response to debtor's omnibus response

8/8/2019 Response to Debtor's Omnibus Response

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JURISDICTION AND VENUE

1. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334.

Venue is proper in this Court pursuant to 28 U.S.C. 1408 and 1409. This matter constitutes a "core

proceeding" within the meaning of 28 U.S.C. 157(b)(2)(A).

2.

BACKGROUND

3. On April 16, 2009 (the Petition Date), the Debtors filed voluntary petitions for

relief under Chapter 11 of the Bankruptcy Code. The Debtors operate and maintain their businesses

as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Pursuant to

Debtors voluntary petitions filed with this Court, the company listed assets valued at $9.94 billion

against liabilities of $8.78 billion.

4. On April 17, 2009, certain of the Debtors (the Canadian Debtors), along with non-

debtor subsidiaries, sought protection from creditors under Canadas Companies Creditors

Arrangement Act, R.S.C. 1985, c. C-36 (the CCAA), in the Superior Court, Commercial Division,

for the Judicial District of Montreal, Canada (the Canadian Proceeding and the Canadian Court,

respectively).

5. On April 28, 2009, the United States Trustee for the District of Delaware (the U.S.

Trustee) appointed a statutory committee of unsecured creditors (the Committee), pursuant to 11

U.S.C. sec. 1102 of the Bankruptcy Code.

6. On April 14, 2010, the Debtors filed their Third Motion for Order Extending Their

Exclusive Periods to File a Chapter 11 Plan and Solicit Acceptances (the Third Exclusivity

Motion). Pursuant to this Courts order dated May 12, 2010 granting the Third Exclusivity Motion

(the Order), Debtors exclusivity for filing a plan of reorganization was extended through and

including July 21, 2010. Further, the Order extended exclusivity for solicitation of acceptance of a


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plan through and including September 9, 2010.

7. On May 24, 2010, Debtors filed their First Amended Joint Plan of Reorganization

(the Plan) and Disclosure Statement for First Amended Plan (the Disclosure Statement) [D.I.

2199 and 2200]. On June 29, 2010, Aurelius Capital Management, LP (Aurelius) filed an

Objection to Disclosure Statement (the Aurelius Objection) [D.I. 2526].

8. The Shareholders filed a Joinder (the Joinder) [D.I. 2558] to the Aurelius Objection

as the Shareholders share many of the concerns raised by Aurelius. For example, Aurelius objects to

the Debtors Disclosure Statement as it lacks a liquidation analysis for each Debtor, nor does it

include a valuation of the reorganized Debtors. See Objection, at *3. Aurelius also objects to the

Disclosure Statements lack of explanation of how certain intercompany claims are being treated

under Debtors proposed plan. Id.

9. Contained in Docket # 2796, AbitibiBowater Inc. (the Company), together with its

subsidiaries, affiliated debtors and debtors-in-possession (collectively the Debtors and individually

as an Individual Debtor or Individual Debtors) proposed a second amended joint plan of

reorganization (the Plan) for acceptance by the court and all creditors entitled to vote on the Plan.

The Plan is to be considered with reference to the Disclosure Statement with exhibits thereto.

10. On September 13, 2010, certain equity shareholders filed an objection to the Debtors

Plan of Reorganization (Docket #3224).

RESPONSE

11. In response to the Debtors Omnibus Reply to Objections to Confirmation of

Debtors Second Amended Joint Plan of Reorganization Under Chapter 11 of The Bankruptcy Code

Dated August 2, 2010 (D.I. 3378) as regards Certain Equity Shareholders, the Debtors claim the

following:

As a result [of Blackstones valuation], taken as a whole, the Company is


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hopelessly insolvent.

They [shareholders] argue in favor of a viewpoint that this Court has already

rejected, and offer no support or substantiation to suggest why the Court should

reconsider its conclusions.

Moreover, the Shareholders present no evidence whatsoever in support of their

objection.

they [shareholders] string together a series of disjointed and unsubstantiated facts

that they believe demonstrate the value of the Companys assets and subsidiaries in a

misguided effort to discredit the Enterprise Valuation.

The evidence, however, establishes beyond doubt that the Company is

hopelessly insolvent.

the only credible evidence.[is] that there is not a million dollars or tens of

millions of dollars or hundreds of millions of dollars but billions of dollars

standing between other constituents in the related Chapter 11 cases and any

possible recovery by [AbitibiBowater Inc.s shareholders]. Hrg Tr. 67:17-25,

Aug. 4, 2010 (emphasis added).Nothing has changed since that hearing that

should alter the Courts observations.

Certain of the Shareholder Objections challenge the distribution of New ABH

Common Stock to management under the Plan. As discussed in 23-29 of this

Omnibus Reply, the New ABH Common Stock to be awarded to management

under the management incentive plans is entirely appropriate in these cases.

One of the Shareholder Objections asserts that the Plan unfairly grants

employees (who may also hold stock in AbitibiBowater) the right to participate in


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the Rights Offering, but not equity holders. (Romero Obj. 14.) Participation in

the Rights Offering, however, was granted to holders of general unsecured claims

against the Debtors. Thus, employees eligibility to participate in the Rights

Offering is a product of the employees unsecured claim against a Debtor and not,

as the Shareholders suggest, on account of any AbitibiBowater stock that they

may also have held.

12. For summary, the Shareholders Objection to the Plan of Reorganization centered on

the following arguments: (1) Debtors have undervalued or failed to value multiple assets, (2) Debtors

are withholding recoveries until after Plan confirmation to avoid distribution; (3) Debtors

subsidiaries have not been properly valued; and (4) Debtors have put forward this Plan without

concern for the fundamental fairness of the bankruptcy process nor a concern for their fiduciary

duties to the shareholders.

13. Reviewing the responses to the Shareholders Objection, it is clear that the Debtors

have not attempted to refute the substantiated claim that Debtors are withholding recoveries until

after Plan confirmation to avoid distribution. In fact, they never mention the NAFTA settlement,

Union agreements, or pension liabilities at all. Therefore, it is assumed that this point is conceded by

the Debtors. As such, the valuation completed by Blackstone, which has not been shared with the

Shareholders, needs to be recalculated with the pension liability removed, the $130 million for the

NAFTA settlement added, the $108 million for the American Union settlement, and the present value

of the negotiated reduced labor costs from the Canadian and American Union added to the EBITDA,

at a minimum.

14. The valuation analysis needs to be recalculated not only on the Debtors as a whole,

but on the Debtors individually since they are not substantively consolidated. While as raw figures

these claims do not amount to billions they clearly amount to hundreds of millions and using the


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Discounted Cash Flow valuation, may amount to billions in EBITDA for the Debtors. Even if these

figures in and of themselves are not able to overcome the insolvency of the Company as a whole,

they might be able to overcome the insolvency of one or more Debtor. Equity within one or more

Debtor may very likely flow to the Shareholders. Yet, the Shareholders have been pushed away from

the table at every opportunity and not been allowed to see the valuation purported to exist.

15. This point regarding lack of valuation report cannot be overemphasized. The only

valuation numbers included in the Disclosure Statement summary and other public filings from the

Debtors are for the company as a whole. Yet, the plan must address each Debtor individually. How

can the Court approve a plan when one of the major classes is prevented from seeing an alleged

analysis that purports to demonstrate no recovery for that class? Can this honestly be considered a

fair process? There could well be individual Debtors that have equity for shareholders, but without

evidence being presented, the Court and the Shareholders are being told believe us, there is no

value.

16. For example, the Debtors themselves argue that at the time Bowater issued the

Guarantee to Fairfax, Bowater had equity value of almost $1 billion and was not even close to being

insolvent. It would be important to see in the valuation analysis how the management team that has

worked so diligently and tirelessly on behalf of creditors and shareholders to the point they can claim

millions in personal enrichment lost a billion dollars in Bowater in less than one and one half years.

The Debtors Omnibus Response claim that the management team currently in place should be

retained which is the fundamental purpose of the management incentive plan. Frankly, the

Shareholders are stupefied why a management team which has lost a billion or more in equity in such

a short period should be retained, especially at such a high cost.

