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Restructured AbitibiBowater could emerge from creditor protection in October (July 08, 2010)


July 8, 2010
By Pulp & Paper Canada

AbitibiBowater could emerge from bankruptcy protection in October if creditors vote in August to approve the n…

AbitibiBowater could emerge from bankruptcy protection in October if creditors vote in August to approve the newsprint producer’s restructuring plan, the Canadian Press reports. The Montreal-based company has been under court protection in Canada and the United States since April 2009.
Following the creditor’s meeting in late August, the Quebec Superior Court and the U.S. Bankruptcy Court would meet in early September to endorse the restructuring plan.
According to a Canadian Press article which appeared in the Winnipeg Free Press on July 5, the proposed timetable is expected to be approved on July 9.
The restructuring plan will see AbitibiBowater’s debt decrease from US$6.5 billion to US$1.6 billion as it pays off secured creditors and debtor-in-possession financing. It will also offer up US$500 million in new convertible notes to eligible unsecured creditors.
Unsecured creditors will receive between nothing and 48% when their debt is converted to equity, depending on their class.
The Winnipeg Free Press reports that current shareholders will walk away empty-handed. Others fall somewhere in between, including workers who received no severance when their mills were shut over the past year.
The company has obtained the support of its main bondholders and the unsecured creditors committee in the U.S. The committee’s endorsement is particularly significant because it’s very rare for a U.S. bankruptcy judge to go against a plan approved by such a committee, the story notes.
Chief executive David Paterson has said the company can’t continue to cut its way to offset the continued decline in demand for newsprint.
The reorganized company hopes to capitalize on export market opportunities and promising growth markets for paper used in catalogues, magazine inserts, direct mail, inkjet paper and paper packaging.
AbitibiBowater has streamlined its asset portfolio by closing or idling 3.4 million tonnes of paper capacity since 2007. Newsprint production capacity has been trimmed 36 per cent to 3.6 million tonnes and accounts for 38 per cent of total sales, down from 45 per cent in 2007, according to the Winnipeg Free Press story.

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