ABH (TSX, NYSE) US$
MONTREAL, March 24 /PRNewswire-FirstCall/ -- AbitibiBowater Inc. announced today that it has entered into a definitive agreement with Fairfax Financial Holdings Limited (TSX and NYSE: FFH) for an investment by Fairfax and its designated subsidiaries in AbitibiBowater of US$350 million in the form of unregistered convertible debentures. This transaction, which is part of the Company's previously announced US$1.4 billion refinancing plan, is expected to address upcoming debt maturities and general liquidity needs of its Abitibi-Consolidated Inc. subsidiary. There is no financing condition to the obligations of Fairfax to fund the transaction.
The US$350 million of convertible debentures is convertible into AbitibiBowater common shares at US$10.00 per share, carries an 8% cash coupon, has an ability for the Company to pay interest in the form of additional "pay-in-kind" debentures at a rate of 10%, and has a subsidiary guarantee. The debentures have a maturity of 5 years and are non-callable.
The transaction, which is scheduled to close on March 31, 2008, is subject to certain conditions, including the receipt of various lender consents and the closing of the other components of the Company's US$1.4 billion refinancing plan. Under the Fairfax Purchase Agreement, Fairfax will have the right to appoint two directors to the Board of Directors of the Company.
In connection with the approval of the Fairfax transaction by the Board of Directors of AbitibiBowater, and pursuant to an exception provided by the New York Stock Exchange stockholder approval policy, the Audit Committee of AbitibiBowater determined that a delay in the transaction in order to secure stockholder approval of the issuance of the convertible debentures, given the pending maturities of Abitibi-Consolidated's April 1 and June 20, 2008 senior notes, as well as the current state of the credit and capital markets, could seriously jeopardize the financial viability of AbitibiBowater. Accordingly, AbitibiBowater's Board of Directors and Audit Committee expressly approved the Company's decision not to seek stockholder approval of the issuance of the convertible debentures to Fairfax. The New York Stock Exchange has accepted AbitibiBowater's reliance on the exception and the Company, in reliance upon this exception, is mailing a letter to all stockholders notifying them of its intention to issue the convertible debentures without their prior approval.
For AbitibiBowater, Troutman Sanders LLP acted as legal advisor to the Company and Cravath, Swaine & Moore LLP acted as legal advisor to the Company's independent directors. On behalf of Fairfax, Shearman & Sterling LLP and Torys LLP acted as co-legal advisors.
This press release is neither an offer to purchase nor a solicitation of an offer to sell any securities. The convertible debentures have not been and may not be registered under the Securities 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. Following the required divestiture agreed to with the U.S. Department of Justice, AbitibiBowater will own or operate 27 pulp and paper facilities and 35 wood products facilities located in the United States, Canada, the United Kingdom and South Korea. Marketing its products in more than 90 countries, AbitibiBowater is also among the world's largest recyclers of newspapers and magazines, and has more third-party certified sustainable forest land than any other company in the world. AbitibiBowater's shares trade under the stock symbol ABH on both the New York Stock Exchange and the Toronto Stock Exchange.
About Fairfax Fairfax Financial Holdings Limited is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.
Forward-Looking Statements Statements in this report 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 the Company's anticipated timetable for closing the sale of its convertible debentures to Fairfax and its future plans regarding continued refinancing relating to a previously announced debt exchange offer, a potential senior secured term loan and the possible issuance of senior secured notes by its Abitibi-Consolidated subsidiary. Forward-looking statements may be identified by the use of forward-looking terminology such as the words "will" and "expect" and other terms with similar meaning indicating possible future events or potential impact on the business or other stakeholders of the Company 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 the Company and Abitibi-Consolidated or at all, the condition of the U.S. credit and capital markets generally, worsening industry conditions and the ability to meet the required closing conditions set forth in the convertible debenture purchase agreement, including, but not limited to, approvals by the Company's various lenders and the successful closing of the other components of the Company's US$1.4 billion refinancing. If Abitibi-Consolidated is unable to repay, refinance or restructure its near-term debt maturities on or before their maturities, Abitibi-Consolidated would be in default under the indentures relating to those notes and may be compelled to seek bankruptcy protection under applicable law, which may negatively impact or disrupt the operations of AbitibiBowater and its other principal subsidiary, Bowater Incorporated.
Additional factors are detailed from time to time in the Company's filings with the Securities and Exchange Commission (SEC) and the Canadian securities regulatory authorities, including those factors contained in the Company's Annual Report on Form 10-K, as amended, for year ended December 31, 2007, each under the caption "Risk Factors." All forward-looking statements in this report are expressly qualified by information contained in the Company's filings with the SEC and the Canadian securities regulatory authorities. The Company disclaims any obligation to update or revise any forward-looking information. DATASOURCE: ABITIBIBOWATER INC. - ENGLISH CONTACT: AbitibiBowater Inc.: For Investors: Duane Owens, Vice President and Treasurer, (864) 282-9488; For Media: Seth Kursman, Vice President, Communications and Government Affairs, (514) 394-2398, ; Fairfax Financial Holdings Limited: Greg Taylor, Chief Financial Officer, (416) 367-4941
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