8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 14, 2010

ABITIBIBOWATER INC.

(Exact name of Registrant as Specified in Charter)

Delaware	001-33776	98-0526415
(State or other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

AbitibiBowater Inc.

1155 Metcalfe Street, Suite 800

Montreal, Quebec

Canada H3B 5H2

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (514) 875-2160

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01 Regulation FD Disclosure.

On September 14, 2010, AbitibiBowater Inc. (the “Company”), through a wholly owned subsidiary, will commence a private offering of new senior secured notes as part of its proposed exit financing relating to its pending emergence from creditor protection proceedings. A press release issued by the Company on September 14, 2010 announcing the private offering is attached as Exhibit 99.1 to this report. The notes offering is being made solely to qualified institutional buyers, as defined under Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to certain non-U.S. persons, as defined under Regulation S under the Securities Act (“eligible holders”).

The notes offering will be made pursuant to a confidential offering memorandum dated September 14, 2010 (the “Offering Memorandum”). Certain sections of the Offering Memorandum contain information regarding the Company that has not previously been publicly disclosed. These sections include: (i) “Summary,” (ii) “Risk Factors,” which updates the most recently filed Risk Factors relating to the Company, (iii) “Use of Proceeds,” (iv) “Capitalization,” (v) “Unaudited Pro Forma Consolidated Financial Information” and “Reconciliation of Non-GAAP Information,” (vi) “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources,” (vii) “Business,” and (viii) “Description of Certain Indebtedness.” These sections are furnished as Exhibits 99.2, 99.3, 99.4, 99.5, 99.6, 99.7, 99.8 and 99.9 respectively, to this report.

The information contained in this Current Report on Form 8–K, including the Exhibits, is furnished pursuant to Item 7.01 of Form 8–K and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information in this report shall not be incorporated by reference into any registration statement or any other document filed pursuant to the Securities Act, except as otherwise expressly stated in such filing. By filing this report and furnishing the information contained herein, including the exhibits hereto, the Company makes no admission as to the materiality of any such information.

Forward-Looking Statements

Statements in this report, including the exhibits, that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements relating to our intentions, beliefs or current expectations concerning, among other things, the notes offering and other financing activities, our pending emergence from Creditor Protection Proceedings, our results of operations, financial conditions, liquidity, prospectus, growth, strategies and the industry in which we operate. Forward-looking statements may be identified by the use of forward-looking terminology such as the words “will,” “could,” “may,” “intend,” “expect,” “estimate,” “believe,” “anticipate,” and other terms with similar meaning indicating possible future events or potential impact on the business or securityholders of AbitibiBowater.

The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance. These statements are based on management’s current assumptions, beliefs and expectations, all of which involve a number of business risks and

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uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to:

• industry conditions generally;

• growth in alternative media that would reduce the demand for print media and our products;

• the ability of our customers to afford to pay for our products;

• general economic and market conditions, including the new residential construction market in the U.S.;

• our capital intensive operations and the adequacy of our capital resources;

• our ability to obtain permits to operate our facilities and continue to remain in compliance with environmental laws and regulations;

• strikes and other labor-related supply chain disruptions that may impact our ability to operate our facilities;

• fluctuations in foreign currency exchange rates, especially those relative to the U.S. dollar and the Canadian dollar;

• our significant degree of leverage, underfunding of our pension plans and concerns about our financial viability;

• the prices and terms under which we would be able to sell assets;

• lack of comparable financial data due to the restructuring of our business or the adoption of Fresh Start Accounting;

• the success of our implementation of additional measures to enhance our operating efficiency and productivity;

• the costs of raw materials such as energy, chemicals and fiber;

• our ability to obtain fair compensation for our expropriated assets in the province of Newfoundland and Labrador, Canada and the possibility that we could lose any or all of our equity interest in Augusta Newsprint Company;

• the post-emergence impact of the bankruptcy proceedings on our operations, including the impact on our ability to negotiate favorable terms with suppliers, customers, counterparties and others; and

• the risk factors set forth under the section of the Offering Memorandum titled “Risk Factors,” included as an exhibit to this report.