17. Further, the Debtors in their Omnibus Response failed to address the argument raised

by the Shareholders that the Debtors own liquidation analysis shows three of the Debtors to be


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solvent right now. In the Plan objection, the Shareholders showed that (1) Abitibi-Consolidated

Finance LP (Book Value = $50.6M, Face Value of Claim = $8M), (2) Bowater Incorporated (Book

Value = $6,338.1M, Face Value of Claim = $5,173.2M), and (3) Bowater Nuway Inc (Book Value =

$549.1M, Face Value of Claim = $63.4M) are all solvent at present. This leaves a book value of

$1,693.2M greater than the face values of the claims for those three Debtors. Since this point was

not refuted in the Omnibus Response, the Debtors must be conceding this point as well. Therefore,

even though the actual valuation analysis is not available to the Shareholders, the liquidation analysis

demonstrates at least three Debtors are currently solvent and therefore the valuation report needs to

be further reviewed.

18. In the Omnibus Response, the Debtors claim that the Shareholders are attempting to

discredit the valuation analysis without evidence. A more complete argument is that the

Shareholders request the valuation analysis be produced to ascertain, on an individual Debtor

basis, the impact of monetary claims which do not appear adequately handled as well as the

impact of new financial realities and until that valuation is produced and analyzed and updated,

the Court cannot approve the Plan.

19. The Debtors themselves clearly state in the Plan they have not substantively

consolidated these cases and each case should be confirmed individually. Yet, the Debtors continue

to make claims regarding the insolvency of the Company as a whole. The Debtors claim the

Shareholders offer no evidence of how the Blackstone valuation is flawed, while at the same time

refusing to share the valuation with the Shareholders. How can the Shareholders be expected to find

flaws in a document they are not allowed to review?

20. It is important to note that as the Debtors attempted to refute the claims asserted in

the Shareholders Objection, they themselves offered no evidence beyond an earlier claim offered in a

transcript of a hearing. The Debtors still have not produced a valuation of each individual Debtor


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that the Shareholders may examine. They have not produced the financial projections that

Blackstone used nor the precedent transactions Mr. Zelin refers to in his declaration and Disclosure

Statement. So it would seem that lack of evidence is a common problem in these cases.

21. The Debtors claim that the Shareholders have only presented arguments which the

Court previously rejected in an Equity Committee hearing. This is difficult to resolve with the

inclusion in the Shareholders Objection of the NAFTA suit, the pension liabilities agreement, and

the Union settlements in the Shareholders objection since these issues were not available at the time

of the Equity Committee hearing.

22. Furthermore, the Court never actually rejected the arguments presented by the

Shareholders. In fact, at the Equity Committee Reconsider Hearing, Mr. Shah on behalf of the

Shareholders was advised by the Court to present his arguments at Plan confirmation.

23. The Debtors claim of rejection would seem to apply to the valuation report prepared

at great expense to the Shareholders in support of the August 4th Equity Committee hearing. The

Debtors seemed to be so concerned about the arguments presented in the NHB valuation report that

they objected to its inclusion simply because the expert was not available for cross-examination. It is

hard to understand how the lack of expert witness changes the information included in the report that

apparently caused such concern for the Debtor. In the interest of fairness, if the Debtor wanted to

understand how the NHB report ended up with different results than Blackstones, perhaps the

Debtors should have used their far more extensive resources to depose the NHB advisor.

24. The Debtors suggest that the Shareholders have strung together a series of disjointed

and unsubstantiated facts to discredit a valuation analysis which has never actually been shown to the

Shareholders. Perhaps the Debtors would like to qualify that spurious argument for the Court.

Which facts are unsubstantiated? The NAFTA settlement, the Union claim resolution, the pension

liability agreement, the NOLs, the undervaluing of the golf course, the precedent transactions for


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timberland sales, the Debtors own demonstration of equity in three Debtors in their own liquidation

analysis, or the 6,000 times personal enrichment by management in their incentive plan?

25. The Debtors in the Omnibus Response stated:

Instead, they [shareholders] string together a series of disjointed and unsubstantiated

facts that they believe demonstrate the value of the Companys assets and

subsidiaries in a misguided effort to discredit the Enterprise Valuation. Pure

speculation and wishful thinking, however, are not appropriate methodologies for

valuing a multi-billion dollar enterprise, and the Shareholders do not provide any

other credible basis on which to challenge the Companys Enterprise Value.

[insertion added]

The Shareholders agree that pure speculation and wishful thinking are not proper means for

challenging an Enterprise Value. The Shareholders do not agree that the attempt is misguided

because as the Shareholders of the Company, it would seem that there is a vested interest in

maximizing their recovery. This is supposedly a fiduciary responsibility of the tireless executive

team. The Shareholders are confused how asserting, and substantiating, hundreds of millions of

dollars that have not been added to the Companys Enterprise Value can be classified as pure

speculation and wishful thinking.

26. However, if the Debtors want to continue to assert that the attempt is misguided then

perhaps the tireless and diligent executive team should have involved the Shareholders in the process

from the start. The Shareholders reached out to the executive team to share with them our concerns

regarding the naked shorting and bond irregularities and were told that the management team had no

comment. The Shareholders asked via letter and telephone to be involved and communicate directly

with the management team on multiple occasions and each time were rebuffed. Mr. D. Owens at

Investors Relations emailed us that he could not speak to us on the phone regarding any matters (true


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and exact copies of the emails from Mr. Owens are attached). We received a letter telling us the

management team had no comment on issues the Shareholders were bringing to them (a true and

exact copy is attached). So, if the Shareholders are misguided, surely the Court can see that without

communications and no valuation analysis, the Shareholders are pursuing the best course available to

them.

27. In the Omnibus Response, the Debtors argued:

One of the Shareholder Objections asserts that the Plan unfairly grants employees

(who may also hold stock in AbitibiBowater) the right to participate in the Rights

Offering, but not equity holders. (Romero Obj. 14.) Participation in the Rights

Offering, however, was granted to holders of general unsecured claims against the

Debtors. Thus, employees eligibility to participate in the Rights Offering is a product

of the employees unsecured claim against a Debtor and not, as the Shareholders

suggest, on account of any AbitibiBowater stock that they may also have held.

It is important to note that the Shareholders argument in the objection was actually slightly different

than the response from the Debtors would indicate. The Shareholders never asserted that thepast

employees (not all employees) are granted participation in the Rights Offering as a result of their

status as shareholders. Instead, the argument was that the past employees were considered having a

Convenience Claim (Class 7 by the way and not Class 6 as indicated in the Debtors response) if they

filed a claim other than one related to a retirement plan (Example : severance pay, value of pension

credits or lost group insurance due to the termination of salary continuance or other). By permitting

these past employees, some of whom are likely also to be shareholders, to be classed as Class 7

should have only permitted them access to a small cash settlement according to the Plan, but instead

the recent memo to them cited in the Shareholders objection show that they have access to the

Rights Offering now. This establishes two classes of shareholders. Past employees who have a


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convenience claim can participate in the Rights Offering. Those that do not have such a claim, and

all other shareholders, cannot participate in the Rights Offering. This would seem an unfair

establishment of a superior class of Shareholders, unless citing a recent communication to past

employees is considered unsubstantiated.

28. Beyond refuting the same old tired refrain from the Debtors counsel regarding the

Shareholders lack of evidence and the insolvency of the Company as a whole, the Shareholders

would like to respond to some specifics from the Debtors Omnibus Response to the Objections.

Specifically, the Shareholders would like to address the use of Fair Market Value in the Debtors

alleged valuation (or rather lack thereof), the impact of Carbon Credits and Timber assets, the

Management Incentive Plan, recent improvements in the financial outlook of the Debtors, and the

treatment of Shareholders in this Plan versus other similar plans.

