Newsprint Maker AbitibiBowater Inc.'s Finances 'Severely Constrained'

By: Newsprint maker AbitibiBowater Inc. warned Monday that its finances are "severely constrained" as massive debts come due amid a chilly credit environment and an industry downturn.

The Delaware-based company's warning, contained in a Securities and Exchange Commission filing, accompanied a public offer to exchange about $1.8 billion in debt for new offerings that carry a higher interest rate.

More than $1 billion of the debt comes due before the end of August, and "there are significant maturities coming in 2010 and beyond," the company said.

AbitibiBowater (nyse: ABH - news - people ), which is the world's largest newsprint maker, "experienced a considerable decrease in liquidity" in January and February of this year due to a significant interest payment and lower sales, the SEC filing stated.

"Further, Abitibi has a $347 million term loan due March 31, 2009 and $230 million outstanding under an accounts receivable securitization program that is scheduled to terminate in July 2009. As a result, Abitibi's liquidity position is currently severely constrained," the company said.

Besides the global recession and collapsing newspaper business that has slashed newsprint demand, the company faces a subzero global credit environment plus the recent expropriation of an approximately $300 million asset by a Canadian province. Though U.S.-based, AbitibiBowater's administrative headquarters are in Montreal.

The heavy debt coming due this year, frozen credit markets and Canadian expropriation also led AbitibiBowater to cut its estimate for 2008 fourth-quarter adjusted operating income by nearly a third - to a range of $52 million to $62 million from a previous range of $65 million to $95 million.

In afternoon trading, shares fell 7 cents, or 8.5 percent, to 74 cents.