AbitibiBowater CFO: Company eyes 'initial big step' to reduce debt

By Jennifer Lanning Drey

Savannah, Ga., Jan. 14 - AbitibiBowater, Inc.'s top priority is debt reduction following its emergence from Chapter 11 bankruptcy, and the company would like to take "an initial big step that way," William Harvey, its chief financial officer, said during the question-and-answer portion of a company conference call held Friday.

AbitibiBowater issued $850 million of new notes in September prior to emerging from bankruptcy in December.

Harvey said any cash generated from assets sales would be used first for debt reduction and noted that under the $850 million debt issue, if the company sells an asset in the first six months it may use the proceeds to reduce debt by $100 million at a call option of 105. The company has the ability to take out $85 million in any given year at a call option of 103.

"I think that low leverage makes a lot of sense for the business that has been cyclical in the past and that we hope would be more stable in the future," Richard Garneau, AbitibiBowater's chief executive officer, said during the call.

The company will also look at opportunities to use some of its cash to move from newsprint to value-added grades, Garneau said.

The CEO said the company's liquidity is "good and improving," with about $250 million of cash and an undrawn $600 million revolving credit facility.

"Our company has a conservative capital structure with ample liquidity," Garneau said.

Focus on key sites

After reducing its fixed costs and streamlining its asset portfolio through the restructuring, AbitibiBowater is now focused on production at its key sites, Garneau also said during the call.

"These are the sites that have a future. We have retained our best assets that we believe have the majority of our cash flow generation ability," Garneau said.

The strategy going forward is to focus on improving margins and further lowering costs, he said.

"We are focusing our capital spending at the right facilities, and we will explore opportunities that improve our business profile when the risks are appropriate," he said.

Through its restructuring, AbitibiBowater reduced debt levels by more than $6 billion and reduced its annual fixed costs by $880 million.

Actions on the operational restructuring side included the closing of marginal assets, reduction of selling, general and administrative expenses, and renegotiation of labor agreements.

"All of these initiatives improve our competitive profile, streamlining the company and providing the financial flexibility to be successful," Garneau said.

AbitibiBowater is a Montreal-based producer of newsprint, commercial printing papers, market pulp and wood products.

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