MONTREAL — A U.S. softwood lumber coalition says it will fight the Quebec government's plan to provide up to US$100 million in loan guarantees to AbitibiBowater (TSX:ABH), which employs 7,500 in the province.

It's a "benefit" that isn't allowed under the 2006 softwood lumber agreement between Canada and the United States, said Zoltan van Heyningen of the U.S. Coalition for Fair Lumber Imports.

"It's not something that anybody is going to take lying down," he said Friday from Washington, D.C. "We're not going to let it go, the U.S. government is not going to let this go."

Van Heyningen's group has fought for decades to have the U.S. government impose duties, quotas or other limits on imported lumber from Canada, arguing producers benefit from government subsidies.

He noted that AbitibiBowater is a significant lumber producer, although it's better known as the world's biggest newsprint maker.

AbitibiBowater issued a statement saying it appreciated the province's confidence in the company.

David Paterson, AbitibiBowater's president and CEO, said the guarantees would provide funds "while we continue to address our restructuring program and support our business continuity."

Formed by the merger of Montreal-based Abitibi-Consolidated and South Carolina-based Bowater Inc., the company says it had no option but to file under Chapter 11 of the U.S. bankruptcy code, and its Canadian equivalent after failing to refinance debts.

Documents filed Friday in Quebec Superior Court say that AbitibiBowater will suspend remaining severance payments of about $28 million "for the time being" to several hundred former employees at its now closed paper mill in Grand Falls, N.L.

Quebec Finance Minister Raymond Bachand said his government's priority is the AbitibiBowater workers in his province, mainly in small, regional communities that are dependent on the forestry industry.

Dave Coles, president of the Communications, Energy and Paperworkers Union, said the Quebec government's offer shows the importance of the forestry industry in the province.

"It's a very bold and courageous move," Coles said from Vancouver.

He argued the loan guarantee wouldn't violate the softwood lumber agreement in any way.

In Quebec's Saguenay region, federal Revenue Minister Jean-Pierre BlackBurn didn't offer any financial aid Friday but said he would try to find solutions to AbitibiBowater's problems that would respect the softwood lumber agreement.

The region, about 250 kilometres north of Quebec City, is home to a number of communities that depend on forestry jobs.

Coles also said keeping pensions intact for current and retired employees is a priority as the company restructures.

"They're all in grave danger," Coles said.

He said federal government should nationalize all private sector pension plans in Canada because "governments don't go broke," noting that other ailing companies have plans in jeopardy.

AbitibiBowater has more than 30 pension plans of various sorts, according to documents prepared for the Quebec Superior Court.

Abitibi-Consolidated Inc. alone has 20 pension plans, which require an $131 million from the company this year. The Bowater unit has another 13 pension plans for Canadian workers, requiring $72 million of company contributions in 2009.

In addition, there are smaller pension plans for employees in other countries, including salaried workers in Canada and the United States.

The 2009 contributions would normally include large special payments to reduce insolvency deficits, which arose because assets wouldn't cover benefits if the plans were wound up.

However, there may be pressure for concessions on pension benefits.

McGill University professor Karl Moore said the company's restructuring will have consequences for its workers.

"It's absolutely going to cost jobs," said Moore, who teaches at the university's Desautels School of Management.

"I am sure they're going to try to reduce the pension benefits," Moore added.

In a document filed with courts in Quebec and Delaware, the company said it has about 15,800 active employees around the world, including about 11,268 in Canada and 3,920 in the United States.

However, job cuts and layoffs have been rippling through the North American forestry industry for months, including at AbitibiBowater, which has cut 4,000 jobs since the merger of predecessors Abitibi-Consolidated and Bowater Inc. in 2007.

AbitibiBowater faces trouble in its markets as demand for pulp, lumber and other paper products are all expected to be squeezed in the weak economy.

There is also less demand for newsprint as more news is delivered on the Internet.

AbitibiBowater is aiming to restructure US$6 billion of debt while under the protection from its creditors, having failed to do so in the months leading up to the court filings.

The company is operating under laws designed to allow companies to continue operating while working with lenders, suppliers, employees and other creditors under court supervision.

AbitibiBowater said Friday that it's working towards a rapid conclusion of the previously announced sale of AbitibiBowater's 60 per cent interest in its Manicouagan, Que., hydroelectric facility for $615 million.