AbitibiBowater Files Amended Plans of Reorganization and Disclosure Documents

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AbitibiBowater Inc., Montreal, Que., Canada, this week announced that the company and 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 its plans of reorganization as well as related disclosure documents. These amendments will also be filed with the Quebec Superior Court in Canada. The unsecured creditors committee supports these plans, the company notes, adding that, with these developments, it is aiming to emerge from creditor protection in the fall of 2010.

The filings provide greater specificity regarding recoveries by unsecured creditors, while maintaining the classifications for all company 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 the company'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.

Since the combination of Abitibi-Consolidated Inc. and Bowater Inc. in 2007 and throughout AbitibiBowater's creditor protection proceedings, the company says it has undertaken sustained and significant actions to restructure and improve long-term profitability. Strategic actions to enhance the company's value include: significant closures of non-profitable capacity; the monetization of non-core assets; and various austerity measures and spending cuts, including a significant reduction in the company's workforce.

AbitibiBowater adds that it 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, the company has also sold aggregate assets and land for total proceeds of more than $940 million. Chief among these transactions was the sale of the company's 60% ownership interest in Manicouagan Power Co. (MPCo) for C$615 million. The MPCo transaction allowed for the repayment of one of the company's initial debtor-in-possession (DIP) financing arrangements and the partial repayment of other secured debt.

AbitibiBowater explains that it plans to emerge with a strengthened financial position by building upon the meaningful headway it has made throughout its restructuring. The company 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 company 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 company 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, the company has ceased newsprint production at its Coosa Pines, Ala. USA, 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 company's Calhoun, Tenn., USA, mill to specialty grades.

Before emerging from creditor protection, the company must obtain adequate exit financing and complete efforts to address labor costs and pension issues, as well as satisfy other conditions set forth in the plans of reorganization. In this regard, AbitibiBowater says it 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. Ultimately, the company'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.