AbitibiBowater announces second phase of comprehensive recapitalization proposal
US$
ABH (NYSE, TSX)
- Net debt to be reduced by $2.4 billion
- Annual interest expense to be reduced by $162 million
- $350 million in new funds to be raised with new debt not maturing until
2014
- Business continuity for employees, trade creditors and customers
- Pre-offer support of approximately 34% of existing note holders
- Implementation of recapitalization expected to occur by early May
2009MONTREAL, March 13 /CNW Telbec/ - AbitibiBowater Inc. ("AbitibiBowater"
or the "Company") announced today a second phase of its comprehensive
recapitalization proposal (the "Recapitalization") with respect to its
Abitibi-Consolidated Inc. subsidiary. The Recapitalization aims to reduce the
Company's debt burden and enhances liquidity.
The Recapitalization of Abitibi-Consolidated will provide a stronger
financial base for the execution of AbitibiBowater's operating strategy and
enhance the long-term value of the Company.
All obligations to trade creditors and to employees, including under the
Company's pension and benefit plans, are unaffected by the Recapitalization
and this transaction will ensure business continuity for them as well as for
customers.
Noteholders holding in excess of approximately $1 billion of outstanding
Abitibi Notes (defined below) (approximately 34% of the total outstanding)
have agreed to vote in favor of the Recapitalization. AbitibiBowater will
solicit additional support for the Recapitalization from other noteholders,
from its secured noteholders and from its lenders.
"This Recapitalization is another important step in AbitibiBowater's
ongoing efforts to deleverage the Company and refinance its current debt
obligations," stated David J. Paterson, President and Chief Executive Officer.
"The transaction offers substantial benefits to AbitibiBowater, increasing its
financial stability while also reducing the Company's annual interest costs
and improving overall liquidity."
AbitibiBowater's Board of Directors has determined that the
Recapitalization is in the Company's best interests and its stakeholders,
given, among other reasons, that it will reduce net debt by approximately $2.4
billion, and significantly improves AbitibiBowater's capital structure.
The Board of Directors relied on many factors in arriving at its
determination, including recommendations by Company Management.
AbitibiBowater's financial advisor, BMO Capital Markets has provided an
opinion to the Board of Directors in connection with the transaction.
"With this comprehensive Recapitalization, AbitibiBowater is
significantly reducing its debt levels and improving its liquidity," said Dick
Evans, Chairman of the Board of Directors. "The Board and management believe
this solution creates a stronger Company in the interest of all stakeholders,
and allows the Company to move forward with confidence to meet the needs of
its customers."The Recapitalization includes the following key elements:
- The conversion of $2.9 billion of eligible unsecured notes issued by
Abitibi-Consolidated (the "Abitibi Notes") into (i) New Notes
consisting of approximately $321 million aggregate principal amount of
12.5% First Lien Notes due March 31, 2014 and approximately
$810 million aggregate principal amount of 11% Second Lien Notes due
June 30, 2014, (ii) approximately 86.7 million shares of AbitibiBowater
Common Stock and (iii) an aggregate of approximately 230.7 million
Warrants (divided among Series A Warrants, Series B Warrants and Series
C Warrants) to purchase one share of AbitibiBowater Common Stock per
warrant at an exercise price equal to, respectively, $1.00, $1.25 and
$1.50 per share.
- A Concurrent Offering of approximately $389 million of First Lien Notes
and 222.2 million Series D Warrants to purchase one share of
AbitibiBowater Common Stock per warrant at $1.25 per share, for an
aggregate purchase price of approximately $350 million. Certain
investors have provided binding commitments to subscribe for
$150 million thereof. AbitibiBowater and Abitibi-Consolidated are in
advanced discussions to secure additional commitments. Qualifying
noteholders may participate in the Concurrent Offering for an aggregate
purchase price of up to $100 million of additional First Lien Notes.