These factors should not be construed as exhaustive and should be read with the other cautionary statements in this report. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking

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statements contained in this offering memorandum, those results or developments may not be indicative of results or developments in subsequent periods.

Any forward-looking statements which we make in this report or the sections of the Offering Memorandum filed as exhibits hereto speak only as of the date of such statement, and we do not undertake, and specifically decline, any obligation to update such statements or to publicly announce the results of any revisions to any such statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

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Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

99.1	Press Release issued by AbitibiBowater Inc. on September 14, 2010
99.2	The section of the Offering Memorandum entitled “Summary”
99.3	The section of the Offering Memorandum entitled “Risk Factors”
99.4	The section of the Offering Memorandum entitled “Use of Proceeds”
99.5	The section of the Offering Memorandum entitled “Capitalization”
99.6	The section of the Offering Memorandum entitled “Unaudited Pro Forma Consolidated Financial Information” and “Reconciliation of Non-GAAP Information”
99.7	The section of the Offering Memorandum entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”
99.8	The section of the Offering Memorandum entitled “Business”
99.9	The section of the Offering Memorandum entitled “Description of Certain Indebtedness”

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

ABITIBIBOWATER INC.
By:	/S/    JACQUES P. VACHON
Name:	Jacques P. Vachon
Title:	Senior Vice President, Corporate Affairs and Chief Legal Officer

Dated: September 13, 2010

EXHIBIT INDEX

99.1	Press Release issued by AbitibiBowater Inc. on September 14, 2010
99.2	The section of the Offering Memorandum entitled “Summary”
99.3	The section of the Offering Memorandum entitled “Risk Factors”
99.4	The section of the Offering Memorandum entitled “Use of Proceeds”
99.5	The section of the Offering Memorandum entitled “Capitalization”
99.6	The section of the Offering Memorandum entitled “Unaudited Pro Forma Consolidated Financial Information” and “Reconciliation of Non-GAAP Information”
99.7	The section of the Offering Memorandum entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”
99.8	The section of the Offering Memorandum entitled “Business”
99.9	The section of the Offering Memorandum entitled “Description of Certain Indebtedness”

EX-99.1

Exhibit 99.1

PRESS RELEASE

US$

ABWTQ (OTC)

AbitibiBowater Announces Private Offering of

$750,000,000 of Senior Secured Notes

MONTREAL, September 14, 2010 – AbitibiBowater Inc. (“AbitibiBowater”) announced today the commencement of a private offering (the “Offering”) of $750,000,000 of Senior Secured Notes due 2018 (the “Notes”). The Offering is a component of AbitibiBowater’s previously announced plans of reorganization and emergence from creditor protection in the U.S. and Canada.

The Notes will be senior secured obligations of AbitibiBowater, and will be guaranteed by AbitibiBowater’s existing and future wholly-owned material U.S. subsidiaries.

The Notes have not been and will not be registered under the Securities Act or any state securities laws. Further, the Notes may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements and, therefore, will be subject to substantial restrictions on transfer. The Offering is being made only to qualified institutional buyers inside the United States and to certain non-U.S. investors located outside the United States.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering, solicitation or sale would be unlawful.

Forward-Looking Statements

Statements in this press release that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. They include, for example, statements about AbitibiBowater’s exit financing plans and the terms of the Offering. Forward-looking statements may be identified by the use of forward-looking terminology such as the words “plan,” “will,” and other terms with similar meaning indicating possible future events or potential impact on the business or other stakeholders of AbitibiBowater and its subsidiaries.

