AbitibiBowater begins private exchange offers, consent solicitation for $1.8 billion Bowater notes

By Angela McDaniels

Tacoma, Wash., Feb. 9 - AbitibiBowater Inc. has begun private offers to exchange some outstanding series of unsecured notes issued by its Bowater Inc. subsidiary for new notes in a private placement, according to a company news release.

The notes eligible for exchange are Bowater's 9% debentures due 2009, floating-rate senior notes due 2010, 9½% debentures due 2012, 6½% notes due 2013 and 9 3/8% debentures due 2021 as well as Bowater Canada Finance Corp.'s 7.95% notes due 2011.

The company is also soliciting consents to amend the indentures governing the existing notes to eliminate the covenants relating to liens, secured debt and sale/leaseback transactions.

The exchange offers and consent solicitation will expire at 11:59 p.m. ET on March 9.

Holders of the 9% debentures who participate in the exchange offer will receive 10% second-lien notes due Jan. 31, 2012, and holders of the remaining existing notes will receive 10½% third-lien notes due March 31, 2012.

For each $1,000 principal amount of notes tendered and accepted, the company will issue $750 of exchange notes for the 9% debentures, $650 of exchange notes for the floating-rate notes, $550 of exchange notes for the 9½% debentures, $525 of exchange notes for the 6½% notes, $500 of exchange notes for the 9 3/8% debentures and $600 of exchange notes for the 7.95% notes.

The new notes will be issued by Bowater Finance II LLC and guaranteed by AbitibiBowater, Bowater, Bowater Newsprint South LLC and by some other subsidiaries of Bowater and Newsprint South.

Private notes offering

Holders of existing notes who tender some or all of their notes in the exchange offers may also subscribe for a portion of Bowater Finance's new 15½% first-lien notes due Nov. 15, 2011 in a concurrent notes offering.

In addition to the 15½% first-lien notes, holders who subscribe will receive an additional $50 principal amount of exchange notes and a subscription fee payable in an additional principal amount of 15½% first-lien notes.

The maximum total subscription amount for 15½% first-lien notes that will be accepted is $211.2 million.

Separately, Bowater Finance has entered into a note purchase agreement with a private institutional investor under which the investor has agreed to purchase $80 million principal amount of the 15½% first-lien notes at par in a private placement.

Net cash proceeds from the concurrent notes offering and the additional private placement will be used to repay amounts outstanding under Bowater's bank credit facilities.

The exchange offers are conditioned on the receipt of more than 97% in total principal amount of 9% debentures and floating-rate notes and greater than 50% in total principal amount of the remaining existing notes. This condition may be waived by Bowater Finance under some circumstances.

The exchange offers are being made only to qualified institutional buyers inside the United States and to some non-U.S. investors located outside the United States.

AbitibiBowater is a Montreal-based pulp and paper manufacturer.

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