Dec 20, 2007. /Lesprom Network/. Canadian forest-products company Tembec said that its board is recommending a recapitalization plan that will see debtholders end up with 95% of the recapitalized equity. Under the transaction, Tembec will convert $1.2 billion of debt into new equity and implement a new four-year term loan of $250 million to $300 million for additional liquidity. The plan, which Tembec expects to implement by the end of February 2008, will reduce annual interest costs by about $67 million. Tembec said that an ad hoc committee of noteholders, which holds more than $250 million of notes, has struck support agreements with the company in favor of the recapitalization. Hurt by tough conditions in the forestry sector and a strong Canadian dollar, Tembec said it expects to hold separate noteholder and shareholder meetings to obtain approvals on February 22, 2008. Under the plan, debtholders will exchange notes for a share of 45% of Tembec's recapitalized equity, receiving 37.5 new shares for each $1,000 of notes. Noteholders participating in the new term loan will get a share of 43% of the recapitalized equity and those acting as backstops are entitled to a share of a further 7%t. Existing Tembec shareholders will get a pro rata share of 5 million new shares. For 100 existing common shares, investors will get 5.84 new shares and about 12.9778 warrants. In late November, the company said that it was exploring strategic alternatives to improve its capital structure and improve liquidity. Options at the time included the sale of noncore assets, cost-cutting, refinancing or repayment of debt, and issuing new debt or equity.