The reader is cautioned not to place undue reliance on these forward-looking statements, which are not guarantees of future performance. These statements are based on management’s current assumptions, beliefs and expectations, all of which involve a number of business risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include, but are not limited to, the ability to obtain proposed financing on terms satisfactory to AbitibiBowater or at all, the

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condition of the U.S. credit markets generally and difficult industry conditions. Additional factors are detailed from time to time in AbitibiBowater’s filings with the Securities and Exchange Commission (SEC), including those factors contained in AbitibiBowater’s Current Report on Form 8-K filed on September 14, 2010. All forward-looking statements in this news release are expressly qualified by information contained in AbitibiBowater’s filings with the SEC. AbitibiBowater disclaims any obligation to update or revise any forward-looking information.

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Contacts

Investors Duane Owens Vice President, Finance 864 282-9488 Media and Others Seth Kursman Vice President, Public Affairs, Sustainability & Environment 514 394-2398 seth.kursman@abitibibowater.com

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EX-99.2

Exhibit 99.2

Summary

The following summary does not contain all of the information that you should consider before investing in the notes. You should read this entire offering memorandum carefully, including the matters discussed in the section titled “Risk factors” and the detailed information and financial information included in this offering memorandum.

Our Company

We are a leading global forest products company with a significant regional and global market presence in newsprint, coated mechanical and specialty papers, pulp and wood products. We are also one of world’s largest recyclers of newspapers and magazines. We were formed through the October 2007 combination of Abitibi and Bowater, which we refer to as the “combination.”

Through our subsidiaries, we currently own or operate 18 pulp and paper manufacturing facilities located in Canada, the United States and South Korea and 24 wood products facilities located in Canada. Excluding currently idled facilities, we have annual production capacity of approximately 6.0 million metric tons of a broad range of printing and writing papers such as newsprint, coated mechanical and specialty papers, which are sold to leading publishers, commercial printers and advertisers. In addition, we sell approximately 1.0 million metric tons of market pulp to paper, tissue and toweling manufacturers. Our sawmills, engineered wood products facilities and remanufacturing locations produce products primarily for new residential construction, and we either use the wood fiber residuals from this business to produce pulp and paper or sell the residuals on the open market.

For the last twelve months ended June 30, 2010, we generated revenues and Adjusted EBITDA of $4.5 billion and $196 million, respectively, and we generated revenue and Adjusted EBITDA of $4.5 billion and $242 million, respectively, for the last twelve months ended July 31, 2010 (see “Reconciliation of non-GAAP information” for information regarding our Adjusted EBITDA).

Our products

We manage our business along the following key business segments—newsprint, coated paper, specialty papers, market pulp and wood products. In general, our products are globally-traded commodities and are marketed in more than 70 countries.

Newsprint

We are among the largest producers of newsprint in the world by capacity, with operating capacity of approximately 3.3 million metric tons, or 9% of total worldwide capacity as of June 30, 2010. In addition, we are the largest North American producer of newsprint and have capacity of approximately 3.1 million metric tons or approximately 37% of total North American capacity. As of June 30, 2010, we owned or operated 12 newsprint facilities in North America and South Korea. We supply leading publishers with top-quality newsprint, including eco-friendly products made with 100% recycled fiber. For the six months ended June 30, 2010, approximately 50% of our total newsprint shipments were to markets outside of North America. These markets have exhibited better demand trends than North America. For the twelve months ended June 30, 2010, our newsprint segment had revenues of approximately $1.8 billion, or approximately 39% of our total revenues for such period.

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Coated papers

We produce coated papers at our Catawba, South Carolina facility. With capacity of approximately 658,000 metric tons, or 14% of total North American capacity, as of June 30, 2010, we are one of the largest producers of coated mechanical paper in North America. Our coated papers are used in magazines, catalogs, books, retail advertising, direct mail and coupons. We sell coated papers to major commercial printers, publishers, catalogers and retailers. For the twelve months ended June, 30, 2010, our coated papers segment had revenues of approximately $428 million, or approximately 9% of our total revenues for such period.

