Canfor Pulp announces asset write-down and impairment charge

Executive Summary

• Canfor Pulp Products Inc. recorded a non‑cash asset write‑down and impairment charge of approximately $106 million for Q4 2025.
• The impairment pushes the company’s net debt to total capitalization ratio to 116% (December 31 2025) and results in an EBITDA interest coverage ratio of –0.1×, breaching its loan covenants.
• Management warns that, absent further covenant relief or a successful “Proposed Transaction” with Canfor Corp., the company is likely to remain out of compliance through Q1 2026.

Key Details

• Impairment Charge: ~$106 M non‑cash write‑down reflecting sustained declines in US‑dollar pulp list prices and difficulty securing economically viable fibre.
• Post‑Impairment Leverage: Net debt / total capitalization = 116% at 31 Dec 2025 (vs. covenant limit of 55%).
• EBITDA Coverage: EBITDA interest coverage ratio = –0.1× (covenant minimum 1.5×).
• Loan Facility Terms:
• December 2 2025 amendment granted security to lenders and a waiver for the quarter ending 31 Dec 2025 (“Covenant Relief Period”).
• After relief period, covenants re‑activate: max net debt/total cap 55%; min EBITDA coverage 1.5× if net debt/Cap > 42.5%.
• Forecasted Covenant Breach: Management expects continued weak pulp market conditions and macroeconomic headwinds to cause further performance declines in Q1 2026, making non‑compliance at 31 Mar 2026 “highly probable.”
• Proposed Transaction: Ongoing arrangement agreement with Canfor Corp. (the “Proposed Transaction”) intended to address financial distress; success is uncertain and not expected to be adversely affected by this release.
• Mitigation Actions: Company pursuing mitigation initiatives; if the Proposed Transaction fails, it will re‑engage lenders for additional temporary covenant relief while exploring a restructuring process.
• Forward‑Looking Statements: Includes expectations on impairment recording, covenant non‑compliance, future lender discussions, and the impact (or lack thereof) on completing the Proposed Transaction.

Notable Quotes

(No direct quotes were provided in the release.)