Moody's Backs AbitibiBowater Junk Ratings

NEW YORK (AP) — Moody's Investor Service on Monday backed ratings of Canadian pulp and paper maker AbitibiBowater Inc. and its subsidiary after it announced a $2.4 billion recapitalization plan to improve liquidity.

The Montreal-based company on Friday unveiled an elaborate plan to cut its debt by $2.4 billion, reduce its annual interest payments and improve its capital structure.

The plan includes measures to convert $2.9 billion in notes from predecessor Abitibi-Consolidated, currently a subsidiary, into a combination of new notes, common stock and warrants. The company will also offer new notes and issue new warrants.

On Monday, the company said it lined up a new investor to provide a backstop commitment of $100 million for its recapitalization plan.

Moody's backed the company's junk-grade corporate family rating and default rating of 'Caa3.' The ratings reflect a heightened probably of default in the near term, the agency said.

It also affirmed Abitibi's secured term loan, unsecured notes and speculative grade liquidity ratings. The rating outlook is negative.