Specialty papers

We produce specialty papers at nine facilities in North America. With operating capacity of approximately 1.8 million metric tons as of June 30, 2010, or 35% of total North American capacity, we are one of the largest producers of specialty papers in North America, including super-calendared, super-bright, high bright, bulky book and directory papers and kraft papers. Our specialty papers are used in books, retail advertising, direct mail, coupons and other commercial printing and packaging applications. For the twelve months ended June 30, 2010, our specialty papers segment had revenues of approximately $1.3 billion, or approximately 29% of our total revenues for such period.

Market pulp

Wood pulp is the most common material used to make paper. Pulp shipped and sold as pulp, as opposed to being processed into paper in the same facility, is commonly referred to as market pulp. As of June 30, 2010, we had capacity of approximately 1.1 million metric tons of market pulp at five facilities in North America, which represented approximately 7% of total North American capacity. Market pulp is used to make a range of consumer products including tissue, packaging, specialty paper products, diapers and other absorbent products. For the twelve months ended June 30, 2010, our market pulp segment had revenues of approximately $634 million, or approximately 14% of our total revenues for such period.

Wood products

We operate 18 sawmills in Canada that produce construction grade lumber sold in North America. We also operate two engineered wood products facilities in Canada that produce products for specialized applications, such as wood i-joists for beam replacement, and four remanufacturing facilities in Canada that produce roofing and flooring material and other products. We sell pulpwood, saw timber and woodchips to customers located in Canada and the United States. For the twelve months ended June 30, 2010, our wood products segment had revenues of approximately $391 million, or approximately 9% of our total revenues for such period.

Competitive strengths

We believe that the following are competitive strengths that provide us with a strong foundation to execute on our strategy and earn an acceptable return on capital:

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Global leader in the forest products industry

We are a global leading manufacturer of newsprint, coated mechanical paper, specialty papers and market pulp, with locations in the U.S., Canada and Korea. According to RISI, we have established a global leadership position in newsprint and leading North American positions in our key segments based on annual manufacturing capacity, including: #1 in newsprint, #3 in coated paper, #1 in mechanical specialty papers and #6 in market pulp. We believe our leading positions provide us and our customers with competitive advantages, including significant economies of scale, extensive sales and marketing coverage in over 70 countries and what we believe to be best-in-class product offerings.

Highly competitive cost structure

Due to the aggressive cost reduction and mill rationalization actions we have taken since the combination, we believe we are among the lowest cost producers in our paper grades in the North American forest products industry. We believe that our mills have significant cost advantages as a result of their high efficiency levels, strong economies of scale and access to low cost sources of energy and fiber furnish. In addition, based on PPPC data, our restructuring actions have resulted in ten of our 12 newsprint mills now being in the lower half of the cost curve for all North American newsprint mills. Our Catawba mill is also consistently ranked as one of the lowest cost producers of coated mechanical paper in North America. Our restructuring process (discussed below under “—Plans of Reorganization”) also has provided us with the ability to reject and repudiate a number of burdensome and disadvantageous contracts and unexpired leases, negotiate labor cost reductions and obtain funding relief in respect of the solvency deficit in our Canadian pension plans. Since the time of the combination, we have lowered our workforce by 6,800 employees or 38%. Our workforce reduction efforts, in addition to improved plant efficiencies and increased scalability, have enabled us to reduce our selling, general and administrative expense (“SG&A”) by approximately 50% since 2007.

Diversified product mix and end markets

We offer a diverse range of products to various end markets that help us mitigate the impact of volatility in any particular product category or end market, which we believe reduces our operating risk. For the twelve months ended June 30, 2010, our sales percentage by category was newsprint at 39%, coated paper at 9%, specialty papers at 29%, market pulp at 14% and wood products at 9%. Our international sales have grown to 31% of our revenues for the twelve month period ended June 30, 2010, including 12% and 10% sold into Latin America and Asia, respectively. Importantly, with newsprint in a long-term decline in North America, given our leading global position, we have focused our efforts on selling production into the export market and for the six months ended June 30, 2010, approximately 50% of our total newsprint shipments were to the export market.

