February 9, 2009 / 3:01 PM / 9 years ago

UPDATE 2-AbitibiBowater announces debt exchange offer

* To exchange old debt for new debt with later maturities

* Says to post an operating loss for the fourth quarter

* Shares fall 10 percent (Recasts, adds details on debt offering, share price move)

NEW YORK, Feb 9 (Reuters) - AbitibiBowater Inc ABH.N said on Monday it is offering to exchange debt for new debt with later maturities in a bid to gain time to try and turnaround its business, and the newsprint maker also warned that it expects to post an operating loss in the fourth quarter.

AbitibiBowater, the largest North American newsprint maker, said it has begun a private exchange offer and consent solicitation with respect to $1.8 billion of debt securities issued by its Bowater Inc subsidiary.

The company also said that it is seeking consents to amend the indentures governing the existing notes, in a bid to eliminate certain restrictive covenants.

The company said the exchange offers and consent solicitation expire on March 9, unless extended.

The company, which has struggled amid the sharp contractions in the newspaper industry in recent years, said it expected to post an operating loss of $285 million to $295 million for the fourth quarter and would shut some operations.

Separately, Bowater has entered into a note purchase agreement with a private institutional investor, who has agreed to purchase $80 million of notes in a private placement.

The company intends to use the proceeds from the notes offering and the private placement to repay amounts outstanding under Bowater’s bank credit facilities.

Early in 2008, AbitibiBowater cut about 1 million tons of newsprint and specialty papers production in a bid to tackle a slump in demand. The company has since taken further measures to curtail production.

Excluding items, the company now expects fourth quarter operating income to be $52 million to $62 million. It also expects fourth quarter adjusted earnings before interest, taxes, depreciation and amortization of $235 million to $245 million.

The company also warned that its fourth-quarter results might be impacted by non-cash goodwill impairment charges.

AbitibiBowater was formed in 2007 after Bowater acquired Abitibi-Consolidated -- The combined entity still holds much of its debt separately under the names of the two original companies.

Bowater and Abitibi have in excess of $1 billion of maturities and repayment obligations that come due before the end of August 2009 and significant maturities that come due in 2010 and beyond.

Shares of the company fell 8 cents to $0.73 a share on the New York Stock Exchange. (Reporting by Euan Rocha and Matt Daily, editing by Dave Zimmerman and Bernard Orr)

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