"AbitibiBowater files for bankruptcy protection
By Christopher Mason in Ottawa
Published: April 16 2009 19:56 | Last updated: April 16 2009 19:56
AbitibiBowater on Thursday filed for bankruptcy protection after the world’s largest newsprint producer failed to obtain an agreement with lenders to restructure its $6bn debt.
The Canadian company had spent weeks seeking a way to reduce some $2.4bn of that debt, much of which was incurred when Abitibi Consolidated and Bowater merged in 2007.
After several missed restructuring deadlines, the company said it saw no viable alternative to bankruptcy in the US, and also Canada, where it will file for creditor protection on Friday.
In filing a Chapter 11 petition, AbitibiBowater listed assets of $9.9bn and disclosed that its 35 largest unsecured creditors are owed about $2.7bn.
Of that total, Bank of New York Mellon Global Corporate Trust is owed almost $2bn.
“[Thursday’s] announced decisions ensure business continuity for AbitibiBowater and were made only after all other viable options to recapitalise our long-term debt were exhausted,” said David Paterson, chief executive.
The company also announced a financing agreement with Fairfax Financial Holdings and Avenue Management for debtor-in-possession lending totalling about $200m for certain Bowater subsidiaries.
Abitibi’s debt handcuffed its ability to manage a long-term decline in demand for newsprint and a more recent decline in newsprint prices.
The global downturn and decline of newspaper consumption as readers move online have hit newsprint demand, exacerbated by newspaper prices that until last autumn were at record highs.
The company’s restructuring hopes hinged on its attempt to exchange Bowater debt maturing in 2009 and 2010 for notes maturing in 2012.
But the company failed to secure the backing of the two-thirds of lenders required before plans to restructure the Abitibi wing’s debt could get under way.
Meanwhile, several US banks, whose loans to AbitibiBowater are secure, held out for better terms during restructuring negotiations.
The company said its day-to-day operations would continue during the restructuring process."