Capital structure flexibility

We expect to emerge from the restructuring process with a realigned capital structure and healthier balance sheet, with approximately $1.1 billion in debt. Our liquidity (cash position plus committed but undrawn lines of credit under our borrowing base for our asset-based revolving credit facility) is expected to be approximately $600 million at emergence, and our asset based revolving credit facility is not expected to have any financial maintenance covenants unless our

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liquidity drops below a minimum threshold level. See “Description of certain indebtedness—ABL Credit Facility.” We believe our realigned capital structure will provide us with greater financial flexibility, which will enable us to better react to changing market conditions and potential opportunities.

Experienced leadership team

We have a highly experienced management team. During our restructuring, we have streamlined our management structure and have successfully retained our key management talent. We believe this has provided us with the established leadership and functional experience necessary to help us execute our strategy, further reduce costs, enhance our competitive position and continue to help us improve our competitive position.

Our strategy

Key elements of our strategy to capitalize on our competitive position and enhance our returns on capital deployed are to:

Improve business mix

We plan to improve our business mix by focusing on grades that have and are expected to offer higher returns on capital. We believe we have cost effective opportunities to grow or convert newsprint capacity into coated and specialty papers and light-weight containerboard, which generally offer better demand characteristics, margins and returns compared to other, more commodity-like paper grades. In the second quarter of 2010, we converted our Coosa Pines newsprint mill to produce light-weight containerboard and other packaging grades. We are evaluating additional opportunities to convert some of our production capacity from less attractive grades to more attractive ones. By converting or closing some of our mills that were producing newsprint and other lower return grades, we believe that we can increase the capacity utilization across our mill system, improve the supply dynamics in these lower returning grades and enhance our return on capital.

Reduce our cost and increase operational flexibility

We continue to explore a variety of capital investment projects to significantly reduce our costs and increase operational flexibility similar to the recent streamlining of production at our Thunder Bay mill. At Thunder Bay, we idled paper machines for six months and restarted only the larger, more modern machine; renegotiated labor agreements; resized the workforce; rolled out a wage reduction across the woodlands operations; and renegotiated the power agreement. The combined changes resulted in a cash cost savings at the mill of over $150 per ton and we believe Thunder Bay is now one of the lowest cash cost mills in the industry. We believe additional initiatives of this nature would further improve our cost position, enhance our earnings potential and improve the cost competitiveness of our facilities. Furthermore, we expect that, following emergence and as a result of new labor agreements we have entered into during the first half of 2010 and management wage reductions, we will realize labor cost savings of approximately $95 million annually. In addition, we plan to further leverage our recycling system to provide low cost furnish to our mills system, giving us greater potential either to reduce furnish costs or offer higher margin products.

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Target export markets with better newsprint demand

Although North American newsprint demand is expected to decline, RISI has projected that world newsprint demand will increase by about 1.6% per year from 2009 to 2012, with growth being strongest in Asia at 4.7%, Latin America at 4.9% and the Middle East at 5.6%. The growth in many of our international markets is primarily the result of increased urbanization trends, a rapidly growing middle class, lower Internet penetration rates per capita versus developed countries, economic growth and rising literacy rates. Accordingly, we will continue to focus on capitalizing on the growth of these markets. The location of our Eastern Canadian mills, which are on or near deep sea ports, allows us the flexibility to serve these higher growth markets. In addition, our Mokpo, South Korea newsprint mill will continue to focus on Southeast Asian markets, where demand for the first six months of the year increased approximately 10% compared to the same period in 2009. For the six months ended June 30, 2010, approximately 50% of our total newsprint shipments were to markets outside of North America.

