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Catalyst Paper has 30 days to make an interest payment on its debt, or it risks default.Catalyst Paper

Catalyst Paper said on Thursday it has chosen to delay a $21-million (U.S.) interest payment, a move that could trigger a default and force debt holders to negotiate some sort of deal with the debt-laden Canadian paper maker.

The Richmond, B.C.-based specialty paper and newsprint producer, said that together with its financial adviser, Perella Weinberg Partners, it is continuing to review alternatives to address its capital structure.

Rising costs for recycled fibre and energy, and lower demand from China have hit North American paper companies. Earlier this month, Wausau Paper said it would close its Brokaw paper mill in Wisconsin, cut 450 jobs and exit its print and colour business.

"Debt reduction has been identified as a priority, given current business and economic conditions, and discussions are ongoing with certain [note holders]" Catalyst said.

Analysts already see little to no value for the company's equity holders, given its $840-million (Canadian) mountain of debt.

Catalyst said that in light of its talks with note holders it has decided to defer the interest payment that is due Thursday.

"This is likely a negotiation tactic to force note holders to come to an agreement on a debt restructuring outside of bankruptcy protection," Scotia Capital analyst Benoît Laprade said in a note to clients.

The company now has 30 days in which to pay the interest before triggering a default. Failure to pay the amount within this period would allow 2016 note holders to declare the $390-million (U.S.) principal amount and all accrued interest, due immediately.

The company's stock, which has shed nearly 85 per cent of its value so far this year, was flat on the Toronto Stock Exchange on Thursday morning.

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