AbitibiBowater Restructuring Sends Ripples Through The Industry
By Pulp & Paper Canada
By Pulp & Paper Canada
MONTREAL — AbitibiBowater moved quickly to secure financing and terminate prior agreements in the days following its April filing for creditor protection. The newsprint maker plans to use this proces…
MONTREAL — AbitibiBowater moved quickly to secure financing and terminate prior agreements in the days following its April filing for creditor protection. The newsprint maker plans to use this process to “deal decisively” with its debt burden.
The company has a tremendous footprint in Canada: it employs 10,000, has 14 pulp and paper mills, and operates 28 forest products plants.
AbitibiBowater announced that debtor- in-possession (DIP) financing and continuation of existing receivables securitization programs will allow it to meet its current operating needs and continue day-to-day functioning during restructuring.
A financing arrangement has been made with Fairfax Financial Holdings Limited and Avenue Management LLC, plus the Quebec court has authorized Abitibi to enter into a loan agreement with Bank of Montreal for debtor-in-possession financing which will be guaranteed by Investissement Quebec. The Abitibi Quebec agreement will provide up to $100 million.
Pensions immediately came up for discussion as part of the restructuring plan. The Quebec Superior Court gave approval for AbitibiBowater to suspend pension payments towards its unfunded liabilities for workers, but ruled that the company must abide by its collective labour agreement and apply changes to its pension program that were to take effect on May 1.
Prior to seeking bankruptcy protection, AbitibiBowater unilaterally rescinded pension benefit improvements that had been negotiated in an earlier collective agreement and were to take effect on May 1. According to the Globe and Mail, lawyers for Abitibi told the court the company could not cover the cost of about $68 million to pension fund payouts to allow for early retirement at 57 instead of 58 for some workers.
Highlighting Abitibi’s reach in Quebec, the judge overseeing the company’s restructuring had to excuse himself from this pension motion because his father is among the company’s pensioners.
SFK Pulp felt the effects of Abitibi- Bowater’s restructuring immediately, as the insolvent company terminated fibre and bark supply agreements for SFK’s mill in St. Flicien, Que. Under these agreements, Abitibi supplied about 80% of the fibre requirements of that mill.
“We intend to continue our discussions with Abitibi to establish a fair price for black spruce and jack pine wood chips. During ongoing negotiations between the parties, Abitibi offered a minimum of 500,000 metric tonnes/year of wood chips and an adequate volume of bark to SFK Pulp. We are also firming up our business opportunities with other wood chip suppliers that are not already under contract with Abitibi,” reports Pierre Gabriel Ct, president and CEO of SFK Pulp.
AbitibiBowater produces a wide range of newsprint, commercial printing papers, market pulp, and wood products.