AbitibiBowater Files Amended Plans of Reorganization and Disclosure Documents

AbitibiBowater Inc. has announced that certain of its U.S. and Canadian subsidiaries, currently under creditor protection, have filed with the U.S. Bankruptcy Court for the District of Delaware amendments to AbitibiBowater's plans of reorganization as well as related disclosure documents. Amendments to its plans of reorganization and related disclosure documents will also be filed with the Québec Superior Court in Canada. The unsecured creditors committee supports the plans. With these developments, AbitibiBowater is aiming to emerge from creditor protection in the fall of 2010.

These filings provide details on the treatment of creditor claims for the proposed plans of reorganization. If and when the plans are approved by the courts and creditors, AbitibiBowater expects to emerge with a significantly improved financial position, resulting from its efforts to reduce costs, lower debt and mitigate the impact of ongoing market and currency fluctuations. The court-filed documents will be made available at www.abitibibowater.com/restructuring once filings have been made in courts in both the U.S. and Canada.

"The filing of these amendments to our plans of reorganization and related disclosures is an important milestone on the path towards emergence," stated David J. Paterson, President and Chief Executive Officer. "Our significant progress to date in restructuring AbitibiBowater is a testament to the resolve and dedication of our employees and business partners. Working collaboratively, we are facing our challenges and developing solutions to transform the Company. Our goal is to build an organization with a leaner financial model, a low-cost and flexible operating platform, and a diverse and innovative mix of products, capable of nimbly reacting to industry dynamics."

Recovery for Creditors

The filings provide greater specificity regarding recoveries by unsecured creditors, while maintaining the classifications for all AbitibiBowater creditors as proposed in the May 4, 2010, draft framework for the plans of reorganization. The plans of reorganization specify that non-disputed pre-petition secured, administrative and priority claims would be paid in full in cash, or satisfied as otherwise agreed, at emergence.

The plans of reorganization also provide that AbitibiBowater's current common stock will be cancelled and holders will receive no recoveries, while unsecured claims would receive a pro rata share of equity in the reorganized company upon emergence, subject to certain conditions. A convenience class for unsecured claims has also been established. Estimates of recoveries for unsecured creditors are detailed in the filings. Final recoveries for unsecured creditors are subject to change as a result of any future amendments to the plans of reorganization, including dilution from a potential rights offering, a management incentive program, or additional claims or adjustments to claims that may be recognized at a later date.

Restructuring Efforts

Since the time of the combination of Abitibi-Consolidated Inc. and Bowater Incorporated in 2007 and throughout AbitibiBowater's creditor protection proceedings, AbitibiBowater has undertaken sustained and significant actions to restructure and improve long-term profitability.

Strategic actions to enhance AbitibiBowater's value include:

• significant closures of non-profitable capacity


• the monetization of non-core assets


• various austerity measures and spending cuts, including a significant reduction in the AbitibiBowater's workforce.

AbitibiBowater has streamlined its asset portfolio to focus on top-performing facilities by closing or idling 3.4 million metric tons of paper capacity, moving from an overall production capacity of 10.4 million metric tons to 7 million metric tons, since 2007. During this period, AbitibiBowater has also sold aggregate assets and land for total proceeds of over $940 million. Chief among these transactions was the sale of AbitibiBowater's 60% ownership interest in Manicouagan Power Company (MPCo) for C$615 million. The MPCo transaction allowed for the repayment of one of the AbitibiBowater's initial debtor-in-possession (DIP) financing arrangements and the partial repayment of other secured debt.

Business Plan

AbitibiBowater plans to emerge with a strengthened financial position by building upon the meaningful headway it has made throughout its restructuring. AbitibiBowater has developed a business plan, in consultation with its creditors, stakeholders and financial advisors, which forecasts improved earning margins and cash flow. These improvements will be made possible in part by AbitibiBowater's efforts to focus its manufacturing at highly competitive operations.

The reorganized company plans to manage a more adaptive and flexible operating portfolio, designed to better capture value through market cycles and capitalize on export market opportunities. There is also potential upside, in promising growth markets, from AbitibiBowater innovations in new inkjet product offerings.

Other prospects include current efforts to further diversify the company's product mix by converting capacity towards other market segments. As of May 17, 2010, AbitibiBowater has ceased newsprint production at its Coosa Pines (Alabama) paper mill and entered the packaging papers market with linerboard and corrugated medium as well as natural kraft and bag grades. Another example of a capacity conversion is the recent shift of 100,000 metric tons of newsprint capacity at the AbitibiBowater's Calhoun (Tennessee) mill to specialty grades.

Next Steps

Before emerging from creditor protection, AbitibiBowater must obtain adequate exit financing and complete efforts to address labour costs and pension issues, as well as satisfy other conditions set forth in the plans of reorganization. AbitibiBowater has commenced a process to obtain an exit financing package that will provide sufficient capital for the emerged company to manage business operations and execute its plans. In connection with this exit financing, AbitibiBowater has secured a backstop commitment from certain unsecured noteholders for a rights offering of up to $500 million along with a commitment to support the restructuring process. In this rights offering, AbitibiBowater would offer new convertible notes with a seven-year maturity from the date of closing to eligible unsecured creditors. The notes would be obtained upon exercise of the rights and convertible into common stock of the emerged company. Additional information on this rights offering has been disclosed in the court filings.

Ultimately, AbitibiBowater's plans of reorganization will require creditor approval and confirmation by the courts. Affected unsecured creditors who are entitled to vote will receive the court-approved disclosure and voting materials, which are expected to be mailed in July subject to court approvals. More information about AbitibiBowater's restructuring process can be found at www.abitibibowater.com or by calling toll-free 888 266-9280. International callers should dial 503 597-7698.

AbitibiBowater's Letter to its Employees (.pdf)

AbitibiBowater's Letter to its Stakeholders (.pdf)

Source: AbitibiBowater