29. The Debtors have claimed, and been joined in this claim by Fairfax, Mr. Zelin and

Mr. Harvey, that the Bowater was solvent at the time the Guarantee was granted to the tune of $1

Billion. Further, the team asserts that Bowater received nearly $970 million in quantifiable benefits

as a result of the Guarantee. To demonstrate the solvency and receipts, the Debtors hired an expert

named Reilly to demonstrate the solvency and receipt of benefits by Bowater. In this report, Reilly

claims the following:

The term insolvent is defined, in relevant part, in Section 101(32) of the Bankruptcy

Code as: financial condition such that the sum of such entitys debts is greater than

all of such entitys property, at fair valuation, exclusive of property transferred,

concealed, or removed with intent to hinder, delay or defraud such entitys

creditors." ( 65)

The balance sheet test is used to determine whether, at the time of the transaction(s)

in question, the fair market value (and the present fair saleable value) of the subject


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company assets is greater than the stated amount of the subject company liabilities

(including any identified contingent liabilities). (para. 66)

To determine whether the fair market value of the subject company assets exceeds the

subject company stated liabilities, an analyst should estimate the fair market value of

the subject company assets. ( 66)

Once the fair market value of the assets is estimated, the post-transaction liabilities

are subtracted in order to quantify the post-transaction net asset value (or equity

value) of the subject company. ( 67)

30. Therefore, according to the Debtors own expert, a balance sheet test requires the use

of Fair Market Value. The Internal Revenue Service Revenue Ruling 59-60 ("Revenue Ruling 59-

60") defines fair market value as "the price at which the property would change hands between a

willing buyer and a willing seller when the former is not under any compulsion to buy and the latter

is not under any compulsion to sell, both parties having reasonable knowledge of the relevant facts."

31. The company has included in the Disclosure Statement the following: As part of the

Companys emergence from the Chapter 11 Cases and CCAA Proceedings, it will be required to

adopt fresh start accounting. Accordingly, the Companys assets and liabilities will be recorded at

fair value as of the fresh start reporting date. The fair value of the Companys assets and liabilities

may differ materially from the recorded values of assets and liabilities in the Financial Projections.

The Companys financial results after the application of fresh start accounting may also be different

from historical trends. This would seem to indicate that the Debtors are stipulating they are not

currently using fair value for the assets or else the fresh start accounting would not differ materially.

32. So, if the Debtors are not using fair market value for their undisclosed valuation

analysis, then what data are they using? According to the First Day Motions:

j. Timberland, Less Timber Depletion. Timberland is stated at cost less


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accumulated cost of timber harvested. The portion of the costs of timberland

attributed to standing timber is charged against income as timber is cut, at rates

determined annually, based on the relationship of unamortized timber costs to the

estimated volume of recoverable timber. The costs of seedlings and reforestation of

timberland are capitalized.

Property, Plant and Equipment. Property, plant and equipment are carried at cost.

33. So, two of the Debtors largest assets (timberland and property, plant & equipment),

are being carried at cost. Some of the Debtors property, plant & equipment are several decades old.

Cost is not an applicable value and certainly not equivalent to the Fair Market Value. Timberland is

certainly cannot be evaluated at cost since the Debtors have not purchased timberland for many

years. Mr. Zelin indicates that the alleged valuation used precedent transactions, but those

transactions recorded in the 8Ks can best be described as distressed sales values and not fair

market value.

34. In the 2007 10K (p. 24), the Debtors declare a Net gain on disposition of assets as

the following:

In 2007, we recorded net pre-tax gains of $145 million related primarily to the sale

of approximately 133,600 acres of timberlands ($1085 per acre) and other fixed

assets for cash proceeds of $197 million. In 2006, we recorded net pre-tax gains of

$186 million related primarily to the sale of approximately 535,200 acres of

timberlands ($347 per acre), our Baker Brook and Dgelis sawmills and other fixed

assets for cash proceeds of $332 million. In 2005, we recorded net pre-tax gains of

$66 million related primarily to the sale of approximately 29,900 acres of timberlands

($2207 per acre) and other fixed assets for cash proceeds of $76 million. (emphasis

added)


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35. This would have the Shareholders believe that the Debtors freehold timberlands can

be valued between $347 and $2207 per acre with a midpoint of $1452 per acre. If this is the

precedent transaction data that was used by Mr. Zelin, as it should have been, then the 1.2 million

acres of timberland held by the Debtors should have been valued at $1,742,400,000. This is a

staggering sum to be so lightly referred to by Mr. Zelin in the August 4th Equity Committee hearing

as insignificant compared to other assets. While it may be argued those data points are old and not

reflective of current market values, Tembec USA, a competitor of the Debtors, recently sold a 770-

acre tract in West Feliciana Parish, LA, to Benton Land Investments. Of the 770 acres, 200 acres of

the parcel are high land; the remaining 570 acres are bottomland located near Thompson's Creek and

are subject to flooding. The property sold for about $1,820 per acre for the entire 770-acre tract

[excerpted from Businessreport.com published September 22, 2010]. While this may seem

unsubstantiated to the Debtors, it does provide face validity for the midpoint price per acre of the

Debtors timberland.

36. Another interesting aspect of timber is the fact that the Company holds leases to

several million acres of timberlands. These leases permit the Company to use the trees so long as the

Crown agrees the forest are being managed well. In the Disclosure Statement, these leases are

referred to as critical for business operations and yet there is no value attributed to them? To

demonstrate that the Company is a good steward of the forests, they recently paid to have all of their

leased boreal forests third party certified as sustainable. In this effort, they declared their interest in

using the timber for Carbon Credits. In fact, the Company has been a member of the Chicago

Carbon Credit Exchange for the past five years. Carbon credits are a value the Company recognizes,

but does not seem to have been adequately included the alleged valuation analysis, though this is

something that Shareholders truly cannot substantiate since they have not been permitted to review

the valuation report.


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37. The Shareholders also objected to the Management Incentive Plan. In defense of the

plan, the Debtors chose to point out how diligently and tirelessly the management executive

teams worked to maximize recovery for the stakeholders while negotiating the Plan and ensuring

emergence as a viable, on-going concern. While the management team was supposedly working

so hard, the Debtors claim they took no bonuses, froze their salaries, and even took a 15% pay cut.

Such self-sacrifice, according to the Debtors, must be rewarded by enhancing their ownership in the

Reorganized ABH. The Debtors argue that the management team should be compensated to the tune

of 8.5% of the Reorganized ABH stock and that this value is not unreasonable compared to other

Chapter 11 cases. Furthermore, the Debtors argue it is necessary to ensure the executive team is

retained as the Company emerges, though the Shareholders are curious on what performance record

this conclusion is reached.

38. The Shareholders find some of these statements to be extraordinary. While

maximizing the value for all stakeholders, this management team chose to lay off 6,000 employees,

reduce the wages of their remaining employees 10% and cancel the shares held by long-time

investors including employees nearing retirement, senior citizens, and middle-class workers. It is

also worth noting that while they supposedly received no bonuses over the time they were tirelessly

working to eliminate the livelihood for thousands of workers and reduce it for thousands more, they

did increase their stock holdings from 1.5% to 2.1%. Now, less than a year later, they are asking to

increase their personal holdings to 8.5% of the New Reorganized ABH. While this may seem to be

reasonable to the Debtors counsel, it is hard to imagine how increasing the value of management

teams shares from approximately $35,000 worth of stock to hundreds of millions is a reasonable

incentive plan. It is interesting that in the Omnibus Reply, the Debtors never argue the monetary

value of the incentive, but rather supply evidence of the percentage of shares in the incentive

program that other Chapter 11 cases have included. Examining the monetary enrichment is far more


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illuminating and illustrative.

39. The Debtors Plan clearly states (p. 115):

Blackstones mid-point estimate of Enterprise Value implies a mid-point value for theNew ABH Common Stock (the Equity Value) of approximately $2,425 million.

40. Therefore, the Debtors management will see the value of their new holdings become

worth at least $206,125,000. That is a nearly 6,000 times increase in value as a result of shepherding

a company into bankruptcy, refusing to pay claims and debts owed, forcing the unions to renegotiate

contracts for lower wages and benefits, laying off thousands of workers, and eliminating value for

people that have been invested in this company for years.