Explore strategic opportunities

We believe there will be continued consolidation in the paper and forest products sector as we and our competitors continue to explore ways to increase efficiencies and diversify customer offerings. We believe this consolidation has been and will continue to be a benefit to our industry and our customers. Accordingly, from time to time, we expect to explore strategic opportunities to enhance our business and provide a good return on capital for our stakeholders. Additionally, we will continue to execute on our non-core asset sales program and use the proceeds to continue to improve our balance sheet or reinvest in our business.

Recent developments

July 2010 financial results

In the third quarter of 2010 our financial results continued to improve significantly. Sales in the month of July 2010 were approximately $374 million as compared to July 2009 sales of $339 million. July 2010 consolidated operating income was approximately $9 million as compared to a July 2009 consolidated operating loss of $45 million. EBITDA and Adjusted EBITDA for July 2010 was $12 million and $47 million, respectively, compared to July 2009 EBITDA of $47 million and Adjusted EBITDA of $0 million (which included $28 million of alternative fuel tax credits) (see “Reconciliation of non-GAAP information” for additional information regarding our calculation of EBITDA and Adjusted EBITDA). Product line contribution, which is before depreciation and SG&A, continued to improve in July 2010.

July 2010 newsprint sales volumes were approximately 219,000 metric tons compared to 255,000 metric tons for July 2009. Although our July 2010 newsprint sales volumes were below July 2009 levels, our newsprint product line contribution was approximately $14 million in July 2010 compared to a negative contribution of $16 million in July 2009, reflecting improved average transaction prices and lower cash costs per metric ton. Newsprint sales in July 2010 were approximately $135 million as compared to sales of $129 million for July 2009. Our newsprint average transaction price (international and North America) for July 2010 was approximately $616 per metric ton as compared to a June 2010 average of $595 per metric ton and July 2009 average of $506 per metric ton. Our newsprint average cash cost was approximately $473 per

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metric ton in July 2010 as compared to $506 per metric ton in June 2010. The improvement in our newsprint average transaction price increase is a result of continued implementation of the North American and international newsprint price increases.

July 2010 coated papers sales volumes were 58,000 short tons as compared to sales volumes of 56,000 short tons in July 2009. Coated papers sales in July 2010 were approximately $42 million as compared to sales of $39 million in July 2009. Our coated papers product line contribution for July 2010 was approximately $9 million, as compared to $4 million in July 2009. Our coated papers average transaction price for July 2010 was approximately $731 per short ton, as compared to $684 per short ton for June 2010 and $708 per short ton for July 2009. On August 10, 2010 we announced a price increase of $60 per short ton effective for all North American shipments on or after September 15, 2010.

July 2010 specialty papers sales volumes were 157,000 short tons compared to July 2009 sales volumes of 151,000 short tons. Specialty papers sales in July 2010 were approximately $108 million as compared to sales of $105 million for July 2009. Our specialty papers product line contribution for July 2010 was approximately $10 million as compared to $10 million in July 2009. Our specialty papers average transaction price for July 2010 was approximately $687 per short ton as compared to $668 per short ton for June 2010 and $698 per short ton in July 2009. Our specialty papers July 2010 cash cost was $552 per short ton compared to $532 per short ton in July 2009. On August 10, 2010 we announced a price increase of $60 per short ton on super-calendered grades effective for all North American shipments on or after September 15, 2010.

July 2010 market pulp sales volumes were 76,000 metric tons, compared to sales volumes of 103,000 metric tons in July 2009. The July 2010 volumes were affected by the significant maintenance outages in June 2010 and July 2009 sales volumes were higher than normal due to timing of international shipments and inventory stocking by our customers. However, our market pulp product line contribution of $25 million significantly exceeded product line contribution of $1 million in July 2009. Market pulp sales in July 2010 were approximately $62 million as compared to $52 million in July 2009. Our market pulp average transaction price (all grades) for July 2010 was approximately $805 per metric ton as compared to $508 per metric ton in July 2009. Our July market pulp average cash cost per metric ton was $424 compared to a cash cost per metric ton of $414 for July 2009. In June 2010 we performed our annual kraft pulp mill outages at our Thunder Bay and Coosa Pines facilities. All of our 2010 annual kraft pulp mill maintenance outages have now been completed.

