AbitibiBowater on the verge of bankruptcy

Archiv – North American news print producer AbitibiBowater, is struggling to restructure its debt and avert bankruptcy. The company faces a Friday deadline to reach an agreement with its bondholders. If it fails to do so, it may be forced to file for bankruptcy protection, according to people briefed on the matter. In their last statement, th company said it had secured US$ 100 million from an unnamed investor. US / Canada | North American news print producer AbitibiBowater, is struggling to restructure its debt and avert bankruptcy. The company faces a Friday deadline to reach an agreement with its bondholders. If it fails to do so, it may be forced to file for bankruptcy protection, according to people briefed on the matter. In their last statement, th company said it had secured US$ 100 million from an unnamed investor.
Last year, newsprint consumption tumbled 14%, and 16% among daily newspapers, Paul Quinn, an analyst at RBC Capital Markets, wrote in a research note this week. He called the drop-off ’staggering.’
In AbitibiBowater’s case, that plunge in demand has also left the company struggling to shoulder its substantial debt burden. Much of that debt was assumed when the company was created through the 2007 merger of Abitibi-Consolidated of Montreal and Bowater of Greenville, South Carolina.
Last month, the US – Canadian company began two bond-exchange offers in an effort to trim its debt by about $2.4 billion. Under the terms of the offers ‘€’ a complicated endeavor given the company’€™s debt structure ‘€’ existing holders of nearly $250 million in AbitibiBowater bonds that mature later this year would invest additional capital to gain new, secured debt in the company.
The deadlines for those offers have already been extended twice. Several investors in the company, including Steelhead Partners, have agreed to provide hundreds of millions of dollars to help the restructuring efforts, a person with knowledge of the matter said. But the exchange offer is being held up by some bondholders, including Citigroup, people briefed on the negotiations said. Together, these bondholders hold about $40 million of the bonds due in 2009.
The investment of Citigroup, which had hedged its bond exposure by taking out credit-default swaps, would be protected even if AbitibiBowater were forced to file for bankruptcy. But Citigroup took out the swaps as a hedge only because its participation in the exchange offer was initially rebuffed. It would be willing to participate as long as those contracts were paid off as well, a person close to the firm said.