41. It should be noted that there are approximately 54 million common shares of the

Company. This is not a common position for large, Chapter 11 cases. It means that the common

shareholders could receive value for their investment and be made whole for a very small investment,

certainly less than the management incentive plan.

42. The Debtors claim that the management incentive plan is fair and reasonable in part

because they have tirelessly negotiated to make the Company a viable on-going concern. The

Debtors argue that management took no bonuses and even a pay cut over the year they were working

so tirelessly. To provide an example of the negotiations for which management supposedly deserves

this reward, a memo dated March 13, 2010, is attached. This memo details an agreement with the

Unions of FTPF/CSN at Clermont, Alma, Kenogami and Laurentide. The memo is in French, but a

translation is as follows:

Salaries:

o from the date of ratification of the collective agreement, wage rates applicable

April 30, 2009 ( 2010 for Alma and Clermont ) will be reduced 10 %.

o from May 2012 (2013 for Clermont and Alma ), rates of pay applicable will


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be increased by 1%.

o from May 2013 (2014 for Clermont and Alma ), wage rates applicable will be

increased by 1.5%.

Company will provide a death benefit of CND$5,000 for future pensions.

Learning Plan for Employees of production: from the first day following ratification,

the newly hired employees will be covered by a new apprenticeship program to be

established locally in each plant based on the following principles. The salary of entry

under the program will be established salary increases as follows :

o of the date of entry has 1500 hours worked: 70 % regular rate of the position

worked;

o 1501 has 3000 hours WORKED 80 % regular rate of the position

o worked ;

o of 3001 has 4500 hours worked: 90 % regular rate of the position

o worked ;

o from the 4501 hours worked : regular rate of the position worked.

So the Debtors management team demands to be enriched over $200 million while reducing

the pay of their remaining workers by 10% and never fully reinstating their pay and not fully paying

new hires for the first two and a quarter years of service. And they have capped the death benefits in

the pensions to CND$5,000 which is barely enough to cover funeral expenses here in the United

Sates. While this hardly seems an equitable arrangement, it is also interesting to note that these

benefits to the Company do not begin until after the company emerges.

43. It should also be noted that nowhere in the Omnibus Response to Objections did the

Debtors reply to the argument that the Shareholders were specifically prevented from calling a

Shareholders meeting to air their concerns during this bankruptcy process by the implementation of


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by-laws amended shortly before the Company entered bankruptcy. It would seem that the Debtors

counsel is willing to concede that diligent negotiations by the Debtors management team do not

include communicating with Shareholders.

44. According to Bloomberg article posted recently and included in the attachments, the

Company sold their new private bonds September 20, 2010 and they sold $850 million dollars worth

of bonds, even though the initial offering was to be for $750 million. The bond sell was a success

especially since they priced them at a premium rate according to the below Bloomberg article. This

states that the private offering gave the bond holders an initial windfall of $12 million dollars on the

first day of issuance, and states they priced their bonds at a premium almost 2% higher than another

bond sold the day before with identical maturity and similar ratings. This shows that management is

committed to emergence to the point that they are willing to pay a premium to band holders to do it.

CONCLUSIONS

45. Despite the poor response from the Debtors counsel to the Shreholders objection,

the Plan is not confirmable because it clearly:

Does not account for recent improvements in Debtors financial picture;

The Plan appears to have overlooked substantial assets;

Debtors have conceded points that clearly undermine the valuation analysis which

they have refused to share with us

Debtors have not shown individual Debtor valuations which makes it nearly

impossible to ascertain Shareholder recoveries; and

Management incentives undermine the fundamental fairness of the bankruptcy

process.

46. The Shareholders vehemently refute the response by the Debtors counsel that the


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objection arguments are unsubstantiated. The theme that is running though many of the

Shareholders arguments and indeed through many of the other objections is the Company is

undervaluing assets. The executive team appears willing to pay a premium rate for almost a billion

dollars in bonds when while clearly future projections and earnings are better than expected and the

sector is improving as a whole. Management has not acted in the best interest of all stakeholders as

illustrated in this response and does not deserve a retention bonus. The disclosure values do not

include recent positive developments and the plan is not confirmable.


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RESERVATION OF RIGHTS

47. The Shareholders reserve all rights to assert additional statements prior to or at the

time of the hearing on the Motion.

Date: September 22, 2010Wilmington, Delaware

EQUITY SHAREHOLDERS

Dr. Henry A Romero, CPE, CSPElizabeth L. Romero, MS115 Bristol Bend LaneDickinson, TX 77539Telephone: 281-770-5382Facsimile: [email protected]


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Attachment 1: Memo of agreement with the Unions of FTPF/CSN at Clermont, Alma,

Kenogami and Laurentide.


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Attachment 2: Email From Duane Owens


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Attachment 3: Email form Duane Owens Re: Equity Committee


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Attachment 4: Email from D. Owens


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Attachemnt 5: Printout Re: Tembec USA Land Sale


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Attachment 6: Pensions


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Attachment 7: One Day Windfall to Bond Investors


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Attachment 8: Additional References and Resources in Support of this Response


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Link to a one year soft lumber chart:

http://quotes.ino.com/chart/index.html?s=CME_WP.U10.E&t=&a=&w=&v=d12

Lumber Futures Chicago Mercantile Exchange

http://www.randomlengths.com/base.asp?s1=In_Depth&s2=Useful_Data&s3=Lumber_Futures

Link to a stock chart the gives stored lumber in Europe just as KFC said thestorage is low

http://www.europulp.net/

News print prices up:

FORESTWEB Report: Newsprint Markets on the Rebound?North American newsprint markets continue to show relative improvement, leadingto a steady upturn in pricing so far this year and announced future hikes.

By: Debra Garcia

LOS ANGELES (August 10, 2010) --

North American newsprint statistics released July 21 by the Pulp and PaperProducts Council (PPPC) showed positive signs for the industry, which has givenproducers a foundation for continuing to raise prices.

Catalyst Paper Corp. and Blue Heron Paper Co. have in recent days separatelyannounced US$40 per tonne price hikes on 30-pound newsprint in the U.S. effectiveSept. 1, with Catalyst saying that the increase is intended to narrow the gap inpricing between East and West.

In a report released July 26, The Reel Time Report said newsprint markets are

currently tight.

While North American newsprint demand and shipments within the continentcontinued to ease a bit in June, shipments to overseas remained robust, more thanoffsetting the domestic slippage, according to PPPC data.

Newsprint shipments within North America totaled 455,000 tonnes in June, which


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was off 1.9% year-over-year. This brought the total shipped through first-half 2010 to2.735 million tonnes, which was down 1.5% from a year ago.

Total shipments up

However, total North American shipments to all locations were up 11.1% year-over-year in first-half 2010, with volumes in June increasing by 85,000 tonnes, or 14.3%,from last June. This includes a 7.3% hike in U.S. shipments and an 18.8% jump inCanadian shipments, according to a July 26 research note from Salman Partners.

Although newsprint demand in North America continued to drop in June, it was off arelatively modest 2.4% year-over-year to 462,000 tonnes and down 1.6% throughthe first half from a year ago, to 2.782 million tonnes, the PPPC reported.

Total U.S. consumption fell 8.1% year-over-year in June, but consumption for AllDailies was up 0.8%, according to Salman Partners.

CBIC World Markets Inc. noted in a July 28 research note that demand appears tobe stabilizing, even though year-to-date consumption through June was down 6.2%.

Overseas orders remain robust, with North American newsprint shipments tooverseas up 73.2% year-over-year in June to 222,000 tonnes, bringing the year-to-date total to 1.196 million tones which was 57.0% higher than the first six monthsof 2009, the PPPC reported.

However, The Reel Time Report said that the June level of exports only equaled

May of 2008.Salman Partners said shipments to Western Europe were off in June by 12.6% year-over-year, while shipments to Latin America jumped 66.6%.

Strong exports helped North American newsprint mills operate at a shipments-to-capacity ratio of 101% in June, while the year-to-date rate was 91%. The rates areadjusted by the PPPC for idled capacity.

