AbitibiBowater Resolves Objections to Restructuring
November 18, 2010, 5:58 PM EST
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By Michael Bathon
(Updates with noteholders’ claim in sixth paragraph.)
Nov. 18 (Bloomberg) -- AbitibiBowater Inc. resolved most of the remaining objections to its restructuring plan, paving the way for the company to exit bankruptcy by shedding about $7.2 billion in debt, lawyers said.
AbitibiBowater reached an agreement with Aurelius Capital Management LP and Contrarian Capital Management LLC, noteholders of its Bowater Canada Finance Corp. unit, Kelley Cornish, an attorney for AbitibiBowater, told U.S. Bankruptcy Judge Kevin J. Carey today on a hearing conducted by phone in Wilmington, Delaware.
“We have been successful in resolving confirmation objections,” except for issues regarding a $387 million claim made by Fairfax Financial Holdings Ltd., Cornish said. The noteholders argue that the claim stems from a fraudulent transfer and shouldn’t be allowed.
AbitibiBowater, the world’s biggest newsprint maker by capacity, sought bankruptcy protection in April 2009 after U.S. lenders refused to accept a proposed debt restructuring. In court documents, the Montreal-based papermaker listed $7 billion in assets and $9.5 billion in debt as of March 31. Sales were $4.4 billion in 2009.
AbitibiBowater, Aurelius and Contrarian agreed that if the company wins approval of its reorganization plan at a Nov. 23 hearing, stock worth $743.6 million will be reserved to resolve both of the noteholders’ disputed claims, according to court papers.
Bowater Claim
The noteholders say they have a claim of about $620 million against the company’s Bowater Inc. unit for guaranteeing the 7.95 percent Bowater Canada notes. Bowater Canada, or BCFC, also has a claim against Bowater for about the same amount under Nova Scotia law, according to the noteholders, who seek recoveries under the claim.
AbitibiBowater will escrow $2 million to put BCFC into insolvency in Canada and wind it down. Court reorganizations for the unit in the U.S. and Canada will be dismissed.
AbitibiBowater has 22 pulp and paper mills and 26 wood- products plants in the U.S., Canada, the U.K. and South Korea. The company was formed in October 2007 by the merger of Abitibi- Consolidated Inc. and Bowater Inc. in a stock transaction valued at about $4.8 billion.
Fairfax bought $350 million in convertible notes issued by AbitibiBowater, and guaranteed by Bowater, in April 2008. Proceeds from the notes were used to stabilize the Abitibi side of the company, which was “teetering on bankruptcy” following the merger, court papers show.
The noteholders argue in court papers that the transaction was fraudulent because “Bowater did not receive any direct consideration in exchange for guaranteeing the Fairfax bonds, and there is compelling evidence that Bowater was insolvent.”
AbitibiBowater defended the guarantee, saying it preserved cost savings and other benefits of merging the companies. Allowing the Abitibi side to file for bankruptcy would have cost Bowater about $200 million a year, the company said in court papers.
The case is In re AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
--Editors: Stephen Farr, Michael Hytha.
To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.
