Thank you, Mr. Chairman.
I am here today to discuss the company and the restructuring process, from which the company will hopefully soon emerge.
Due to the economic conditions that we faced and the lack of sufficient funding within the business to continue without filing for court protection, we filed 16 months ago both in the United States and in Canada. Our main challenge at that time, which remains in the marketplace today, was declining demand for our primary product, newsprint. We are the world's largest producer of newsprint, and that market has seen a significant demand destruction. In our belief, there is no expectation for recovery in demand for that product going forward.
We also saw a significant reduction in the United States housing market. That is a key component for our company, since in eastern Canada, primarily in the province of Quebec, we are a significant producer of lumber. As we all know, the U.S. housing market has still not recovered. For many of our other products, we saw significant swings in demand and pricing due to the global economic situation we faced.
On top of that, we were faced with debt maturities and debt refinancing in the spring of 2008. That was not that long ago, but if we remember back, that was at the height of the credit crisis, the meltdown on Wall Street, the failure of Lehman Brothers, all issues that are still affecting credit markets and capital markets across the globe.
In response, we filed for the companies as I mentioned, but we also immediately started the process of restructuring the company, which included selling assets, and which unfortunately included idling and closing assets across our system in both Canada and the United States as well as in Great Britain. Of course this unfortunately impacted employees and communities across our system. We are here today to discuss those impacts.
Throughout this process we have survived, and we are back on the road to recovery and hope to emerge from bankruptcy soon as a much more flexible company. That could not have been done without the support of the employees of the company who are continuing to operate in a safe and now profitable fashion across Canada and all of our systems.
One of the major steps we undertook was to reduce the cost of operating the company. We have reduced our SG&A, the administrative costs of running our company, by 50%, which is some $160 million a year. That includes significant reductions in staffing at our headquarters as well as across the entire system.
Ultimately this company will succeed as we emerge with a de-leveraged balance sheet. I want to remind the committee that at the time we filed, we had approximately $6.8 billion of debt, and we anticipate emerging with roughly $1 billion of debt as a highly de-leveraged company coming out of this process.
Let me talk for a second about the process we've gone through. The key was, of course, to get the support of our creditors in both the U.S. and Canada. To do that, we had to develop a business plan. That business plan has been submitted and approved by the creditors. It is the base plan for our go-forward strategy, and it contemplated a very de-leveraged, very flexible, very low-cost manufacturing platform based on declining demand in newsprint and the conversion of assets away from newsprint at a pace that matched the decline in consumption of newsprint.
Another key component of the plan was the resolution of our NAFTA claim. That has been resolved and is part of our emergence plan. As we go forward, we will have to continue to battle with the demand components of our market and with the fact that, whether we produce in Canada or in the United States, we have to compete globally, remembering that we are in a free trade industry. When we compete for orders we're competing with Europeans, Asians, and South Americans. At the same time, we're selling our products primarily out of Canada to many of those same markets. Canada is our export platform and will remain our export platform going forward.
Another issue that is always a challenge for our company is the exchange rate. The relationship between the Canadian dollar and the U.S. dollar is important, because we have always been a larger manufacturer in Canada than in the U.S. We will be a larger manufacturer at emergence as well. Our costs are more than 50% in Canadian dollars, but our revenues are predominantly in U.S. dollars, so the ability to implement hedging policies on currency issues is important to us. We have to be out of bankruptcy to do that.
As I mentioned a minute ago, one of our strategies to deal with the decline in newsprint demand is to continue conversion projects away from newsprint, in essence to stop shrinking the company in terms of closing facilities but start converting facilities to other products, dealing with the demand destruction components to newsprint in a positive sense in the sense of reinvesting in assets and making products other than newsprint to deal with the decline.
Looking at the next steps, as we sit here today we're very close to starting the process of raising our new funds; in terms of the capital raise, that will start next week. We are in the process of resolving many issues as related to our pension obligations in Quebec, and then ultimately Ontario. All these matters have to be resolved in a successful manner in terms of our ability to exit. Our creditors want these matters resolved before they'll support the exit plan and essentially write off their debt and accept equity in replacement of their debt obligation.
Over the next several weeks, you'll see the company raising capital, concluding agreements with the provincial governments, primarily in Quebec and Ontario, and starting the process of re-engaging with our creditors, and ultimately our new investors, on the future of the company. That future needs to be one that ensures the profitability and sustainability of the enterprise so that we can meet our obligations to creditors, to investors, as well as our employees.
Let me finish my statement by saying that our goal from this entire process was not to attack the pension plans of our retirees and our active employees, and we believe we have achieved that, though the solution is not final yet. In the next few days I think you'll be very pleased to see the solution we've reached on pension obligations, both past and future, in terms of our employees.
Mr. Chairman, that's my statement.