Hefty curtailments

Downtime has been substantial this year, as reflected in recent quarterly reportsfrom some North American newsprint producers.

In its second-quarter report, released July 29, Catalyst Paper said its newsprintcurtailment during the quarter was at 52% of newsprint capacity, inclusive of its ElkFalls, British Columbia, mill. The No. 1 PM at its Crofton, British Columbia, mill


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remained indefinitely idled and production on other machines was switched fromnewsprint to uncoated mechanical grades.

The Elk Falls mill will be permanently closed in September due to weak markets forcommodity paper grades and an uncompetitive cost structure, said Catalyst Paper,

adding that its Paper Recycling Division also would be closed.

In releasing results for its third-quarter ended June 26, Tembec Inc. said on July 29that its newsprint shipments during the most recent quarter were equal to 47% ofcapacity, as compared with 44% the prior quarter.

Due to weak newsprint demand, the company took 68,300 tonnes of market-relatednewsprint downtime in the most recent quarter, which was the same as the priorquarter but did not include 600 tonnes of downtime taken for maintenance duringthat preceding quarter. The Pine Falls, Manitoba, newsprint mill was down for theentire third quarter.

U.S. mills operated at 89% in June, while Canadian mills ran at 109%, and bothwere at 76% a year earlier, reported Salman Partners.

Inventories lean

The high operating rate in June resulted in North American newsprint mills paringdown their inventories during the month by 68,000 tonnes to 229,000 tonnes by theend of June. This level was 235,000 tonnes lower than the 464,000 tonnes held instock a year earlier, reported the PPPC.

Total North American consumer and mill inventories fell by 88,000 tonnes in June,with 20,000 tonnes of that drop coming from the decline in stocks held byconsumers, resulting in All U.S. Users inventories dropping to 512,000 tonnes at theend of June. This was 89,000 tonnes less than the 601,000 tonnes of inventory heldby All U.S. Users a year ago.

All U.S. Dailies inventories at the end of June were down 86,000 tonnes, or 15.9%,year-over-year, according to Salman Partners.

In terms of days of supply, the 39 days reported by All U.S. Users for June was

down six days from a year earlier, and the 48 days held by All U.S. Dailies wasdown four days year-over-year. Both levels were unchanged from the prior month,Salman Partners reported.

Total imports of newsprint into North America in June totaled 7,000 tonnes, whichwas down 26.9% year-over-year and brought the total through first-half 2010 to


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46,000 tonnes, which was off 7.0% from a year earlier, the PPPC reported.

Price momentum

Market conditions have enabled newsprint producers to continue to raise prices in

the U.S. Since bottoming out last August at $440/tonne for 30-pound newsprint,prices have risen steadily by a total of $180/tonne to the July 1 level of $620/tonne,based on data from the Reel Time Report.

The latest price hike attempts for Sept. 1 are being led by Catalyst Paper, whichannounced on July 23, followed by Blue Heron Paper on July 26.

FOEX Indexes Ltd. reported on July 27 that newsprint prices in the U.S. have beenmoving up for one year now. It stated that some producers announced priceincreases from July 1 and some from Sept. 1, and some of these were intended tostabilize the gaps in prices between East and West.

FOEXs U.S. newsprint benchmarks both rose in the preceding week from a weekearlier, with 30-pound newsprint up $3.65 to $596.71/tonne, and 27.7-poundnewsprint up by $4.45 to $635.39/tonne.

CIBC said that newsprint prices were up $20/tonne in June from the previous month,to $615/tonne, with producers partially implementing the second of two $25/priceincreases slated to take effect in May/June.

Salman Partners said that newsprint prices were at $615/tonne in June and forecast

that they will average $595/tonne in 2010 and increase to $620/tonne in 2011.Boreal Forest pact to not cut:

Press Release -- May 18, 2010

Canadian forest industry and environmental groups sign world's largest conservationagreement applying to area twice the size of Germany

TORONTO and MONTREAL, May 18 /CNW Telbec/ - Today 21 member companiesof the Forest Products Association of Canada (FPAC), and nine leading

environmental organizations, unveiled an unprecedented agreement - the CanadianBoreal Forest Agreement - that applies to 72 million hectares of public forestslicensed to FPAC members. The Agreement, when fully implemented, will conservesignificant areas of Canada's vast Boreal Forest, protect threatened woodlandcaribou and provide a competitive market edge for participating companies.


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Under the Agreement FPAC members, who manage two-thirds of all certified forestland in Canada, commit to the highest environmental standards of forestmanagement within an area twice the size of Germany. Conservation groups committo global recognition and support for FPAC member efforts. The Agreement calls forthe suspension of new logging on nearly 29 million hectares of Boreal Forest to

develop conservation plans for endangered caribou, while maintaining essential fibersupplies for uninterrupted mill operations. "Do Not Buy" campaigns by Canopy,ForestEthics and Greenpeace will be suspended while the Agreement is beingimplemented.

"The importance of this Agreement cannot be overstated," said Avrim Lazar,President and CEO of FPAC. "FPAC member companies and their ENGOcounterparts have turned the old paradigm on its head. Together we have identifieda more intelligent, productive way to manage economic and environmentalchallenges in the Boreal that will reassure global buyers of our products'sustainability. It's gratifying to see nearly a decade of industry transformation andhard work greening our operations, is culminating in a process that will set a forestrystandard that will be the envy of the world."

Environmental groups, including the three organizations that have been mobilizinglarge customers towards green products, say the coming together of two traditionaladversaries reflects a new commitment to a common goal.

"This is our best chance to save woodland caribou, permanently protect vast areasof the Boreal Forest and put in place sustainable forestry practices," said RichardBrooks, spokesperson for participating environmental organizations and Forest

Campaign Coordinator of Greenpeace Canada. "Concerns from the public and themarketplace about wilderness conservation and species loss have been criticaldrivers in arriving at this agreement. We have a lot of work to do together to makethis agreement successful and we are committed to make it happen."

Also vital to the agreement have been the efforts of the Pew Environment Group andIvey Foundation, which worked to support the two sides coming together and tofacilitate the negotiations.

"For years we have helped bring opposing parties together to conserve this globaltreasure, Canada's boreal forest," said Steve Kallick, director of the Pew

Environment Group's International Boreal Conservation Campaign. "We're thrilledthat this effort has led to the largest commercial forest conservation plan in history,which could not have happened without both sides looking beyond their differences.As important as today's announcement is, our ultimate success will be measured byhow we tackle the work ahead to put this plan into practice."


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The Agreement identifies explicit commitments for both sides and sets out a plan,which includes:

The development and implementation of world-leading forest management andharvesting practices;

The completion of joint proposals for networks of protected areas and the recoveryof species at risk including woodland caribou;

A full life cycle approach to forest carbon management; and

Support for the economic future of forest communities and for therecognition of conservation achievements in the global marketplace.

Signatory environmental organizations, FPAC, and the Association's companieshave begun meetings with provincial governments, First Nations and localcommunities across the country to seek their leadership and full participation inadvancing the goals of the Agreement. Participants recognize that governments,including First Nation governments, are decision makers within their jurisdictions.The Agreement recognizes that aboriginal peoples have constitutionally protectedaboriginal and treaty rights that must be respected and engaged in order for theAgreement to fulfill its objectives.

The progress made to reach the objectives laid out in the Canadian Boreal ForestAgreement will be regularly measured and reported on by a jointly agreed-uponindependent auditor.

Forestry Companies Participating in the Agreement:AbitibiBowater, Alberta Pacific Forest Industries, AV Group, Canfor, Cariboo Pulp &Paper Company, Cascades Inc., DMI, F.F. Soucy, Inc., Howe Sound Pulp andPaper, Kruger Inc., LP Canada, Mercer International, Mill & Timber Products Ltd,NewPage Port Hawkesbury Ltd, Papier Masson Lte, SFK Pulp, Tembec Inc., TolkoIndustries, West Fraser Timber Co. Ltd, Weyerhaeuser Company Limited - allrepresented by the Forest Products Association of Canada.