The uncommitted portion of the Concurrent Offering may be backstopped
as permitted by market conditions. There can be no assurance that
AbitibiBowater and Abitibi-Consolidated will enter into any such
additional commitments or backstops.
- The repayment in full of the Company's $413 million 13.75% Secured
Notes due 2011, and any accrued and unpaid interest thereon.
- Interest accrued but not paid as well as a portion of the principal
outstanding under the existing term loan facility due March 30, 2009
will be repaid cash such that the principal amount outstanding will be
reduced to $200 million and the maturity date shall be extended to
March 31, 2012.
- The Commercial Division of the Superior Court of Québec in Montréal
will be asked to grant an interim order under the Canada Business
Corporations Act (CBCA) in connection with the Recapitalization,
including calling meetings of the affected noteholders and lenders.
- The Recapitalization is conditional upon, among other things:
- final Court approval;
- the completion of the sale of the Company's 60 percent interest in
Manicouagan Power Company (for which it announced today its
acceptance of a non-binding proposal from Hydro-Québec which could
result in gross proceeds of C$615 million);
- the completion of the previously announced exchange offers, notes
offering and private placement by AbitibiBowater's subsidiaries,
Bowater Incorporated, Bowater Canada Finance Corporation and Bowater
Finance II LLC.;
- the closing of the Concurrent Offering resulting in gross proceeds of
$350 million;
- the completion of the amendment of the convertible notes of
AbitibiBowater, into $190.0 million of new convertible notes of
AbitibiBowater which shall be convertible for AbitibiBowater's Common
Shares at a price of $1.75 per share.
- If approved, implementation of the Recapitalization is expected to
occur by early May, 2009.
Effect on Affected Noteholders and Lenders
------------------------------------------
If the Recapitalization is completed, affected noteholders and lenders
will be affected as described below.
Abitibi Notes: Noteholders will receive, for each $1,000 principal amount
of Abitibi Notes, the principal amount of New Notes, and numbers of Common
Shares and Warrants as shown in the table below:
-------------------------------------------------------------------------
Principal Principal
Amount Amount
of of
First Second
Lien Lien Common Series A Series B Series C
Eligible notes Notes Notes Shares Warrants Warrants Warrants
-------------------------------------------------------------------------
7.875% Notes
due 2009 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
15.50% Notes
due 2010 $175 $320 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
8.55% Notes
due 2010 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
7.75% Notes
due 2011 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
Floating
Rate Notes
due 2011 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
6.0% Notes
due 2013 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
8.375% Notes
due 2015 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
7.4% Debentures
due 2018 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
7.5% Debentures
due 2028 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
8.5% Debentures
due 2029 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
8.85% Debentures
due 2030 $75 $270 29.422 26.107 26.107 26.107
-------------------------------------------------------------------------
Accrued and unpaid interest up to April 1, 2009 shall be satisfied through
the issuance of First Lien Notes.
In addition, in the Concurrent Offering for each $1,000 principal amount
of Abitibi Notes held on the specified claims measurement date, qualifying
noteholders shall be entitled to (but shall not have the obligation to) submit
$33.95 in cash in consideration for $37.72 of additional First Lien Notes and
21.553 Series D Warrants to purchase one AbitibiBowater Common Share per
warrant at exercise price of $1.25 per share.
Term Loan Facility: Interest accrued but not paid, as well as a portion of
the principal outstanding under the term loan facility due March 30, 2009 will
be paid such that the principal amount outstanding will be reduced to $200
million. The term loan facility will also be replaced to, among other things,
change the interest rate to LIBOR + 600 basis points and the maturity date to
March 31, 2012.
Secured Notes: The Secured Notes, and any accrued and unpaid interest
thereon, shall be repaid in full in cash.
