro – Lawndale Capital Management: All right. And as this accrual occurs, and the minority partner in Stendal has not made a similar type of injection, each quarter does their pro rata ownership interest then further diminish and what percentage are they down to now on Stendal?

No, Andy because as you know, there was original capital injected into Stendal based on a shareholders’ equity plus [the loan], so what we are talking about is this accrual in terms of the interest on the shareholders’ loan that existed and that will continue to accumulate and that accumulates for both parties, the minority and us. There was, of course, a dilution because of the -- when we amended the Stendal facility last year, we contributed EUR10 million. The minority partner did not contribute and there was, of course, some dilution up to the 75%, which allowed us then to keep the relationship and that’s basically it. So there’s no further dilution at this point that we are expected of the minority. Andrew Shapiro – Lawndale Capital Management: Okay. In terms of your Celgar and Rosenthal debt pieces, the Celgar -- remind us again, the Celgar line matures and also the Rosenthal line, when you would expect this new line and its new maturity dates and all that to be locked down? And also if you could tell us anything in particular about the differences in the new loan from the prior facility because it seems like the availability on the new loan is a bit reduced and I don’t know if there’s a rate change or not.

So the Canadian one expires May of next year; the Rosenthal line expires October of next year but the extension carries it out into 2012. The reduction on the Rosenthal revolver is standard practice for European banks today. If you want to renew, it’s a -- your starting position is well, why don’t we talk about 75% of the original loan, and I guess considering that we’ve never drawn on the Rosenthal revolver in its original state in the four years that we had it at 40 million, we thought 25 was okay. We also at the same time are getting government support CAD4.4 million equipment loan which is not a working capital base thing but it’s just a recovery of capital we’ve been spending on a washer project at Rosenthal. So that kind of in our minds allowed us to be comfortable with the 25. Andrew Shapiro – Lawndale Capital Management: And how much is drawn on each of the Celgar and Rosenthal lines against how much is available?

So the Canadian is drawn CAD22 million out of 40, but with where our inventory levels are now, and this is similar to the disclosure of the last quarter, we really are at the limit of our borrowing base on the Canadian one. And on the existing CAD40 million for Rosenthal, we had CAD10 million drawn at the end of the year and we’ve since paid that CAD10 million back in mid-July. Sorry, at the end of June, we had CAD10 million outstanding and repaid that in the middle of July. Andrew Shapiro – Lawndale Capital Management: Okay, so it’s at zero out of 40 and when does it drop down to 25? When does the new line likely go effective?

I think it will be in two weeks when we sign all the documentation. We’ve been through -- we’ve had our commitment letter, obviously, we’ve announced that and we’ve finished turning the document, so it’s just the legal department is finishing off the security agreements and we are done. Andrew Shapiro – Lawndale Capital Management: And is it a similar interest rate margin, no change in that?

Slight increase in the margin but it’s a great rate compared to anything you would ever expect to find in North America and the covenants are a little bit easier than the previous one. Andrew Shapiro – Lawndale Capital Management: Okay, I have a few more questions but we’ve asked a few here, so we’ll back out into the question queue but come back to us, please.

Your next question comes from the line of Bill Hoffman with RBC Capital Markets.

Just to follow-up on the last questions, Dave, you said you paid down 10 of the revolver after the quarter end. I’m assuming that pulls your cash down then from 33 to 23?

In the researcher group, that’s right, yes.

Yeah, in the researcher group -- so I guess the next question is, is that cash available to either entity, Celgar and Rosenthal? And I guess to follow-on with that, if you have the availability of if Rosenthal needed it over Celgar, can you move that if you have that -- are you restricted from moving cash back and forth?

Well, there’s no tax reasons or legal impediments to moving money within our structure. Where we have to be careful though is if we draw too much out of Rosenthal and pushed it up to Mercer or to Celgar, we have to think about the bank’s perceptions -- they really just don’t want us draining the liquidity out of their facility and moving it to the parent, so there are some structural restrictions depending on how well that mill is doing. For example, if you do an EBITDA to interest expense test, included in interest expense needs to be payments to the parent, so that you have some natural restriction from moving liquidity at a time when the mill was doing poorly. If the mill is doing better from an EBITDA perspective, that opens up the availability. So today we have room to move some amount of money, not all of it, some amount of money -- but having said that, we don’t have a need so we are not intending to do that in the near future.

And then just to follow-on that, with regard to the Celgar side of the equation, could you just talk about your liquidity strategy there, especially as you go into the back half of the year and are planning some -- you know, your annual maintenance shut?