Environmental Organizations Participating in the Agreement:Canadian Boreal Initiative, Canadian Parks and Wilderness Society, Canopy

(formerly Markets Initiative), the David Suzuki Foundation, ForestEthics,Greenpeace, Ivey Foundation, The Nature Conservancy, and the Pew EnvironmentGroup's International Boreal Conservation Campaign. The Hewlett Foundation'ssupport for boreal forest conservation has been critical to the collective efforts ofthese groups.


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For further information: CONTACT: Forest Products Association of Canada: MonicaBailey, Manager, Communications: (613) 563-1441 xt 323; Canadian BorealInitiative: Suzanne Fraser, Director of Communications: (613) 552-7277; Canopy:Nicole Rycroft, Executive Director: (778) 987-9099; CPAWS: Ellen Adelberg,Director of Communications and Marketing: (613) 292-2875; David Suzuki

Foundation: Jode Roberts, Communications Specialist: (647) 456-9752;ForestEthics: Todd Paglia, Executive Director: (416) 527-2284; Greenpeace: AlexPaterson, Media & Public Relations: (416) 524-8496; The Ivey Foundation: TimGray, Program Director: (416) 867-9229; Pew Environment Group: Elyssa Rosen:(775) 224-7497; The Nature Conservancy: Aaron Drew, Media Relations: (720) 425-3930; Location of other media materials:www.CanadianBorealForestAgreement.com

MMPIQ POR:

Fourth Amended Joint Plan and Disclosure Statement filed (9/21/10)

Class: 1EClass Descriptions: Equity InterestsImpaired/Unimpaired: ImpairedTreatment: Holders retain their Interests.

"This Class is Impaired, and the Holders are entitled to vote on the Plan. EachHolder of Allowed Interests in this Class, as of the Record Date, shall retain itsInterests in the Debtor. In the alternative, the Holder may elect to have its Interests

redeemed, which redemption shall occur on, or as soon as practicable after, theEffective Date. If the Holder elects to have its stock redeemed, such Holdershall receive on account of and in exchange for its Interests cash in theamount of $0.25 for each share of MMPI Existing Common Stock held by theHolder.

The deadline for Holders of Interests to elect redemption of its MMPI ExistingCommon Stock shall be the date set as the deadline for casting Ballots to accept orreject the Plan (the Election Deadline). Holders who do not make a redemptionelection as of the Election Deadline will be deemed to have irrevocably elected toretain their Interests in the Debtor."

Source: PACER (Docket 1845)

Pension issue settled in principal, better earning than expected:

Published September 7th, 2010 at 6:19 p.m. | Updated at 18:20


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AbitibiBowater expects to generate net profits of juicy next year

Canadian Press

AbitibiBowater paper mill, to be relieved of its restructuring process judicial October14, expects to generate profits totaling U.S. $ 1.5 billion between early 2011 and late2014.

According to a document filed in court recently, the Montreal-based companyexpects to suffer a net loss of U.S. $ 427 million in 2010, then a net profit of U.S. $295 million in 2011 to U.S. $ 387 million in 2012 , U.S. $ 384 million in 2013 andU.S. $ 445 million in 2014.

In fact, net profits could be back in the second half of 2010, if we rely on projectionsof management.

As for revenues, they would spend 4.66 billion USD in 2010 to 5,340,000,000 in2011 $, an increase of 14.5 percent. According to forecasts, then they remainrelatively stable until 2014.

The calculations are based partly on the slow recovery experienced by the forestrysector in recent months, partly because of increased Chinese demand. They arealso based on the painful rationalization AbitibiBowater establishment in recentmonths.

Thousands of employees lost their jobs, the company wishing to concentrate onwhat it considers to be its factories more efficient and less costly to operate.Moreover, no less than a quarter of headquarters staff was dismissed.

Furthermore, to restore its balance sheet, AbitibiBowater has obtained $ 615 millionCdn of the sale to Hydro-Quebec's interests in the Manicouagan hydroelectriccompany, whose $ 200 million were used to repay holders of bonds. The companyhas also pulled some $ 37 million from the sale of closed plants in Quebec, Ontarioand British Columbia and $ 53 million from the sale of timberlands.

In addition, the financing costs of AbitibiBowater will decrease dramatically once the

reorganization is complete. Currently, the company is awash in no less than U.S. $ 7billion of unsecured debt and U.S. $ 1.1 billion of secured debt.

Finally, the company has benefited from the protection of the court to cancel morethan 200 contracts, which would have saved $ 69 million CDN in 2010.


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When the "new" AbitibiBowater will come, the debt of U.S. $ 7 billion has beenconverted into ordinary shares. The actions of the current company, they will beremoved without compensation to their owners, as is often the case in suchcircumstances.

Value of nearly U.S. $ 4 billion

At the request of AbitibiBowater, the firm Blackstone has estimated that the newcompany would have a total value between 3.5 and 3.9 billion U.S. dollars. Takinginto account the debt of U.S. $ 1.25 billion it will continue to drag, the new shares ofAbitibi would have a total value of U.S. $ 2.4 billion.

The majority of the shares will be distributed to creditors, but a portion of 8.5 percentof the lot will be reserved for incentive plans for executive directors ofAbitibiBowater. They will also receive a bonus linked to the restructuring of thecompany.

Each unsecured creditor will receive the best Canadian sum of $ 3036 CAN,regardless of the amount owed by Abitibi. The rest can take the form of companystock that often worth much less than the claims.

As for CBS, which AbitibiBowater owes money, a total of C $ 5 million granted tothem, with the key to a limit on the maximum payment that will reach every worker.

To make all these payments and ensure that they have liquidity of at least U.S. $600 million in mid-October, AbitibiBowater after obtaining exit financing of up to U.S.

$ 2.3 billion.Of this amount, approximately $ CAN 130 million will come from the recentsettlement with Ottawa in an expropriation case in Newfoundland, while the banksJP Morgan, Barclays and Citigroup have agreed to pay U.S. $ 300 million to Abitibi.Significant emissions rights and obligations will complement the whole.

On the other hand, employees in Quebec and Ontario AbitibiBowater should expectchanges to their pension plans. Faced with unfunded liabilities of those who brushagainst the $ 160 million per year, the company has asked Quebec, at Queen's Parkand Ottawa for a regulatory exemption.

Abitibi said it recently reached an agreement in principle with Quebec in this regard.The defined benefit plans would be processed by programs less attractive, butpayments to retirees would remain unchanged.

Canadian creditors must approve the restructuring plan AbitibiBowater at a meeting


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de la cession de terrains forestiers.

En outre, les cots de financement d'AbitibiBowater diminueront drastiquement unefois sa rorganisation termine. l'heure actuelle, l'entreprise croule sous pasmoins de 7 milliards $ US de dette non garantie et 1,1 milliard $ US de dette

garantie.

Enfin, la compagnie a profit de la protection de la cour pour faire annuler plus de200 contrats, ce qui lui aura permis d'conomiser 69 millions $ CAN en 2010.

Lorsque le nouveau AbitibiBowater verra le jour, la dette de 7 milliards $ US aurat convertie en actions ordinaires. Quant aux actions de la compagnie actuelle,elles seront supprimes sans compensation pour leurs dtenteurs, comme c'estsouvent le cas en pareilles circonstances.

Valeur de prs de 4 milliards $ US

la demande d'AbitibiBowater, la firme Blackstone a valu que la nouvelleentreprise aurait une valeur totale oscillant entre 3,5 et 3,9 milliards $ US. En tenantcompte de la dette de 1,25 milliard $ US qu'elle continuera traner, les nouvellesactions d'Abitibi auraient une valeur globale de 2,4 milliard $ US.

La plus grande partie des actions sera remise aux cranciers, mais une portion de8,5 pour cent du lot sera rserve aux programmes d'intressement destins auxdirigeants d'AbitibiBowater. Ceux-ci auront galement droit une prime lie larestructuration de l'entreprise.

Chaque crancier non garanti canadien recevra au mieux la somme de 3036 $CAN, peu importe la somme qu'Abitibi lui doit. Le reste pourra prendre la formed'actions de l'entreprise qui vaudront souvent bien moins que les crances.

Quant aux employs canadiens qui AbitibiBowater doit de l'argent, une sommetotale de 5 millions $ CAN leur est consentie, avec la cl un plafond quant auversement que pourra toucher chaque travailleur.

Pour effectuer tous ces paiements et s'assurer d'avoir des liquidits d'au moins 600millions $ US la mi-octobre, AbitibiBowater compter obtenir un financement de

sortie pouvant atteindre 2,3 milliards $ US.

De cette somme, quelque 130 millions $ CAN proviendront du rcent rglementconclu avec Ottawa dans une affaire d'expropriation Terre-Neuve, tandis que lesbanques JP Morgan, Barclays et Citigroup se sont engages prter 300 millions $US Abitibi. D'importantes missions de droits et d'obligations viendront complter


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le tout.

D'autre part, les employs qubcois et ontariens d'AbitibiBowater doivents'attendre des changements leurs rgimes de retraite. Face aux dficitsactuariels de ces derniers, qui frlent les 160 millions $ par anne, l'entreprise a

demand Qubec, Queen's Park et Ottawa une drogation rglementaire.

Abitibi dit avoir rcemment conclu un accord de principe avec Qubec cet gard.Les rgimes prestations dtermines seraient transforms par des programmesmoins avantageux, mais les versements des retraits demeureraient inchangs.

Les cranciers canadiens doivent approuver le plan de restructurationd'AbitibiBowater lors d'une assemble prvue le 14 septembre Montral.

More articles on Pension issue, stretch out over 10 years and the 200 millionin bonuses :

The Charest government AbitibiBowater lets be generous with its managementemployees taking advantage of the concessions wrested from its workers, accusedthe Parti Quebecois. Yesterday, the PQ critic Franois Rebello attacked Quebec'sdecision to allow the multinational spread over 10 years contributions to cover thedeficit of $ 1.3 billion in its pension plans. He said the government should haveaccompanied the relaxation of the rules of the obligation to grant shares to pay thepension funds of employees.

He recalled that the AbitibiBowater restructuring plan confirmed by a significant

reduction in pensions for workers, but provides "a generous compensation programfor executives."

According to the Member for La Prairie, the 550 beneficiaries of this plan couldcollect up to $ 200 million. "It's clearly too generous. And it does not even identifywhich leader is right. It could end up in the pockets of a handful of people. "

He recalled that the CSN union center and the Communications, Energy andPaperworkers condemned the granting of bonuses of $ 6 million to fifty frames.

Franois Rebello argued that he should command the decency to wait "at least two

years to pay" these bonuses related to the restructuring plan. "When they havestarted selling newsprint at a price that makes sense and they make a profit, we cansay that they are entitled to the premium.

"Overall, our pension funds, stop fooling around," he concluded. We must structureour business to not be fooled. When companies are in trouble, that's when he must


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put the proper conditions. With the agreement yesterday, we will end up with journalarticles where we will [one day] from the CEO of AbitibiBowater with $ 30 million inhis pockets and we will be outraged by this.

http://www.cyberpresse.ca/le-soleil/affaires/actualite-economique/201009/15/01-

4315999-laxisme-envers-abitibibowater-dit-le-pq.php

CDS article in 2009:

BEIJING, June 12 (Reuters) - Credit default swaps are "instruments of destruction"that should be outlawed, billionaire investor George Soros said on Friday.

Soros said the asymmetry of risk and reward embedded in CDS exerted so muchdownward pressure on the bonds underlying the contracts that companies andfinancial institutions could be brought to their knees.

"Some derivatives ought not to be allowed to be traded at all. I have in mindcredit default swaps. The more I've heard about them, the more I've realisedthey're truly toxic," he told a banking conference.

"CDS are instruments of destruction which ought to be outlawed," Soros told a

meeting of the Institute of International Finance, many of whose member banks andfinancial institutions are active participants in the huge CDS market.

Going short on bonds by purchasing a CDS contract carried limited risk butalmost unlimited profit potential. By contrast, selling CDSs offered limitedprofit and practically unlimited risk, Soros said.

This asymmetry, which encouraged investors in effect to sell corporate bonds short,was reinforced by the fact that CDS were traded and so tended to be priced as

warrants, which could be sold at any time, and not as options, he added.

Credit default swaps are used to protect against nonpayment of debt or to speculateon a company's credit quality.


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But Soros said: "People buy a CDS not because they expect an eventualdefault but because they expect them to appreciate in response to adversedevelopments."

SKEWED INCENTIVES:

He said one financial institution that discovered to its cost the risk/reward distortionsof CDS was insurer American International Group (AIG.N), which was a big seller ofCDS, offering banks protection against a deterioration in their bond portfolios,especially mortgage-linked securities.

The U.S. government stepped in to save AIG from collapse under bad mortgagebets last September, and has put up to $180 billion at the company's disposal since.

"AIG thought it was selling insurance on bonds and as such CDS were outrageouslyoverpriced. In fact AIG was selling bear market warrants and it severelyunderestimated their value," Soros said.

At this point, the phenomenon that Soros describes as reflexivity kicked in. That is to

say, the mispricing of financial instruments -- in this case, CDS -- affected thefundamentals that the prices were supposed to reflect.

Nowhere were the consequences of the ensuing chain reaction more severe than inthe case of financial institutions, whose ability to do business depended on trust,Soros argued. He cited the failures of Bear Stearns and Lehman Brothers.

But the potential damage that CDS could do was not limited to financial firms,Soros added. He pointed to the bankruptcy of North America's largest

newsprint maker, AbitibiBowater Inc (ABWTQ.PK), and the pendingbankruptcy of General Motors (GM.N)

"In both cases, some bondholders owned CDS and they stood to gain more bybankruptcy than by reorganisation."It's like buying life insurance on someone else's


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life and owning a license to kill," he concluded.

Soros' criticism echoes fellow investor Warren Buffet's description of derivatives in2003 as "financial weapons of mass destruction".

On derivatives in general, Soros said they should be as strictly regulated as stocks.He said derivatives should be standardised and saw no case for custom-madederivatives, which he said only increased the profit margins of the financiers whotailored them.

Lumber limit Up:

Sep 22, 2010 (Dow Jones Commodities News via Comtex) -- 0752 EDT [DowJones] - CME lumber futures Wednesday are locked up the daily limit of $10.00 per1,000 board feet for the second straight day, reaching levels that haven't been seensince May 26 and leaving a gap on daily charts. The trading is a continuation ofTuesday's action in which prices jumped the daily limit after the U.S. CommerceDepartment released a surprisingly bullish August housing starts report. While manycash-oriented traders dismissed the seasonal number as being awash in seasonal-adjustment modifiers, other investors stepped in to buy on the market's technicalmerits. As of 07:58 a.m. EDT, Nov futures were up 4.31% at $242.00 while Jan wasup 3.99% at $260.50 and March was up 3.81% at $272.80. (LWA)

Contact us at 913-322-5179 or [email protected](END) Dow Jones Newswires

09-22-10 0800ET

Tembec recent sell of land for $1,820 and acre:

West Feliciana Parish tract sellsA 770-acre tract in West Feliciana Parish was purchased by Benton LandInvestments for $1.4 million. Tembec USA owned the property as part of their

Crown-Zellerbach purchase. The acreage fronts on La. Highway 964 near Tembecand also on Thompson's Creek. According to John Kean IV with Beau BoxCommercial Real Estate Company, who brokered the transaction, 200 acres of theparcel are high land; the remaining 570 acres are bottomland located nearThompson's Creek and are subject to flooding. "This [latter] portion of the property isgreat for hunting," said John. The site also has marketable timber and a rail station


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that once serviced the Tembec paper mill. The property sold for about $1,820 peracre for the entire 770-acre tract. According to Kean, the property will be usedprimarily for recreational purposes until market conditions improve.

