Bowater Canada Finance Chapter 11 Case to Be Dismissed
Reorganized newsprint maker AbitibiBowater Inc. filed a motion to dismiss the Chapter 11 case of subsidiary Bowater Canada Finance Corp.
Although affiliates implemented their U.S. and Canadian reorganizations in December, the BCFC affiliate was dropped out because creditors of the subsidiary voted down the plan.
It was agreed at the time with BCFC noteholders that the subsidiary’s U.S. Chapter 11 case would be dismissed, as would the arrangement proceeding in Canada. Since then, BCFC has been assigned into a proceeding under Canada’s Bankruptcy Insolvency Act, in which the creditors’ representative will continue pursuing claims against affiliates.
The BCFC noteholders turned down the Abitibi plan, believing they would have a larger recovery pursing claims through litigation.
BCFC is a so-called unlimited limited liability company under Canadian law. Unlike ordinary corporations, where owners have no liability for company debt, the shareholders of an unlimited limited liability company are liable for all the company debt. In addition to their claims on the notes, the noteholders could a make a separate claim based on BCFC’s status as an unlimited limited liability company.
A bankruptcy judge last month unsealed a September report from BCFC’s special adviser looking into whether BCFC should pursue claims against affiliates and their officers and directors. The adviser concluded that claims shouldn’t be pursued against officers and directors. The adviser also recommended against suit for misuse of proceeds of the BCFC notes.
In a similar case involving a Canadian finance subsidiary of Smurfit-Stone Container Corp., a bankruptcy judge in Delaware ruled this month against the noteholders. That opinion was based on a specific provision in the indenture waiving a possible double recovery. The question of whether noteholders are entitled to a double recovery on account of Canadian law was left undecided in the Smurfit decision. For a discussion of the Smurfit case, click here for the Jan. 11 Bloomberg bankruptcy report.
Abitibi’s plan reduced debt by 88 percent, from $6.8 billion to $850 million. For a summary of the plan, which treated creditors differently at each of the 40 affiliated companies, click here for the Nov. 23 Bloomberg bankruptcy report.
The company was formed in October 2007 by a merger between Montreal-based Abitibi-Consolidated Inc. and Greenville, South Carolina-based Bowater Inc. Abitibi makes newsprint, uncoated mechanical paper and lumber. Bowater also makes newsprint, along with papers, bleached kraft pulp and lumber.
The Montreal-based company began reorganizing with 24 pulp and paper mills plus 30 wood-product plants. Revenue in 2008 was $6.8 billion. In Chapter 11 petitions filed in April 2009, the combined AbitibiBowater companies listed assets of $9.9 billion and debt totaling $8.8 billion as of September 2008.
The case is AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware
