AbitibiBowater Inc. files for bankruptcy protection

The V.P. of communications for AbitibiBowater Inc. explains why debt-strapped newsprint giant has filed for bankruptcy protection from creditors in Canada and the United States.

CTV Montreal: BNN's Paul Bagnell explains the fallout from the bankruptcy protection

Todd van der Heyden speaks with Paul Bagnell from the Business News Network about the fallout of this.

Watch: See all Videos in the Player

A A | Email This Email | Print | Comments (41) Tweet

CTV.ca News Staff

Date: Thu. Apr. 16 2009 5:26 PM ET

Under the weight of crushing debt and shrinking demand, newsprint giant AbitibiBowater filed for bankruptcy protection on Thursday.

Some Canadian and U.S. subsidiaries have also filed for protection, the company announced in a news release posted on its website.

The statement said the company's board of directors felt it had run out of options and the best course of action was to pursue restructuring.

"We believe that by restructuring AbitibiBowater the company will be in a stronger position for the future," Seth Kursman, of AbitibiBowater, told CTV Newsnet.

That restructuring will happen under Chapter 11 laws in the U.S. and under the Companies' Creditors' Arrangement Act in Canada.

The business will continue its day-to-day operations during the restructuring process that follows bankruptcy protection.

"This doesn't mean the company is going out of business," Kursman said. "The day to day operations of our facilities will continue. Processing of wages, salaries, benefits, that will also continue in the ordinary course."

The decision was made after extensive consultations, and was determined to be in the best long-term interests of the company, he said.

"We have been working for quite a number of months on exchange offers and refinancing plans and recapitalization efforts and unfortunately in the end it didn't work, and we arrived at the situation we're in today," Kursman said.

The statement from the company confirmed bankruptcy protection was a last resort.

"Today's announced decisions ensure business continuity for AbitibiBowater and were made only after all other viable options to recapitalize our long-term debt were exhausted," David Paterson, president and chief executive of the company, said in the statement.

"The steps we are taking today and the vote of confidence given to us by our restructuring financial partners will enable us to protect the value of the business for our many loyal employees, customers, suppliers and other stakeholders."

AbitibiBowater holds a 40 per cent share of the newsprint market, but has struggled with falling demand for newsprint as the newspaper industry contracts, and as more publications go web-based.

Earlier in April, the company announced its subsidiary Abitibi-Consolidated had been granted a waiver from creditors after it failed to meet the requirements of a $210-million loan.

That waiver from Citibank and Eureka Securitisation extended the date of the loan to Sept. 1.

On Thursday, following news of the bankruptcy protection move, reports indicated that 800 former AbitibiBowater workers at the Grand Falls-Windsor plant in Newfoundland would not be receiving the first of two severance payments as previously expected.

The company is supposed to pay $27 million in severance.

A company spokesperson was cited as saying pension payments weren't affected.

Shawn Skinner, Newfoundland's Innovation, Trade and Rural Development Minister, said on Thursday that while the province thinks the company should pay severance, they're not going to step in at this stage.

"The government very strongly feels that the severance owed to the employees should be paid," said Skinner told NTV News. "We will be making sure they understand our position."

He added while he's willing to meet with employees from AbitibiBowater, he doesn't have much to tell them.

"My hesitation is that I don't have a lot of answers. This is not something that I'm in control of."

Not all of their mills will be affected by this action. One mill in Queen's County, N.S., is partly owned by the Washington Post and is not covered by the bankruptcy.

But Courtney Wentzel, president of the local chapter of the Energy and Paperworkers Union of Canada, thinks there's still a lot of uncertainty over the future of the workers at that plant.

"It was a bit of a relief to know we're not under bankruptcy," Wentzell told CTV Atlantic. "But step back and look at it, there's still a lot of questions."

That plant is set to open on April 20 after a five-week shutdown.

With reports from NTV News and CTV Atlantic

Comments are now closed for this story

GG
said

The truly awful thing about this mess...isnt the financial problems of newspapers...they were slow to the mark....but where will we be getting the news from ? This is the domain of reporters who need to be paid. They were paid by newspapers through advertising. There is a major risk assoicated with no good independent reporting/news. If people think its wonderful to get free news off the internet ..they are being fooled. The internet just loads up the news from existing news outlets and provides it. Where will this original news come from in the future if nobody is willing to pay the reporters ? There will be a time gap before the new restructuring of our news/information gets addressed. Advertisers will flock to where people's eyes will be following in mass numbers. With the plethora of web sites the internet is too diverse to acquire mass audiences like the newspapers, in any few places, to attract advertising dollars that would pay for the news reporting. Interesting to see how this plays out. Where I see the missed opportunity is, for the newspapers to put out good online webpapers before the move towards the web. Perhaps these news vehicles can reduce newspaper overhead costs and thereby pay the reporters. This dosnt help the timber industry. The world is going more paperless. The economy and skills and jobs need to evolve accordingly

Ray in AB
said

If i were a news company, in the business of printing instead of internet.. I would be so wooried right now, Its obvious that most of us read news on the internet, its up to date, by the hour and its free.... freeeeeeeeee... I know eventually this industry will fail both internet and print.. simply because no one can pay reporters for free. so once there alternate source of income dries up... say good buy. there is hardly any advertising on the news pages on the internet, and what there is, i doubt pays for all the reporters.. in the next year or two, u will be reuired to buy a membership.. its the future. personally.. I prefer paper on a sunny sat morning on the deck drinking coffee.. but those stress free mornings are sure to be gone..

Greg - Oshawa
said

We as a society need to start to understand that bigger isn't always better! Far too many companies have increased their profits by buying other companies instead of actually "growing" the business!

Mykey, The Lakehead
said

My working career started with Abitibi at Thunder Bay Provincial. I'll always be grateful.

LC
said

Not likleythat you'd see any of the 145M in money from the new grants -- that will be reserved for any buddies of Harper/Clement. It's certainly not the workers that decide what cars to build - that demand usually comes from consumers. Perhaps if we were not working so many hours we'd have time to read the paper too.

LC
said

well i still think we are living on the moon - is anyone CEO really worth more than $75,000-100,000 per year? Do they deserve millions of dollars when they lose their jobs. It would be interesting to survey the employment of some of those people. My husband has worked for Chrysler for 25+ years and we must be doing something wrong cause it's not us with the Hummer or standing in line at the resorts. Maybe if he was actually making the $70.00 per hour that the media reports. Last time i checked it was $33.00/hour same as my niece at Toyota.

Miranda
said

Now, if the head of a certain other union that's been in the news ad nauseam lately were running things here, this would be a totally different, drawn-out story.

Golden
said

Retired Soldier,

You are way off base on this one. The demise of paper has nothing to do with replanting. The inter office memo (Paper) has been replace by email. The internet has replaced newspaper. The high grade paper that once was only produced in the west is now produced in China a lot cheaper from timber transported from Russia. Management was betting on growth in the 90's that did not occur and actually shrunk from factors that were new and not taken into acount. Management made a mistake.

John Wilson

Bridgetown NS

Steve in Fredericton
said

I've just returned from a prolonged vacation on the moon. This global recession you speak of, is it taking place on this earth or some other planet?

I can't help but notice more people driving high-end euro-luxury land yahts dragging fibreglass enclosed trailers carrying over-sized ATV and snow machines. These are the same people I see at the airport as they return from a well-deserved Carribean vacation sporting full-body sun tans they didn't get out of a bottle. Maybe thay are all out of work auto manufacturers or perhaps corporate execs (roughly equal salaries).

BTW, I've got an idea for a zero-emmission, two-wheeled, pedel-powered alternative for carbon-based fuel sucking cars. Think I can get in on that $145M in R&D grants?

Billy in Vancouver
said

Some newspapers still serve a purpose in one way or another.
CTV.ca and the two free dailys are sufficient for some people's access to the news.
No matter how you look at it, what's happening with the economy affects everyone.

Tony
said

There's no doubt that online articles are powerful and is the "Media is the message" of the current generation. If the online readers pull back, they'll see how a newspaper can pack so much credible information. The Newspaper Industry, though, must reach out to their waning readership. Incentives anyone?

Lose the mills and we lose a lot in advertising.

Lose the mills and we'll pay greatly from imports down south.

Going Green is a nice mantra but it also includes a sustainability program. Our computers still contribute to e-waste.

LC
said

More jobs gone...more people left without pensions...more people to file for EI benefits...more management that has screwed up and no doubt don't have to worry about THEIR next meal. Harper/Clement/McGuinty - doing a fine job!! Just wait to see what the fall of the auto industry brings. Lots of comments to "Let them fail" but really the workers themselves and the economy will suffer. Taxpayers will pay for all the EI benefits and social assistance needed. Will any of the CEO's and management folks be looking for future work, not likely -- I'd take half of Rick Wagners pension.What a farce! This recession is corporate greed at it's best. Too many bigwigs with bad decisions and big paycheque. FIAT's CEO earns over 4 million. Think of the money they'd save there with a 15-20% paycut. All a ploy to make the rich richer. Stephen Harper is not starving.

NWO Resident
said

Pinger,

I agree with most of our comments except for forest mismanagement. Tree planting is required by the Canadian government and it is followed through. I should know, I moose hunt in the areas and did a brief stint as a tree planter. The trees are planted and a herbicide is applied a few years later. It's standard procedure.

Pinger
said

The majority of the comments are bang on. The company tried to establish a mini-monopoly but failed to recognize that the combination of: increased Internet users/readers, decreased demand, high interest rates, declining profits, non-profitable plants, antiquated equipment and the sub-mergence (shrinkage) of India, Brazil and China back to small market economies spelled the end. How many years ago did LIFE magazine fold? Was that a foreboding of what was to come? How many two newspaper cities are left? Not many. Was that a predicter? Couple this with the fact that we treat our renewable resources like an outhouse and it's not hard to see the rationale for the death noll. Renewable resource means you might have to put a few bucks out to plant seedlings. (like they do in Europe) They simply didn't do that. They abused the land, misled the gov't inspectors and failed to re-establish the forestry base for future pulp mill operations. Quite simply, they ate the chicken laying the eggs. The Board of Directors of this company should be ashamed of their performance as they let down the employees, the shareholders and Canada.

Andy Y - Vancouver
said

@Prof. Pye Chartt

Haha, good one!

This whole interweb apparently has been widely available since the mid 1990's!!!

Who knew?

As for the auto industry, GM had some silly electric car they were peddling in California a while back, but they quickly ditched that nonsense for the SUV and Hummer, which everyone knows demand will never end for those beasts...

Doug BC
said

It's all about debt and spending beyond our means for so many decades.It started with government spending,then business and consumers got on the same bandwagon.By the time the world figured out that big debt meant big trouble,we were all in a mess.And now we are finally realizing how long it takes,and how hard it is to pay off accumulated debt.
Since we made lots of money in the past,we were insulated from a lot of the negatives about carrying debt and borrowing from the next generation of Canadian taxpayers.Now,as we try to reduce debt,our thrift is a threat to economic recovery.
This is a treadmill.What we have to do,is ensure that we have a real solution as we go forward.NOT another Mickey Mouse patch up that would make a repeat of this fiasco all but a certainty.
It will take a general concensus among ALL of our politicians,that whoever sits in office,there MUST be constraints on what any of them can spend to bribe voters,and some kind of a commitment to continue reducing the national debt,and lowering taxes so our industries can compete.
I would say though,that if "Roger T" can't hear Harper,he must be deaf.On this issue,Harper has been very consistant for a very long time.We can debate whether or not he has the right plan,but his position was made very clear even before he was elected.
We have some tough times ahead.Many more dominos are going to fall before this is even close to being over.
Newspapers,radio and TV stations,shopping malls and retail stores,recycling facilities.Etc,etc,etc.

Kim in Ottawa Ontario
said

This is completely predictable. Newspaper giants are falling and the industry is failing at a rapid pace. This has set off a chain reaction to suppliers of the industry.

Daniel
said

Some people have it right on. Investing is all about seeing the future. (Doesn't always work.) The demand for newsprint isn't just because of the recession, but it�s about innovation. People are reading of the internet. I once had the Globe and Mail, and the National Post delivered to my house. Those days are gone. Also, companies are developing electronic books; a flexible screen where one would just insert a memory card to read the pages of a book. Do you realize the cost savings in printing? Think about schools and text books. It would make life so much simpler. If I were in the forestry industry I would consider retraining, but think how good it would be for the environment saving all those trees.

Jasper
said

Demand for printed media like newspapers and magazines has been declining since as people are going to the internet for this information.

As to "Red X" comments about "high" interest rates...
The prime lending rate is 2.5%. the lowest that anyone here can remember. Banks are not welfare institutions. If you want free money you will have to apply for welfare.

GG
said

Chalk this debaucle to mis-management..that runs these companies on short term returns and lines their personal pockets with excessive compensation, bonuses and stock options. They make decisions on running these companies for the quick buck and return. The long term effects are just starting to be felt on a global scale. Management of companies and industries must make business decisions on the long term sustainability of their enterprises. Thus this is no surprise at all. The economic foundation is crumbling under this systemic capitalistic model.These companies have no interest in re-investing their earlier profits into their companies to remain competitive and relevant. Its apparent we cant self regulate so we are leaving that burden to governments by default. And in the interim its us taxpayers who must pay off these financial atrocities of bad management. AIG couldnt be any more a lightning rod- A for arrogance, I for incompetence and G for greed. And so goes Abitibi and all the other mammoths who sucked us dry.

LH
said

Since not as many people read the paper anymore, this isn't surprising. It probably would have happened even without the economic downturn. They should have been diversifying before this, the writing has been on the wall for some time that people are moving away from newspapers and moving to online sources. Also, its easy to say the executives shouldn't have done this or that, but hindsight is always 20/20. Its easy to criticize when you weren't in that position and weren't the one responsible for the decision making. I have no idea what happened in this company but laying the blame after the fact is a lot easier than making the decisions at the time, I for one wouldn't want to be responsible and then be slammed later for a decision based on facts at the time, not the benefit of hindsight.

Dan from Northern Ont
said

They've been cutting and closing mills for the last 5 years. Not really a surprise. Digital world = less paper.

Cambob
said

What is this "internets" you write about?
I am reading the news, then reviewing a selection of 'letters to the editor'.

Oddly, I am not getting ink all over my hands, and I don't have to recycle the paper once I have finished reading it.

*insert sarcasm here*

Face it. Newsprint is a dinosaur.

Retired Soldier in KIngston, ON
said

The simple reason why the forestry industry and Abitibi-Bowater in particular are in such dire straits is because the industry and provincial politicians chose to put off hard choices regarding competitive wages for their workers.

The forestry industry also did not care to invest in replanting Canada's boreal forests or replacing pulp and paper machinery, plant & equipment which was vintage 1930's.

Not to long ago in Northern Ontario, contractors were paid to bury massive numbers of pine seedlings
as a cost-saving measure!!

These short sighted policies resulted in manufacturing equipment which is vintage World War 2 and an industry which can't compete with more efficient operations around the globe ( think Europe and China! )

Contrast this with Finland and Sweden which have a forest the size of southern Ontario and manage to consistently renew their harvestable timber on a sustainable level .

The canard that somehow, Premier Danny Williams of Newfoundland somehow salvaged his administrations pride and competence in giving Abitibi-Bowater their come-uppance by expropriating "Newfoundland Power" at Grand Falls misses the point!

What he and other Premiers should have done was regulate the forestry industry closely, ensure that a sustainable harvest of Boreal Forest timber was enforced by the Province and that old pulp and paper machinery was replaced in a timely manner, thus ensuring that jobs would stay in Canada and forests would be sustainable!

The result is an industry in its twilight years and a Boreal Forest which is now irretrievably degraded after decades of mis-management, extensive "clear-cuts", polluted rivers and political ignorance and indifference!

Pro Patria!

Sahib Reginawale
said

Carolina from Oak Ridges
I save reading the paper for a Saturday morning. I read this internet post while eating my lunch.
---
Carolina I am eating my lunch as I am reading this. You and me are very similar.

Roger T
said

So it goes on and on and on.....

The economy is sounding like what, I can't hear you Harper! Oh, sounds like bankruptcy is on the rise and more people are losing their jobs, soon their homes.

But the beat goes on....

Ron in the West
said

Why should anyone be alarmed by this. It's a natural evolution of societal and industrial change, just like we have seen over and over in the past. Abitibi was stupid to think the newspaper thing could go on forever. To those who think that nothing should ever change...get real. Maybe you'd like to go back to cleaning our streets with a broom too! Besides, the world will be a better place without all those looney leftist newspapers anyways. The fewer of them that exist, the more unfiltered and unbiased our news will be.

Susan Murray, Moncton
said

I'm not at all surprised by AbitibiBowater filing for bankruptcy. Abitibi has been one of the most poorly managed paper companies in the world for years. They relied for years on the low Canadian dollar to maintain profits, refused to shut down excess unproductive capacity, failed to re-invest in new equipment, refused to diversify to value added products, and foolishly kept all of their production in North America instead of pursuing overseas opportunities.

My sympathies to the employees and pensioners - I hope that they don't suffer too much from this bankruptcy.