Meetings of Noteholders and Lenders
-----------------------------------
The Commercial Division of the Superior Court of Québec in Montréal will
be asked to call meetings of the holders of Abitibi Notes, holders of Secured
Notes and lenders under the Senior Term Loan Facility respectively to obtain
their approvals for the Recapitalization under the CBCA. Details of the
Recapitalization will be provided in an information circular expected to be
sent to noteholders, secured noteholders and lenders by early April 2009, and
the meetings are expected to be held at the Fairmont Queen Elizabeth Hotel,
900 Rene-Levesque Blvd West Montréal, QC H3B 4A5, Canada on or about April 30,
2009.
Issuance of Common Shares and Warrants and Related Stock Exchange Matters
-------------------------------------------------------------------------
In connection with the Recapitalization, and as detailed above,
AbitibiBowater intends to issue Common Shares and warrants convertible into
Common Shares that would, on a fully-diluted basis, constitute in excess of
90% of the currently outstanding Common Shares. As such, the transaction and
such issuance would normally require approval of the AbitibiBowater
stockholders according to the Shareholder Approval Policy of the New York
Stock Exchange (the "NYSE"). However, in connection with the approval of the
Recapitalization, and pursuant to an exception provided by the NYSE's
Shareholder Approval Policy, the Board of Directors and Audit Committee of
AbitibiBowater determined that the delay in the Recapitalization that would be
caused if AbitibiBowater were to secure stockholder approval prior to the
launch and publication of the Recapitalization, given the pending maturities
of Abitibi-Consolidated's debt instruments, severe constraints on
Abitibi-Consolidated's liquidity, and the current state of the credit and
capital markets, would seriously jeopardize AbitibiBowater's financial
viability. Accordingly, AbitibiBowater's Board of Directors and Audit
Committee, pursuant to an exception provided by the NYSE Shareholder Approval
Policy, expressly approved AbitibiBowater's omission to seek stockholder
approval of the Recapitalization that would otherwise have been required. The
NYSE has accepted AbitibiBowater's application of the exception. In reliance
on the exception and in accordance with NYSE policy, AbitibiBowater is mailing
a letter to all its stockholders notifying them of its intention to issue the
Common Shares and warrants convertible into Common Shares without seeking
their approval. AbitibiBowater also intends to rely on an exemption from the
Toronto Stock Exchange stockholder approval requirements, permitted by Section
602(g) of the TSX Company Manual, by relying on such exception of the NYSE,
AbitibiBowater's principal trading exchange.
Summary of Key Terms
--------------------
A summary of the key terms of the Recapitalization is attached to this
press release.
Further Information
-------------------
Further information about the Recapitalization will be available on the
U.S. Securities and Exchange Commission Website (www.sec.gov) under our
company name and on www.abitibibowater.com.
We expect to supplement information in the circular relating to the
meetings to be held in connection with the Recapitalization and otherwise to
communicate information relating thereto by way of news release, mailing or
otherwise.
Securities Law Matters
----------------------
This press release is neither an offer to purchase nor a solicitation of
an offer to sell any securities. One or more classes of new securities to be
offered as part of the Recapitalization have not been and may not be
registered under the Securities Exchange Act of 1933 and, as such, may not be
offered or sold in the United States absent registration or an applicable
exemption from registration requirements.
About AbitibiBowater
--------------------
AbitibiBowater produces a wide range of newsprint, commercial printing
papers, market pulp and wood products. It is the eighth largest publicly
traded pulp and paper manufacturer in the world. AbitibiBowater owns or
operates 24 pulp and paper facilities and 30 wood products facilities located
in the United States, Canada, the United Kingdom and South Korea. Marketing
its products in more than 90 countries, the Company is also among the world's
largest recyclers of old newspapers and magazines, and has third-party
certified 100% of its managed woodlands to sustainable forest management
standards. AbitibiBowater's shares trade under the stock symbol ABH on both
the New York Stock Exchange and the Toronto Stock Exchange.
