Struggling pulp and paper producer Catalyst Paper Corp. (TSX:CTL) said Tuesday it has decided to file for court protection from creditors after some workers and bondholders rejected the company's plan for restructuring debt and cutting costs.

The move came a day after the Vancouver-area company failed to win support from enough of its lenders and from unionized workers at a mill in Crofton, B.C., who rejected contract concessions.

"Without the new labour agreement, and without two-thirds support of 2014 noteholders, the economics of the previously announced consensual restructuring transaction was undermined," president and CEO Kevin Clarke said in a statement.

"The board, management and our advisers believe this approach (court protection) will best facilitate the completion of a recapitalization transaction that delivers the improvements to our liquidity and capital structure which are necessary to put our company on firm financial and competitive footing in the current business and economic environment."

Catalyst said it would be business as usual during the restructuring process under the federal Companies' Creditors Arrangement Act.

Moody's Investors Service withdrew its ratings on Catalyst Paper on Tuesday because of the CCAA filing, but not before giving it a default rating. The rating had already been an extremely low ca/LD.

The ratings agency also withdrew its corporate family rating, senior secured notes rating and senior unsecured notes but not before confirming them at Ca, Caa3 and C respectively.

On the weekend, workers at the Crofton mill represented by the Pulp, Paper and Woodworkers Union of Canada Local 2 turned down a tentative agreement as 58 per cent voted against the deal.

Five other union locals represented by the Communications, Energy and Paperworkers Union of Canada at Catalyst's operations approved the deal.

The company also said Monday that it had secured support from 79.47 per cent of those holding its senior secured notes due 2016. However, just 54.96 per cent of its senior notes due 2014 supported the recapitalization.

The plan required approval by two-thirds of both classes of noteholders.

The energy and paper workers union said Tuesday that governments must act to develop an industrial strategy if the paper industry in Western Canada is going to survive.

"Though it has had numerous opportunities, the Conservative government has not lifted a finger to come to the aid of forest workers and their communities from coast to coast," CEP president Dave Coles said.

"Our repeated requests for temporary loan guarantees to assist the forest industry have been ignored."

The federal government, however, did create a $1 billion aid package for pulp and paper sector in 2009, providing money to help more than two dozen mills across Canada boost their energy efficiency or their environmental performance.

Earlier this month, Catalyst received the go-ahead from a court in British Columbia to begin its restructuring efforts, while at the same time filing for protection from creditors in the United States.

The company reached an agreement for a refinancing that would have significantly cut its debt, but resulted in its bondholders getting a controlling equity stake.

For the three months ended Sept. 30, the company lost $205.7 million or 54 cents per share as it booked a $151-million impairment charge on the Snowflake recycled newsprint mill in northeastern Arizona. That compared with a profit of $6 million or two cents per share a year earlier.

Sales in what was the company's third quarter rose to $340.3 million from $322.3 million.

Catalyst Paper manufactures diverse specialty mechanical printing papers, newsprint and pulp and sells to retailers, publishers and commercial printers in North America, Latin America, the Pacific Rim and Europe.

The company has three mills in British Columbia and one in Arizona with a combined annual production capacity of 1.9 million tonnes.

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