Renkane

MONTREAL, June 30, 2011 /PRNewswire/ - AbitibiBowater (NYSE: ABH) (TSX: ABH) announced today that, with the proceeds from the sale of its 75% indirect interest in ACH Limited Partnership, the Company recently redeemed approximately $270 million of its debt. With these disbursements, AbitibiBowater's total debt has been reduced to a face amount of approximately $670 million. "These recent actions are an important milestone in AbitibiBowater's focus on reducing its debt and associated interest burden," stated Richard Garneau, President and Chief Executive Officer. "Debt reduction is a fundamental part of our strategy to reduce fixed costs and improve the Company's financial position and competitiveness." The following three debt repayments were made during June 2011: $94 million principal at a redemption price of 105%, together with accrued interest, of the $850 million, 10.25% senior secured notes due 2018; $85 million principal at a redemption price of 103%, together with accrued interest, of the $850 million, 10.25% senior secured notes due 2018; and $90 million principal at par, together with accrued interest, of the Augusta Newsprint Company promissory note - repaid in full.

Uccmal--Thanks for the feedback. I used analyst forward estimates as a shortcut for the valuation. I use analyst estimates only to initially screen companies, but do not consider them reliable. I also use Fairfax, Chou, et al holdings as screens for potential target companies, but wouldn't piggyback without getting comfortable on my own (Fairfax recently bought additional shares at around $22). Several of my initial screens show it might be worth digging a little deeper into the story, so I am now in the process of getting more familiarized with the Company. I was wondering if other board members had any insight since there is some interest in fairfax and in pulp/forest products as well. Maestro--It seems cheap to me also. I read they settled the NAFTA claim for C$130M and know that they recently closed on the sale of 75% of its Ontario Hydro assets for C$300M. They are still holding on to their Quebec hydro assets. I am unfamiliar with their timberland holdings and Pan Asia holding but will let you know if I come across anything specific. PS: ~7% drop today appears to have been triggered by an analyst downgrade (TD Newcrest).

ABH has taken a big hit today and is now trading below its price upon reemergence from bankruptcy... They had $320M in EBITDA in 2010 and expect continued strong performance in 2011 and 2012 given current pricing trends and rationalized capacity. The GS analyst estimates EBITDA of $640M for 2011. As a result of the restructuring, they reduced their debt load from US$6B to ~$900M, which equals 1.8x Net debt/EBITDA (2010). They have a strong focus on debt reduction, as they will use some of the proceeds from the recent sale of 75% of the Ontario Hydro assets (C$300M) to redeem a portion of the outstanding debt. 2011 cash flow generation, asset sales and cash on hand are expected to completely reduce net debt by the end of 2011. So with a current market cap of $2B and 0 net debt by the end of 2011, that would give us a forward multiple of 3.1x EV/EBITDA in a company with a leading market position (albeit in a declining market) and lots of financial flexibility. Any thoughts on the largest position held by Fairfax and Francis Chou?

Looks like people are finally beginning to notice how valuable the installed pipes can be: WSJ(5/11) Sidera, Fiberlight To Go On The Auction Block 10/05/2011 23:34 (From THE WALL STREET JOURNAL) By Anupreeta Das Fiber-optic network companies Sidera Networks and FiberLight LLC are on the sales block, people familiar with the matter said, hoping to fetch high prices amid the explosive national demand for high-speed communications services. Sidera, which operates an Internet network in such cities as New York and Chicago, is seeking around $800 million, these people said. That is about 10 times its roughly $80 million in annual earnings before interest, taxes, depreciation and amortization, and in the range of what other fiber-optic companies have recently sold for, they added. Sidera, the Latin name for "constellation of stars," operates a network that it says carries every major stock-exchange trade in the New York area. The company was previously known as RCN Metro Optical Networks, a unit of RCN Corp., which was taken private in a 2010 leveraged buyout by Abry Partners. FiberLight, which is also privately owned, had about $50 million in annual EBITDA and is seeking as much as $500 million, the people familiar with the matter said. Founded in 1998, FiberLight provides network services, including broadband Internet, in and around cities such as Atlanta, Houston and Miami. The companies have hired investment banks to run auctions. Private-equity firms that own fiber assets, as well as larger telecommunications companies like AboveNet Inc. and Paetec Holding Corp. are expected to take a look, the people said.