Forward-Looking Statements
--------------------------
Statements in this press release that are not reported financial results
or other historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. They include,
for example, statements about AbitibiBowater's refinancing plans, the terms
and expected effects of the Recapitalization, our ability to complete the
Recapitalization and the timeframe for its completion. Forward-looking
statements may be identified by the use of forward-looking terminology such as
the words "expect," "plan," "intend," "may," "will," and other terms with
similar meaning indicating possible future events or potential impact on the
business or other stakeholders of AbitibiBowater and its subsidiaries.
The reader is cautioned not to place undue reliance on these
forward-looking statements, which are not guarantees of future performance.
These statements are based on management's current assumptions, beliefs and
expectations, all of which involve a number of business risks and
uncertainties that could cause actual results to differ materially. These
risks and uncertainties include, but are not limited to, the ability to obtain
additional new financing on terms satisfactory to AbitibiBowater and
Abitibi-Consolidated or at all, the condition of the credit markets generally
and worsening economic and industry conditions and the ability of
AbitibiBowater and Abitibi-Consolidated to secure additional financing
commitments or backstops. Additional factors are detailed from time to time in
AbitibiBowater's and Abitibi-Consolidated's filings with the Securities and
Exchange Commission (SEC), including those factors contained in
AbitibiBowater's Current Report on Form 8-K filed on February 9, 2009. All
forward-looking statements in this news release are expressly qualified by
information contained in AbitibiBowater's and Abitibi-Consolidated's filings
with the SEC. AbitibiBowater disclaims any obligation to update or revise any
forward-looking information except as required by law.
Key Terms of the Recapitalization
---------------------------------
If completed as contemplated, the Recapitalization will result in a number
of significant changes to the capital structure of AbitibiBowater Inc.
("AbitibiBowater") and Abitibi-Consolidated Inc. ("Abitibi-Consolidated") and
its subsidiaries ("Abitibi").
Trade Creditors, Customers and Employees Unaffected
- AbitibiBowater's obligations to trade creditors, customers and
employees (including any pension plan entitlement), will remain
unaffected by the Recapitalization.
Treatment of Existing Unsecured Notes
- The following unsecured notes of Abitibi-Consolidated (the "Abitibi
Notes") will be affected by the Recapitalization:
- 7.875% notes due 2009;
- 15.50% notes due 2010;
- 8.55% notes due 2010;
- 7.75% notes due 2011;
- Floating rate notes due 2011;
- 6.0% notes due 2013;
- 8.375% notes due 2015;
- 7.4% debentures due 2018;
- 7.5% debentures due 2028;
- 8.5% debentures due 2029; and
- 8.85% debentures due 2030;
- Each holder of Abitibi Notes (a "Noteholder" and collectively, the
"Noteholders") will receive, in exchange for the Abitibi Notes, the
following:
i. Such Noteholder's pro rata share of approximately $321 million of
12.5% first lien notes due March 31, 2014 (the "First Lien
Notes"), being $75 in principal amount of the First Lien Notes
for each $1,000 principal amount of Abitibi Notes exchanged and
transferred, except that any Noteholder of 15.50% notes due 2010
(the "July 2010 Notes") will receive an additional $100 in
principal amount of First Lien Notes for each $1,000 principal
amount of July 2010 Notes exchanged and transferred.
ii. Such Noteholder's pro rata share of approximately $810 million of
11% second lien notes due June 30, 2014 (the "Second Lien Notes")
being $270 in principal amount of Second Lien Notes for each
$1,000 principal amount of Abitibi Notes exchanged and
transferred, except that any Noteholder of July 2010 Notes will
receive an additional $50 in principal amount of Second Lien
Notes for each $1,000 principal amount of the July 2010 Notes
exchanged and transferred.
iii. Such Noteholder's pro rata share of approximately 86.7 million
shares of AbitibiBowater Common Stock (the "Common Shares"),
being 29.422 Common Shares for each $1,000 principal amount of
Abitibi Notes exchanged and transferred.