We’ve brought our liquidity out of working capital. We are continuing to do that. We are being very careful about fiber procurement, inventory management, those kinds of things and it’s a difficult situation but we think it’s manageable and carry on.

And then with regard to the annual shuts at both facilities in the back half of the year, can you give us an indication of how many days you expect to have them down?

Rosenthal is a longer one -- it’s going to be about 18 days because there’s a bunch of recovery boiler work that needs to be done as scheduled. We’ve been planning this for a couple of years. And for Celgar, we are still not clear on the scope of it because we are pulling back from the amount of work we were going to do because we did have a bunch of tie-in work originally scheduled for the green energy project, which obviously is going to be moving forward into next year some time, so still working on the scope of that but it will be at least 11 days, which would be the normal, possibly slightly longer.

Okay, thanks and then finally, can you just cite production volumes at Celgar and Rosenthal in the second quarter?

In the second quarter -- I can do that. So production for Rosenthal was 79.9, Stendal was 160.9, Celgar was 108.3. Sales volumes for Rosenthal were 84.3, Stendal was 191.4, and Celgar was 119.6.

Thank you very much.

(Operator Instructions) Your next question comes from the line of Andrew Shapiro with Lawndale Capital Management. Andrew Shapiro – Lawndale Capital Management: Follow-ups to fill in some gaps -- what type of fiber prices were embodied in the recently reduced and drawn-down inventory versus the current market environment for the fiber prices? Are we higher, lower -- what are we moving out here?

Well, once we wrote down our inventory, we wrote it down to a level which is pretty similar to what it is. Andrew Shapiro – Lawndale Capital Management: Okay, great. And can you break out what the energy sales were from Rosenthal versus Stendal during the quarter to understand what type of higher German energy subsidies come into the restriction group versus what is outside of the restricted group?

Sorry, Andy, I just don’t have the energy revenue breakdown here at the table. Andrew Shapiro – Lawndale Capital Management: Okay, we’ll do that offline then. And can you describe under what scenarios and timing is the restricted group able to recoup back part of all of its capital investments down into Stendal?

Well, it’s going to take some much stronger operating conditions, obviously and the way to think about it is as Stendal earnings improve, the first place that free cash flow will go will be to top up the debt service reserve account to the point where it has one year’s principal plus interest, and that’s something we negotiated in so that it will always have muscle to weather the next downturn, so it’s first liquidity goes into an insurance basket, which is on our balance sheet but it’s restricted. Andrew Shapiro – Lawndale Capital Management: How big of a basket is that?

One year principal plus interest, so it will depend on the principal for the next year is going to be relatively small, then it starts growing again and the interest is the -- it’s roughly CAD35 million a year. Andrew Shapiro – Lawndale Capital Management: Okay.

Then beyond that, any amounts that have been deferred from the original principal retirement schedule will be swept to the bank, up until the point in time where you’ve made up the deferral to that point in time and then beyond that, free cash flows available for distribution to shareholders. Andrew Shapiro – Lawndale Capital Management: And what is the quantification of the amount that had been deferred?

Well, right now we deferred the March payment, so we’ll call that 10 million. Andrew Shapiro – Lawndale Capital Management: So about 20 million a year?

Yeah, for the first two years and then every year beyond that, it’s -- there is some deferral as well. We had almost a complete deferral in the first two years on the principal and then every year beyond that to 2017, it’s some deferral every year. We just change the slope of the amortization curve out to the point where we’ve got a bullet at the end of -- like the total deferral was around EUR164 million. Andrew Shapiro – Lawndale Capital Management: Okay. Will your footnotes or could your footnotes in your financial statements provide or break out and quantify kind of this cumulative buckets of hurdle before money could flow up from Stendal into the restricted group? It would be useful.

We’ll take that under advisement. Andrew Shapiro – Lawndale Capital Management: You know, in your footnote breakout.

We’ll think about it. We didn’t -- obviously it wasn’t an issue for December 31st because there hadn’t been any deferrals but we will consider what disclosure will help you understand that. Andrew Shapiro – Lawndale Capital Management: Right, in trying to understand the distinction between the two and when money can flow up and the investment in Stendal can be recouped up by the parent co. You’ve really reduced inventory down, created a lot of cash -- I want to get a better feel for whether this is a sustainable level. There’s even more room for improvement or it’s a level that you have to bring back up and costing a bit of cash in the current and future quarters.