Was about to buy some shares after your post, but couldn't log in fast enough: WSC 364.62 +39.87 (12.28%)

FWIW, here's Goldman's most recent commentary on the pulp market: Pulp: Some Reversal in Market Conditions After Record Run Published 24 Aug 2010 12:29:41 pm CST Global shipments of market pulp totaled 3.338 million tonnes in July 2010, down 6.2% from 3.558 million tonnes in July 2009. Although shipments to Western Europe increased 6.4% on a year-over-year basis, shipments to China fell 33.6%, shipments to North America were down 6.7%, and volumes to Other Asia/Africa were off 14.6%. Through the first seven months of 2010, global market pulp shipments were flat with the comparable 2009 period. Although shipments to China sunk 29.5%, volumes were higher into major regions North America (+9.1%), Western Europe (+10.7%), and Latin America (+18.1%). The global shipment to capacity ratio was 88% in July 2010, down from 93% one year earlier. However, for the first seven months of the year, this ratio was 92%, up from 91% in the 2009 period. Pulp inventories held by producers ended July 2010 at 29 days of supply, flat with one year earlier. While considered to be a comfortable level, this represents an increase from 25 days of supply at the end of June 2010. After shooting up to a high $1,020/tonne in July 2010, the price of NBSK pulp fell $30/tonne, to $990/tonne in August 2010. This is still 35.6% higher than the $730/tonne price in August 2009. While the direction of the pulp market during the remainder of 2010 is unclear, we believe that some additional selling price declines are likely, but do not expect prices to plummet to 2009 levels. In our opinion, key determinants of near-term price trends will be the timing of a resumption of Chinese buying to more normal levels, the amount of shuttered North American capacity that is restarted, and the pace of the global economic recovery. Major market pulp producers in the high yield market include Domtar, Georgia-Pacific, Millar Western, Tembec, and Catalyst Paper.

Cardboard, Ucc--thanks for the input. Agree with your assessment on the rationale for the change to a corporation. In regards to the discrepancies in reporting, I finally got an answer back from the Company: "We have changed the calculation of our EBITDA to reflect operations and exclude financial and non cash items. The definition of EBITDA is included on page 1 of the MD&A under the heading «Non GAAP measures». This method of calculating EBITDA is in line with other public entities in our industry." As the company states, the definition is properly disclosed on pg 1 of the MD&A: "References to “EBITDA” are to earnings before amortization, financial charges and income taxes and, effective with this MD&A, also before other non-operating income and expense such as gain or loss on derivative instruments, disposal of capital assets and foreign currency translation." Unfortunately, this tells me that absent this change in reporting method, EBITDA would very likely have been negative for Q4. I'm not very fond of a management team that changes its method of reporting for aesthetic purposes rather than for business reasons, but I guess it's up to the investor to do his/her homework--and at the end of the day EBITDA should not be a substitute for cash-flow. From a business standpoint, aside from the outage, it seems to me that RBK prices were the biggest headwind facing the company during Q4. Does anyone have any market data on the trend for RBK prices? Has anyone been able to point out any other major issues/headwinds from the Q4 release?

Could the unexpected conversion to a corporation be related to a company sale strategy? Are there any limitations imposed on potential buyers under the current structure (such as inability to strip away certain assets or limitiation in the nationality of buyer)?

I was going through the Q4 MD&A and noticed on pg 28 that EBITDAs for prior quarters vary from those reported in the Q3 MD&A (pg 27): 2009 Q3: 6.4M vs 2.3M 2009 Q2: (16.3M) vs (20.3M) 2009 Q1: (2.4M) vs (2.8M) Same thing for numbers reported in 2008. There must be some disclosed explanation, but I can't seem to find it. Could someone point me to the source of the discrepancy? Thanks!