iv. Such Noteholder's pro rata share of a series of warrants to
purchase approximately 76.9 million Warrant Shares at an exercise
price equal to $1.00 per Warrant Share with a term of 18 months
(the "Series A Warrants") being 26.107 Series A Warrants for each
$1,000 principal amount of Abitibi Notes exchanged and
transferred;
- A "Warrant Share" means, prior to the required increase of
AbitibiBowater's authorized Common Shares, a Depositary Share
(as defined below) or, as of and from the date of such increase
of AbitibiBowater's authorized Common Shares, Common Shares,
issuable upon the exercise of the Warrants (as defined below).
v. Such Noteholder's pro rata share of a series of warrants to
purchase approximately 76.9 million Warrant Shares at an exercise
price equal to $1.25 per Warrant Share with a term of 2.5 years
(the "Series B Warrants") being 26.107 Series B Warrants for each
$1,000 principal amount of Abitibi Notes exchanged and
transferred;
vi. Such Noteholder's pro rata share of a series of warrants to
purchase approximately 76.9 million Warrant Shares at an exercise
price equal to $1.50 per Warrant Share with a term of 5 years
(the "Series C Warrants") being 26.107 Series C Warrants for each
$1,000 principal amount of Abitibi Notes exchanged and
transferred;
vii. The ability for Qualifying Noteholders to participate in the
Concurrent Offering, as such term is defined below, in accordance
with its terms and conditions.
- Abitibi-Consolidated will issue First Lien Notes to Noteholders on
account of any accrued and unpaid interest under the Abitibi Notes up
to and including April 1, 2009 on a dollar for dollar basis.
- As part of the Recapitalization, Abitibi-Consolidated will offer
$388.9 million aggregate principal amount of First Lien Notes and
warrants to purchase approximately 222.2 million Warrant Shares at an
exercise price equal to $1.25 per Warrant Share with a term of 5 years
(the "Series D Warrants" and collectively with the Series A Warrants,
Series B Warrants and Series C Warrants, the "Warrants") for an
aggregate purchase price of approximately $350 million (the "Concurrent
Offering"). Qualifying Noteholders will be entitled to participate in
the Concurrent Offering in respect of up to an aggregate purchase price
of approximately $100 million of First Lien Notes. Subject to
proration, for each $1,000 principal amount of Abitibi Notes held on
the claims measurement date, Qualifying Noteholders shall be entitled
to submit $33.95 in cash and shall receive $37.72 of First Lien Notes
and 21.553 Series D Warrants.
- "Qualifying Noteholders" means a Noteholder who, if domiciled in the
United States is a Qualified Institutional Buyer (as determined under
U.S. securities laws) or if domiciled in Canada is an accredited
investor (as determined under Canadian securities laws), or is
otherwise qualified to participate in the Concurrent Offering in
accordance with applicable laws.
Description of the Preferred Shares
- AbitibiBowater will establish a new series of preferred stock (the
"Preferred Shares"). Each Preferred Share will initially represent
(with an appropriate liquidation preference, to the extent required by
Delaware law) the economic and voting equivalent of 1,000 Common
Shares. AbitibiBowater shall arrange for the issuance of depositary
shares in respect of the Preferred Shares (the "Depositary Shares"),
with each Depositary Share representing one one-thousandth of a
Preferred Share. Until there is a sufficient number of authorized
Common Shares, each Warrant will be exerciseable for one Depositary
Share. Once the authorized capital of AbitibiBowater has been increased
to a sufficient number of Common Shares as is required in respect of
the Warrants and New Convertible Notes (as defined below), the Warrants
shall automatically become exercisable for Common Shares and any
outstanding Depositary Shares issued pursuant to previously exercised
Warrants shall automatically be converted, on a one-for-one basis
(except under certain circumstances), for Common Shares.
Description of the New Notes
- The New Notes will be issued by Abitibi-Consolidated or by a successor
corporation to Abitibi-Consolidated formed under the Canada Business
Corporations Act in an aggregate principal amount of approximately
$1,550 million.
