VANCOUVER, British Columbia (News release) -- Canfor Pulp Products Inc. announced that it will record a non-cash asset write down and impairment charge totaling approximately $106 million in its fourth quarter of 2025 results. The impairment reflects sustained declines in global US-dollar pulp list prices combined with persistent challenges in securing economically viable fibre.

After taking this asset write-down and impairment charge into consideration, the Company estimates a net debt to total capitalization ratio of 116% at December 31, 2025, and an earnings before interest, tax, depreciation and amortization ("EBITDA") interest coverage ratio of (0.1) times, as defined under the terms of its operating loan facility.

As announced on December 2, 2025, the Company renegotiated its operating loan facility. Under the terms of the amended agreement, the Company granted security to CPPI's lenders and obtained a waiver of its financial covenants for the quarter ended December 31, 2025 (the "Covenant Relief Period").

Following the Covenant Relief Period, the Company continues to be subject to certain financial covenants, including a maximum net debt to total capitalization ratio of 55% and a minimum EBITDA interest coverage ratio of 1.5 times, which is effective if the net debt to capitalization ratio exceeds 42.5%.

Management's forecasts indicate that due to global pulp market conditions remaining weak and ongoing macroeconomic headwinds, the Company may experience continued declines in financial performance during the first quarter of 2026, making it highly probable that CPPI will not comply with its financial covenants at March 31, 2026.

Although Management is undertaking mitigation initiatives and, as announced on December 3, 2025, advancing an Arrangement Agreement with Canfor Corporation (the "Proposed Transaction"), the ultimate success of these actions cannot be assured at this time. Management's discussions with its lenders regarding future financial covenant relief are currently on hold, pending the outcome of the Proposed Transaction. Should the Proposed Transaction not close, the Company would re-engage with its lenders for further temporary relief while it works to undertake a restructuring process.

The Company does not expect this news release to have any adverse effect on completing the Proposed Transaction.