AbitibiBowater Inc., the world’s biggest newsprint maker by capacity, won court approval of a restructuring plan that sheds about $7.2 billion in unsecured debt, after a bankruptcy judge overruled objections to the plan.
U.S. Bankruptcy Judge Kevin J. Carey, in a 28-page opinion filed today in Wilmington, Delaware, said he will approve the company’s reorganization plan after finding AbitibiBowater properly allowed a $387 million claim by Fairfax Financial Holdings Ltd. Some noteholders objected to that claim, calling it a fraudulent transfer.
“Allowance of the Fairfax guaranty claim under the plan is fair and reasonable,” and the objections to it “will be overruled,” Carey said in the opinion. Other objections, including some from shareholders and retirees, also failed to sway the judge. The company reached an agreement last week that resolved most of the noteholders’ objections.
Under AbitibiBowater’s restructuring plan, about $7.2 billion in unsecured creditors claims will be converted into the reorganized company’s stock, according to court documents.
“Once we meet the remaining closing conditions, we will emerge with a business foundation that fundamentally repositions AbitibiBowater,” Chief Executive Officer David J. Paterson said today in a statement.” The company will exit court protection in December, according to the statement.
The unsecured creditors of AbitibiBowater and its 34 units will see recoveries ranging from nothing to full payment, according to projections in the plan. Unsecured creditors of Bowater Inc., the largest group, are owed about $2.6 billion and are expected to recoup about 48 cents on the dollar. The company canceled a $500 million notes offering that the unsecured creditors would have been allowed to participate in as part of the plan.
The company’s secured lenders will get a full recovery in either cash or another arrangement that pays them in full, according to the restructuring plan. The company’s existing shareholders will be wiped out under the proposal.
AbitibiBowater received Carey’s approval in August to borrow $1.35 billion to help fund its exit from bankruptcy. Units of JPMorgan Chase & Co., Barclays Plc and Citigroup Inc. are the agents for a $600 million asset-based loan and each will contribute $100 million, court papers show.
The company raised $850 million through a notes offering that closed in October, according to a company statement. AbitibiBowater was only originally planning on obtaining $750 million from the notes sale.
The Montreal-based paper maker will use the proceeds from the loans and notes to make payments under the reorganization plan and to help fund its business operations after emerging from bankruptcy, according to court documents.
Steven Zelin, a senior managing director at Blackstone Group LP and AbitibiBowater’s financial adviser, said the reorganized company will have a total enterprise value of $3.5 billion to $3.85 billion with equity worth about $2.4 billion.
AbitibiBowater sought bankruptcy protection on April 16, 2009, after U.S. lenders refused to accept a proposed debt restructuring. The company listed $7 billion in assets and $9.5 billion in debt as of March 31, according to court documents. The paper-maker had sales of $4.4 billion in 2009.
AbitibiBowater has 19 pulp and paper mills and 24 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.
The case is In re AbitibiBowater Inc., 09-11296, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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