Well, I think the expectation should be that for fiber, we will start to invest working capital in fiber again going into the second half of the year at all three mills. That would be typical of the seasonality, and for finished goods inventory, we are going to work hard to keep them at the levels they are at right now. There’s not a lot of room to take them down, maybe a little bit of room in Rosenthal. They are a little bit higher than they need to be but the other two mills are down at pretty much what it takes to keep the flow going to the customers, considering the order fulfillment process that pulp has to follow. Andrew Shapiro – Lawndale Capital Management: Okay, and I don’t have any questions about the current proposed exchange offer. It is certainly an offer we as large convert holders will not be accepting and hopefully there will be improved discussions going forward.

I guess that’s your opinion, Andy, so we’ll certainly have discussions, I’m sure, but the offer presently is outstanding and we’ll have further discussions on that. Andrew Shapiro – Lawndale Capital Management: Sure. I just think you’re wasting valuable time.

Well, we appreciate your comments.

Our final question will come from the line of Rick Sherman with Oppenheimer.

I’m a little confused about the program for the black liquor. I thought it was predicated on what was going on in the U.S. and that program was going to come to an end anyway by the end of the year. If this thing -- you know, the investments you make in this, do they extend beyond ’09? Are they predicated in any way on whatever is going on with the program in the U.S.? Because I thought they were simply put forward by the government to try to mitigate the advantages that the U.S. producers had?

I’ll try to address that. So the U.S. black liquor program has been in place, the companies in America have been benefiting since late third quarter of last year, benefiting throughout all of 2009 and some question as to whether it will end -- you know, the highway bill that it’s embedded in is up for amendment or whatever they do at the end of this year. There’s also a budget before congress that would have this ended at September 30th, so there’s not real good clarity on where it’s going. But the Canadian government’s response was to assist the Canadian industry to recover from the damage that’s been done by that protectionist measure and -- but they want to do it in a way where they don’t create softwood lumber risk, so it’s a capital grant. It’s to help producers only that produce black liquor. You can’t spend it on a sawmill or in the forest or those kinds of things, and it has to have an energy and environmental benefit to the mill through the spending of capital. They also didn’t want to create an environment where Canadian operators start destroying their own market running hard to earn more black liquor, so they set it up in a way that was quite clever -- they said you start measuring black liquor back at January 1st of 2009 and the -- each company’s entitlement is allocated starting with January 1. Every day they measure the black liquor until a full million dollars is allocated to the companies that operated in that timeframe, and the math tells us we are pretty close to that line right now, so any future activity isn’t -- you know, any change in activity isn’t going to change how much you are entitled to, so it takes gaming away from the system. And then because capital takes time to deploy, they’ve given us a three-year window to spend it.

Do you have to produce some form of bio-diesel with it or anything like that?

No, it’s just strictly -- it’s strictly a benefit based on the Black Liquor generated and burned at the facility. We don’t have to add diesel to it.

The project has to basically be in energy efficiency or environmental improvements.

So is the intention of the government right now as it currently is constituted that this is a three-year -- is there a timeline on this program, is three years?

The CAD1 billion gets allocated and as I mentioned, it’s probably allocated now. Our activities up to this point in time, as a Canadian industry, the billion dollar limit has been reached. It will be by mid-September, we’ll know how much we as a company are entitled to and so every company will have a bucket of funding available predefined and you’ve got three years to spend it.

Three years to spend it, okay. So it’s really not -- the grant to basically spend this money on a project that ultimately on a longer term basis will throw off additional EBITDA to you through energy production, is that the best way to think about it?

Exactly -- so the government has a number of objectives. They are looking for energy efficiency in their industries, they are looking for environmental improvements in their industries, and they’ve got an economic development agenda -- they want to preserve as much of this industry as they can in the wake of this recession that we are in and some of the protectionist measures that the American mills have received, which puts them in a much more advantageous competitive landscape. If you don’t spend capital on these kind of facilities, eventually you become a dinosaur and so that’s part of the thinking behind the Canadian government’s approach. They are doing what they can to help us compete in the face of existing competition.

Okay. Going over to your working line of capital, I think if I understood it correctly, okay, I understand you are going from CAD40 million to CAD25 million, but your CAD40 million original line on Rosenthal was good until -- did I hear October of 2010?

Yes.

The original line?

Yes.

Okay, and you are changing that to approximately a combination of CAD30 million -- you know, a combination of 25 plus the term loan?

Right.

Okay. Did I hear you say -- okay, is there a reason -- did I hear you say that in the next few weeks or whatever, you would subsequently convert that down to the 20 -- you would put into place, you’d go from the CAD40 million to the CAD25 million literally a year early?

Yes.

