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Tembec Advances Recapitalization Transaction
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Montreal, Quebec, Canada, 23 December 2007 − Tembec Inc. announced today that it has gained additional support for the proposed recapitalization transaction announced on 19 December 2007 (the “Recapitalization”).

Since Tembec’s public announcement of the Recapitalization, more noteholders have executed support agreements with Tembec whereby they have agreed to vote in favor of and support the Recapitalization. As of 23 December 2007, noteholders have executed support agreements and have agreed to vote approximately USD 580 million of notes in favor of and to support the Recapitalization. Tembec will continue to solicit and obtain further support for the Recapitalization.

Tembec has entered into additional backstop agreements as contemplated in the Key Terms of the Recapitalization announced on 19 December 2007.

Key elements of the proposed Recapitalization are as follows:

* Conversion of USD 1.2 billion of Tembec's debt into new equity.

* Implementation of a new four-year term loan of USD 250 million to USD 300 million (final amount to be determined by Tembec) to provide additional liquidity.

* Reduction of Tembec's annual interest expense by approximately USD 67 million.

* Business as usual for employees, trade creditors, and customers. They will not be affected by the Recapitalization.

* Implementation of the Recapitalization is expected to occur by the end of February 2008.

The new capital structure will provide a stronger financial base for the execution of Tembec’s operating strategy and enhance the long-term value of Tembec.

Tembec’s trade creditors and its obligations to employees (including pension and benefit plans), are unaffected by the Recapitalization and will continue to be paid or satisfied in the ordinary course of business.

“This Recapitalization transaction is a significant and positive development for Tembec and its stakeholders," said James Lopez, resident and CEO of Tembec Inc. "It is a consensual solution that is fair to both our noteholders and our shareholders, and it meets Tembec’s previously stated business objectives of improving its capital structure and liquidity,” he said. “This transaction does not affect Tembec’s customers, suppliers, or workforce. It is business as usual.”

Tembec’s board of directors is unanimously recommending all noteholders and shareholders support the transaction because it will reduce net debt by approximately USD 1.2 billion, normalizing Tembec’s capital structure. Tembec’s financial advisor BMO Capital Markets has provided an opinion to Tembec’s board of directors that the terms of the Recapitalization are fair from a financial point of view to the company.

“With this transaction, Tembec is delivering on its key commitment to explore and pursue strategic alternatives to reduce its debt levels and improve liquidity,” said Guy Dufresne, chairman of the board of directors. “The board and management believe this transaction accomplishes Tembec’s objectives. It is a comprehensive recapitalization that creates a stronger company and allows for the pursuit of greater opportunities.”

An ad hoc committee of noteholders has executed support agreements with Tembec whereby they have agreed to vote in favor of and support the Recapitalization. The committee holds in excess of USD 250 million of notes. Tembec will continue to solicit and obtain additional noteholder support for the Recapitalization.

Tembec expects to hold separate noteholder and shareholder meetings on 22 February 2008, in Montréal, Québec, to obtain the required approvals for certain steps necessary to implement the Recapitalization transaction, including approval by the noteholders of a Plan of Arrangement under the Canada Business Corporations Act.

Details of the Recapitalization will be provided in an information circular expected to be distributed to noteholders and existing shareholders by the end of January 2008. In addition to noteholder and shareholder approvals, implementation of the Plan of Arrangement is subject to final approval of the Court and receipt of all necessary regulatory and stock exchange approvals.

Further information about the Recapitalization will be available on SEDAR (www.sedar.com) and the company’s web page (www.tembec.com).

A conference call intended for financial analysts and institutional investors was held 19 December 2007. A recording of the conference call can be accessed via the internet at www.tembec.com in the “Investors” section.

Tembec is a large, diversified, and integrated forest products company. With operations principally located in North America and in France, the company employs approximately 8000 people. Tembec’s common shares are listed on the Toronto Stock Exchange under the symbol TBC. Additional information on Tembec is available on its website at www.tembec.com.


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