- The First Lien Notes and Second Lien Notes will mature on March 31,
2014 and June 30, 2014, respectively. Interest will accrue on the First
Lien Notes and on the Second Lien Notes at the rate of 12.5% per annum
and 11% per annum respectively and be payable semi-annually in arrears
on March 31 and September 30, respectively of each year, starting on
September 30, 2009.
- The New Notes will be guaranteed by AbitibiBowater US Holding LLC, a
subsidiary of AbitibiBowater, Donohue Corp., a subsidiary of
AbitibiBowater US Holding LLC, and by certain other wholly-owned
subsidiaries of Abitibi-Consolidated or AbitibiBowater US Holding LLC
(the "Guarantors").
- The New Notes and the guarantees in respect thereof will be senior
secured obligations of Abitibi-Consolidated and the Guarantors,
respectively.
- Each Guarantor will irrevocably and unconditionally guarantee on a
senior secured basis the performance and punctual payment of all
obligations of Abitibi-Consolidated under the New Notes and the
indenture relating thereto. The First Lien Notes and Second Lien Notes
will respectively have a first and second priority lien on
substantially all of the assets of Abitibi-Consolidated and the
Guarantors other than those assets securing the Amended Term Loan, as
defined below, and will respectively have second and third priority
lien on the collateral securing the Amended Term Loan.
- The Indenture for the New Notes will contain certain covenants relating
to, among other things, restricted payments, asset sales, use of
proceeds from asset sales, dividends and other distributions, issuance
of stock, indebtedness, liens, transactions with affiliates, and
fundamental changes including mergers, consolidation and liquidation.
Support Agreement
- Noteholders holding approximately 34% of the aggregate principal
amount of all Noteholders' claims in respect of the Abitibi Notes (the
"Consenting Noteholders") have each executed a support agreement (the
"Support Agreement") whereby they have agreed to vote in favor of and
support the Recapitalization and the Plan of Arrangement at the
Noteholders' meeting.
- The Support Agreement shall terminate upon the date of the earliest to
occur of the following (i) the failure to file the Plan of Arrangement
with the Court on or before May 31, 2009; (ii) the implementation of
the Plan of Arrangement; (iii) the date on which AbitibiBowater or
Abitibi-Consolidated enter into a written agreement with respect to an
alternative transaction; (iv) written notice from the Consenting
Noteholder to Abitibi, in the event of a breach by AbitibiBowater and
Abitibi-Consolidated of any representation, warranty, covenant or other
material obligation provided for in the Support Agreement or any other
material agreement directly relating to the Recapitalization which
breach is not cured within five (5) days after such Consenting
Noteholders have notified AbitibiBowater and Abitibi-Consolidated of
their intent to terminate the Support Agreement; (v) the date upon
which the Consenting Noteholders' initial commitment agreement
terminates; (vi) the commencement of a voluntary or involuntary case or
proceeding by or against AbitibiBowater and Abitibi-Consolidated and
(vii) June 30, 2009.
Backstop and Firm Commitment Agreements
- Certain current Noteholders have provided binding commitments to
subscribe for an aggregate of $150 million of First Lien Notes as part
of the Concurrent Offering (the "Aggregate Initial Commitments"). In
consideration for their Aggregate Initial Commitments, these investors
will receive consideration equal to $50 of First Lien Notes and 53.895
Series A Warrants, 53.895 Series B Warrants and 53.895 Series C
Warrants for each $1,000 of committed amounts.
- Any Qualifying Noteholder that commits to fund up to a specified amount
of the Concurrent Offering (a "Backstop Party") will receive a backstop
commitment fee in an amount of $50 of First Lien Notes and 53.895
Series A Warrants, 53.895 Series B Warrants and 53.895 Series C
Warrants for each $1,000 committed only in the event the
Recapitalization is completed; provided, however, that Abitibi shall
have no obligation to pay such fee in the event such Backstop Party
fails to fund its pro rata share of the Aggregated Backstop Call Amount
(as defined below) as and when required (unless no amount is called by
Abitibi).