Deborah
said

Unfortunately we are going to be hearing more of this "bankruptcy" in the near future.

Sign of the times!!! We all lived in our own little world just plodding along for far too long. Now it's all coming crashing down around us and we wonder why!!!

My mother is on a survivor pension from GM and get's $600 a month. At 64 it is looking like she will be trying to get a job to make ends meet should GM go bankrupt... cause her pension will be sure to go with it!!!

So everyone suffers ... and I am not sure what the solution is!!! I don't think anyone does. Throwing money at businesses isn't the solution long term.

Prof. Pye Chartt
said

I NEVER SAW THIS COMING!

Wow. I just learned that more people nowadays are using computers to gather their news information via the "internet," rather than purchasing newspapers.

Imagine. Man. I'm going to figure out how to use this "internet" as soon as possible. Maybe I'll take a course.

This technological development must have BLINDSIDED AbitibiBowater. Who could have known?! Geez. Tough business to be in, when things change so fast.

This makes me wonder whether the North American auto industry is going to get itself into trouble, too. After all, the market for cars has been changing at LIGHTENING speed.

Scary.

NWO resident
said

Carolina,

What makes you think that, because a journalist has written something in a newspaper, it is more credible than a journalist writing an online article? They follow the same rules.

Now, as of Abitibi, I know quite a bit about this company since our mill is the life blood of our town. I can tell you that Abitibi has been one of the worst managed companies of all time. I'm talking about the upper corporate management, not the management at the mill level.

Abitibi wanted to be the largest newprint and other paper maker in the world. To achieve this they took on massive amounts of debt and bought up mills. This happened in the 1990s. Well of course this back fired on them, but their strategic management team has not been able to come up with a plan to fix their mistakes. This bankruptcy has been years in the making.

Red X
said

Not surprised, there were about 9,500 consumer and business bankruptcies in recent data.

Can't get out of debt, declare bankruptcy. That will screw the banks for high interest and deny the creditors control in terms...

Gerry
said

I have been a newspaper reader all my life but My 3 teenage kids will not pick up a newspaper, they get their hockey sports news fix from sites like these they don't like to read day old news I guess

Miramichi Kid
said

Going green, digital (e-commerce) will no doubt take up the slack with regards to the delivery of advertisements and news slowly choking out and replacing hard copy. My deepest condolence goes out to the families affected by this announcement.

Don
said

Does anyone know if they ever were able to sell their dams in Ontario? Why were they trying to do that?

Carolina from Oak Ridges
said

I save reading the paper for a Saturday morning. I read this internet post while eating my lunch. My 20 something kids don't read the papers at all, they go straight to the computer for any news. Soemthing can be posted on YouTube in seconds. Sad that good reporting & journalism may soon be replaced by only sound bites of information. Nothing compares with knowing both sides of a story that a good journalist can get to.

BC Pensioner
said

Apart from the economy, maybe some of the problems with newsprint is that more Canadians are using the internet to get their news stories, which leads to a decline in newsprint paper sales.

David
said

My mother just retired from Abitibi a year ago. I am unsure at this point as to how this will affect her pension. I am appalled at the level of mismanagement that got us to this point. Why did they feel the need to barrow so much money from high interest lenders to finance their merger with Consolidated and Bowater. Shame on their management team!

John from TO
said

Wheres the bail out?>??????

They won't be selling Newfoundland power
said

to one of their creditors, thanks to Danny Williams.

Don't even dream of ripping off Newfoundland while Danny stands on guard.

Goldens
said

Whooo oh! Not another one!

John Wilson
Bridagtown Ns

Today's Canada Stories

Missing Winnipeg siblings found in Mexico

More 1

Residents survey the damage caused by a force one tornado in Saint Benoit, Que., Saturday, May 26, 2012. (Ryan Remiorz / THE CANADIAN PRESS)

Tornadoes cause millions in damage in Quebec

More 1

Vincent Massey Park, Ottawa, Ontario, lightning

Ottawa man struck by lightning dies in hospital

Most Viewed News Stories

View More News Stories

Most Talked about Stories

I fail to see just what a minister could learn by an on site visit that he couldn't get from people who are actual experts in the various fields of work involved. It is doubtful that he is any sort of nuclear engineer or expert in construction. Just another photo op...

Pugfire

Environment minister visits stricken Fukushima plant

Got something to say? Share on CTV News

Pick your location

Canada -

News Sections

News Programs

Features

Browse: