UPDATE 1-Marathon Pulp folds under sagging global markets

(Adds and recasts with company comment)

VANCOUVER, British Columbia Feb 13 (Reuters) - Marathon Pulp still hopes to be able to reorganize its finances as it prepares to shut down the Ontario mill at the end of the month because of weak pulp markets, and official said on Friday.

Marathon, a joint unit of Tembec Inc (TMB.TO) and Kruger, said on Friday it was filing under Canada's Bankrupcy and Insolvency Act because its cash flow was not sufficient to meet its current financial obligations.

Chief operating officer Sue Nakanishi said the company still hopes to be able to reorganize. "Only time will tell," she said.

The mill with a annual capacity of 200,000 tonnes of northern bleached kraft pulp will run until it uses its existing chips and then shut down indefinitely, likely by Feb. 28, the company said.

The mill in Marathon, Ontario, employed about 230 people.

Tembec, which holds a 50 percent stake in the joint venture, said it will record a one-time gain of C$3 million in the current quarter because of the filing. Tembec had recorded C$61 million in sales from Marathon in 2008.

(Reporting Allan Dowd, Editing by Frank McGurty)