(Appraiser Tom Cook owns Cook Moore and Associates. Reach him at 293-7006 or

[email protected].)

http://www.businessreport.com/archives/real-estate-weekly/latest/Sept 23, 2010

More Paper price hikes, Sonoco :

More Paperboard Price Hikes Out for OctoberSpet. 15, 2010 - Two U.S. paperboard makers have come out with October pricehikes for uncoated recycled paperboard.

Sonoco said that it will increase prices in the U.S. and Canada by $35 per ton for alluncoated recycled paperboard grades, effective with shipments on October 11.

RockTenn announced a $35 per ton price increase on all grades of its uncoatedrecycled paperboard, effective with shipments on October 18.

In addition, on Sept. 13 Caraustar announced a $35 per ton on all uncoated recycledpaperboard grades effective Sept. 27, and The Newark Group is out with a $30 perton increase effctive Oct. 4.

SOURCE: Sonoco and RockTenn

Newsprint benchmarks:

http://www.paperage.com/foex/newsprint.html

DateStandard Newsprint45 g/m2 in Europe(Euro)

Standard Newsprint30lb. in the U.S.(US dollars)

Standard Newsprint27lb. in the U.S.(US dollars)

21-Sept-10 418.19 618.82 659.70

14-Sept-10 419.04 617.43 658.23

7-Sept-10 412.89 606.85 646.80

31-Aug-10 413.25 604.75 644.56

24-Aug-10 412.50 603.32 642.73


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17-Aug-10 412.29 603.32 642.73

10-Aug-10 411.49 602.29 641.66

3-Aug-10 411.31 600.71 640.02

27-July-10 411.12 596.71 635.39

20-July-10 410.25 593.06 630.94

Excerts from the 8K

In the third quarter of 2010 our financial results continued to improvesignificantly, continuing the trend observed in the month of July as describedbelow.Sales for the month of August 2010 were approximately $415 million ascompared to August 2009 sales of approximately $349 million. August 2010

consolidated operating income was approximately $11 million as compared to anAugust 2009 consolidated operating loss of approximately $21 million andapproximately $9 million operating income in July 2010. EBITDA and AdjustedEBITDA for August 2010 was $68 million and $50 million, respectively,compared to August 2009 EBITDA of $37 million and Adjusted EBITDA of $27million (which included $27 million of alternative fuel tax credits) (seeReconciliation of non-GAAP information below for additional information regardingour calculation of EBITDA and Adjusted EBITDA). Product linecontribution, which is before depreciation and SG&A, continued to improve in August2010.

August 2010 newsprint sales volumes were approximately 249,000 metric tonscompared to approximately 250,000 metric tons for August 2009. Ournewsprint product line contribution was approximately $13 million in August2010 compared to a negative contribution of approximately $16 million inAugust 2009, reflecting improved average transaction prices. Newsprint sales inAugust 2010 were approximately $156 million as compared to sales ofapproximately $125 million for August 2009. Our newsprint average transactionprice (international and North America) for August 2010 wasapproximately $627 per metric ton as compared to a July 2010 average ofapproximately $616 per metric ton and August 2009 average of approximately$500 per metric ton. Our newsprint average cash cost was approximately $482 permetric ton in August 2010 as compared to approximately $473 per metricton in July 2010 and approximately $484 per metric ton in August 2009. Theimprovement in our newsprint average transaction price increase is a result ofcontinued implementation of the North American and international newsprintprice increases.


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BMO commodities prices pulp and newsprint:

http://www.bmonesbittburns.com/economics/goods/current/

September 22, 2010

Energy & Materials CrudeOil

Nat. Gas

Lumber PulpNews-print

(Henry (Alta.

(WTI) Hub) Empress)

US$/bbl US$/mmbtu US$/mbf US$/tonne

1997 20.58 2.50 1.41 379 590 555

1998 14.37 2.08 1.53 312 543 596

1999 19.25 2.27 2.04 368 541 509

2000 30.30 4.31 3.81 282 685 564

2001 25.92 3.96 3.48 275 558 585

2002 26.10 3.36 2.63 262 490 465

2003 31.14 5.50 4.82 268 553 503

2004 41.44 5.91 5.25 386 640 550

2005 56.46 8.81 7.51 347 647 610

2006 66.10 6.74 5.92 290 722 667

2007 72.36 6.98 6.32 245 824 593

2008 99.57 8.86 8.09 215 858 701

2009 61.69 3.95 3.46 177 718 564

y-t-d 2010 77.67 4.59 3.75 249 954 589

Sep '09 69.46 3.01 2.56 183 770 450

Oct 75.82 4.02 3.80 185 800 480

Nov 78.08 3.70 3.30 206 830 500

Dec 74.30 5.33 4.77 214 830 530

Jan '10 78.22 5.81 5.02 234 850 545

Feb 76.42 5.33 4.63 282 880 550

Mar 81.24 4.29 3.62 276 910 565

Apr 84.48 4.03 3.40 312 960 575

May 73.84 4.15 3.48 273 1000 595

Jun 75.35 4.81 3.65 207 1020 615


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Jul 76.37 4.62 3.30 217 1020 630

Aug 76.82 4.31 3.04 220 990 640

m-t-d Sep 74.97 3.91 3.01 230 n.a. n.a.

Forecast2010 78 4.70 3.85 242 947 610

2011 83 5.75 5.15 245 820 685

Commodity price forecasts are by BMO Capital Markets Economics and are independentof those used by BMO CM Equity Research

Pulp and Paper producer raised to out perform by Credit Suisse:

Brazil's Fibria Raised to `Outperform' atCredit Suisse on Pulp OutlookBy Alexander Cuadros - Sep 2, 2010 7:45 AM CT

Fibria Celulose SA, the worlds largest pulp producer, was raised to outperform from neutralat Credit Suisse Group AG, which cited a more bullish pulp-price outlook.Recent pulp market developments indicate that the much feared short-term correction should beconsiderably milder than consensus, Ivan Fadel, an analyst at Credit Suisse, wrote in a note toclients today. We believe that the weakness in China seen over the last 5-6 months hasapproached an end.To contact the reporter on this story: Alexander Cuadros in Sao Paulo [email protected]://www.bloomberg.com/news/2010-09-02/brazil-s-fibria-raised-to-outperform-at-credit-suisse-on-pulp-outlook.html

Stumpage fees non-existent in Newfoundland:

August 30, 2010

The Green Party of Canada expressed shock that the federal government hasreached a settlement with forest giant AbitibiBowater rather than fight thecorporations Chapter 11 claim under NAFTA. Abitibi claimed that Newfoundlandand Labrador had seized its assets in what was tantamount to expropriation. Thetruth is that AbitibiBowater was relying on a 99-year lease which it was violating byleaving the province.


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The terms of the Newfoundland Labrador lease were laughable, amounting tovirtually free stumpage and hydro rights. The 99-year lease was archaic but wasbased on AbitibiBowater running the mill. The decision of the federal government topay the forest company $130 million, without opposing the claim, is an outrage, saidGreen Leader Elizabeth May.

AbitibiBowater filed for damages under NAFTA in 2008. When the company closeda newsprint mill in Grand Falls-Windsor, putting hundreds of people out of work,Premier Danny Williams decided to take back the hydro assets and resource rightsthat had been leased to the company. Williamss decision was widely seen as actingin the best interest of the community, which was essentially economically dependenton the mill.

Adding insult to injury, the federal government has stated that in future cases it willgo back and claim the damages from any province whose actions precipitate a suit.The Harper government may as well take the side of every US corporation andattack Canadian provinces with this anti-Canadian policy, said JacquelineRomanow, Green Party Critic on International Trade and Development.

As the representative for Newfoundland and Labrador on the Green Party federalcouncil, I share the outrage of many in my home province who wonder how lowStephen Harper will go in his ongoing spat with Danny Williams. This low blow costCanadian taxpayers $130 million, said Marlene Wells.

AbitibiBowater is headquartered in Montreal but is incorporated in Delaware, makingit eligible to file under NAFTA. The settlement must be court-approved and the

Green Party of Canada is joining calls to make the entire settlement public.Contact:Debra EindiguerPress [email protected]

response to debtor's omnibus response

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