AbitibiBowater (ABWTQ) Wins Final OK on Receivables Financing Deal
By Peg Brickley of DOW JONES DAILY BANKRUPTCY REVIEW
June 11, 2009
WILMINGTON, Del. (DOW JONES) -- Abitibibowater Inc. (ABWTQ) Thursday won court approval of a $270 million accounts receivable securitization arrangement after agreeing to pay continued interest and professional fees to secured term lenders.
Judge Kevin Carey signed off on the accounts receivable arrangement at a hearing in U.S. Bankruptcy Court in Wilmington, Del.
The deal from a syndicate led by Citigroup Inc. (C) allows AbitibiBowater to speed and smooth its cash flow as it continues operation under the protection of courts in Canada and the U.S.
It's the third piece of the financing that the world's largest producer of newsprint needs to keep its plants running. Carey last week granted final approval to a #206 million Chapter 11 loan, while Canadian courts approved a $100 million loan.
The new accounts receivable arrangement replaces an existing deal from Citigroup that has allowed AbitibiBowater to stay on its feet financially after its May 18 bankruptcy filing. The existing deal terminates Monday.
Term lenders who are owed $347 million had objected to the deal, demanding "adequate protection" payments, including continuing interest on their loans.
Under U.S. law, adequate protection payments are warranted when troubled companies use property that is considered collateral for their secured loans. In this case, lenders say the accounts and the cash are considered collateral.
Term lenders threatened to block the replacement arrangement for accounts receivable unless the company agreed to keep paying them interest.
Company attorney Kelley Cornish said AbitibiBowater agreed to make "modified" adequate protection payments in order to make sure the deal won approval. That includes footing the bill for professionals to look out for the term lenders in the cross-border insolvency proceeding.
AbitibiBowater, based in Montreal, south protection from creditors in an effort to deal with two lines of debt that are the heritage of the 2007 combination that created the company. One series of loans is linked to the Bowater companies; the other is linked to the Abitibi group.
(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)
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