- At least two (2) business days before the final order is issued by the
Québec Superior Court in respect of the Recapitalization transaction,
Abitibi shall provide a written notice (the "Funding Notice") to each
Backstop Party setting forth the following:
i. the aggregate backstop call amount, which amount is equal to
$350 million, less the amount obtained by adding the Aggregate
Initial Commitments to the amount of the Concurrent Offering
subscribed by the Qualifying Noteholders (the "Aggregate Backstop
Call Amount");
ii. such Backstop Party's pro rata share of the Aggregate Backstop
Call Amount; and
iii. instructions to each Backstop Party to wire its pro rata share of
the Aggregate Backstop Call Amount in an escrow account on or
before the Backstop Commitment Call Date, which shall not be
earlier than (two (2) business days following the date of the
Funding Notice (the "Backstop Commitment Call Date").
- No later than the Backstop Commitment Call Date, each Backstop Party
shall execute and deliver an escrow agreement and wire each Backstop
Party's pro rata portion of the Aggregate Backstop Call Amount (plus
any wire transfer fees) to an escrow account.
- In the event the Support Agreement is terminated in accordance with its
terms, the Backstop Agreements shall become void and there will be no
liability on the part of any party to any Backstop Agreement and its
respective partners, officers, directors or stockholders, subject to
certain exceptions.
- In the event that a Backstop Party defaults on its obligation to fund
it's pro rata share of the Aggregate Backstop Call Amount, Abitibi
shall have the right to offer such Backstop Party's commitment position
to other parties subject to certain conditions.
Treatment of Secured Noteholders
- The full outstanding principal amount then due in respect of the 13.75%
secured notes due 2011 (the "Secured Notes"), together with accrued and
unpaid interest thereunder up to and including the Closing Date, will
be paid in cash, in full and final settlement of the Secured Notes.
Treatment of Lenders
- Interest accrued but not paid as well as a portion of the principal
outstanding under the term loan facility due March 30, 2009 (the "Term
Loan Facility") will be paid such that the principal amount outstanding
will be reduced to $200 million. The Term Loan Facility will also be
replaced to, among other things, change the interest rate to LIBOR +
600 basis points and the maturity date to March 31, 2012 (the "Amended
Term Loan").
- The security currently securing the obligations under the Term Loan
Facility and the guarantees granted in respect thereof will remain
unchanged and will secure and guarantee the obligations under the
Amended Term Loan.
Conditions to the Recapitalization
- The Recapitalization is subject to customary closing conditions, and
the following additional conditions, among others:
i. the Recapitalization must be approved by the Noteholders, the
secured noteholders and the lenders;
ii. the Superior Court of Québec in Montréal shall have granted the
final order;
iii. no Material Adverse Effect shall have occurred since the
effective date of the Support Agreements. "Material Adverse
Effect" means a material adverse change in the business
operations of Abitibi and Donohue Corp. and its subsidiaries
(taken as a whole) or the financial condition of the Company on a
consolidated basis or of Abitibi and Donohue Corp. and its
subsidiaries (taken as a whole) subject to certain exceptions;
iv. all required material approvals, material consents and material
waivers of third parties to the consummation of the
Recapitalization shall have been obtained;
v. the completion of the sale of the 60 percent interest in
Manicouagan Power Company resulting in gross proceeds of
$615,000,000 Canadian dollars;
vi. completion of the previously announced exchange offers, note
offering and private placement of AbitibiBowater's subsidiaries,
Bowater Incorporated, Bowater Canada Finance Corporation and
Bowater Finance II LLC;
vii. the closing of the Concurrent Offering resulting in gross
proceeds of $350 million; and
viii. the completion of the amendment of the convertible notes of
AbitibiBowater, into $190.0 million of new convertible notes of
AbitibiBowater which shall be convertible for AbitibiBowater's
Common Shares at a price of $1.75 per share and which shall
mature on September 30, 2014 (the "New Convertible Notes").