Would the situation -- and then on top -- paid down the line by CAD10 million? I’m just curious. I mean, if cash is -- if the situation in the world right now is so unsettled, why negotiate that -- you know, where you might need cash, you never know, I mean, based on market conditions. If we do a double-swoon or something or other, why would you put that into effect a year early and not wait until you got over the hump?

The way these things work, Rick, I think as you approach the maturity on a revolver, and if you are particularly in challenging times, if you are going to draw money on it, you need to demonstrate to the lender how you are going to pay them back through normal operations, and so just drawing down 40 without a forecast to support how you are going to pay it back, the lender is going to have an issue with that. So we felt that it was better to have the certainty and the security of a long-term facility. We don’t think we are going to need that line of credit, even, but it’s a good thing to have and --

No, I’m not disputing that but I mean, everything you just said about the lender wants to know when you draw it down how you are going to pay it back, that doesn’t change whether it’s currently at 40 and you drew it down or whether you bring it down to 25 and suddenly you draw it down.

It does, depending on when the maturity is of that line, so if you basically have to demonstrate that you’ve pulled down 40 and you’ve got to pay it back next month, then you better be able to justify you are going to do that, versus a year or two years from now. And so there is a big difference in terms of how you can justify the amount that you have drawn and still have outstanding versus the forecast and clearly certainty is better if you have a longer period of time than if you have such a short time where nobody is going to believe that, right?

And I also mentioned, Rick, that we did improve some of the features in the new facility, which makes it more available to us under poor operating conditions than the previous --

I would imagine you would have, I mean, basically having done it so far in advanced and having reduced the line in general, yeah. Just to the point of -- not to harp on the exchange offer but this has been obviously maybe once in a generational type of downward move where probably the whole world was disrupted in a way that we haven’t seen before. Obviously the concern was tremendous based on the damage done to your stock price, your bonds, and everything else was just the industry. It obviously is starting to improve somewhat but is there -- I don’t know if you can share any of this but is there anything you can share like as a plan B if we come around to you’ve made this offer to the bond holders, the other caller obviously was quite -- made his opinion known. First of all, the converts, are they primarily -- I recall in the past that a very large percentage of those converts were held by a very small amount of investors. Is that still the case where maybe 80% of those bonds are held by five entities or 10 entities? And I guess my question would be first of all, do you -- can you take any percentage of those, anybody who wants to do it, there’s no minimums, I believe -- what’s plan B if basically that doesn’t fly, or we come around another year from now or whatever? Is there any alternative planning being done relative to taking out those converts?

Well, I think clearly the exchange offer is out there. I am sure that the various holders will have their own opinions. Clearly the quarter was important so that everybody understands how we are performing in light of a very difficult early year period and I think the global economy hopefully has now bottomed and I think moving forward, our expectations are that if the existing holders of the convertible notes, you know, they are going to have to make up their own mind about the exchange offer and we, based on the forecast that we have and the improvements of the global pulp market, we will continue to have adequate liquidity to continue the business and pay the interest, so there’s -- this is not something where there’s an immediacy here. Now clearly the liquidity issue is at low levels, so it’s not like we’re -- you know, we got a lot of safety but we do have adequate levels, so this is not an issue where we’ve got to solve the convertible note or senior note or any other issue, so that’s not a concern to us. I think the equity value clearly has reflected a significant downturn in the business. It’s also had an impact in terms of the debt values as well. And there’s a dislocation in terms of what market is perceiving asset values in this industry to be and we’ve never seen enterprise values which are reflected today in terms of our business in the past because clearly we are in a completely different type of reality and until we get to more normalized conditions, we won't really know what the next period is going to be in terms of asset values. So I think it’s a little bit too early to say do…

Are you able under the restricted group to, for example, sell just one of the mills and subsequently -- and if you did, use it to pay down or the debt that’s related to the restricted group? I mean, what’s the flexibility --

I don’t think we want to get into restructuring scenarios on an open conference call.

Okay.

It’s not an appropriate conversation at all, sorry.

Okay. No problem, thank you very much.

And we have no further questions at this time. I would now like to turn the call back over to management for closing remarks.

Again, we’d like to thank everyone for attending today’s conference call and hopefully as we commented on our, I guess presentation that we have now reached at least a bottom and that we are going to return to a bit of normalcy moving forward. We are quite optimistic based on the inventory levels that we’ve seen that clearly further price increases may occur and this is really dependent on how China moves forward in the coming months. On that, thank you very much.

Ladies and gentlemen, this does conclude today’s teleconference. You may all disconnect.