July 2010 wood product sales volumes were 114,000 mbf compared to sales volumes of 105,000 mbf in July 2009. Wood product sales in July 2010 were approximately $32 million as compared to sales of $29 million for July 2009. Our wood products division continued to perform well in July 2010 and again provided positive contribution of $3 million as compared to $2 million for July 2009. Average lumber transaction prices per unit declined in July 2010 to $266 per mbf, or approximately 7% from June 2010 ($287 per mbf) and were approximately 5% lower than July 2009 transaction prices of $281 per mbf. The decline in average transaction prices was offset by increased sales volumes in July 2010 and the continued maintenance of a low operating cash cost per unit business.

The results of operations for the month of July 2010 discussed above are not necessarily indicative of the operating results to be expected for any other month or for the full year.

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NAFTA settlement

On August 24, 2010, we announced a formal settlement agreement with the government of Canada regarding the December 2008 expropriation of certain of our assets and rights in the province of Newfoundland and Labrador (Canada) by the provincial government pursuant to the Abitibi-Consolidated Rights and Assets Act, S.N.L. 2008, c.A-1.01 (“Bill 75”). Under the agreement, the government of Canada has agreed to pay our new Canadian operating entity Cdn$130 million (approximately US$125 million) following our emergence from the Creditor Protection Proceedings (as defined below under “—Plans of Reorganization”). Such proceeds would be used to reduce the principal amount of the Convertible Notes to be issued in the Rights Offering (as such terms are defined under “—Plans of Reorganization”). As part of the settlement agreement, we have agreed to waive our legal actions and claims against the government of Canada under the North American Free Trade Agreement (“NAFTA”). The settlement agreement is subject to the approval of its terms by each of the Courts (as defined below under “—Plans of Reorganization”), as well as the Courts’ approval of the Plans of Reorganization. A hearing to consider the agreement is scheduled for September 15, 2010.

Permanent mill closures

Also on August 24, 2010, we confirmed the permanent closure of our Gatineau and Dolbeau paper mills, located in the province of Quebec, representing approximately 360,000 metric tons of newsprint (approximately 10% of our current newsprint capacity) and 244,000 metric tons of commercial printing paper capacity (approximately 10% of our current commercial printing paper capacity), respectively. The Gatineau mill has been indefinitely idled since April 15, 2010 and the Dolbeau mill since June 20, 2009.

Resolution of Quebec Pension Situation

The Company’s principal Canadian operating subsidiaries, Abitibi-Consolidated Company of Canada and Bowater Canadian Forest Products Inc., entered into an agreement on September 13, 2010 with the Quebec provincial government related to funding relief in respect of the material aggregate solvency deficits in the registered pension plans they sponsor in the province. The agreement includes a number of undertakings on behalf of the Company’s post-emergence Canadian operating subsidiary, whom we refer to as “AbiBow Canada,” that would become effective upon our emergence from the Creditor Protection Proceedings and apply for five years. AbiBow Canada’s undertakings are a condition to the government adopting the necessary funding relief regulations in Quebec.

Consistent with our previously disclosed agreement in principle with the Quebec pension authorities, the funding relief regulations are expected to provide, among other things, that AbiBow Canada’s aggregate annual contribution in respect of the solvency deficits in its material Canadian registered pension plans for each year from 2011 through 2020 will be limited to the following: (i) a $50 million basic contribution; (ii) beginning in 2013, if the plans’ aggregate solvency ratio falls below a specified target for a year, an additional contribution equal to 15% of free cash flow up to $15 million per year; and (iii) beginning in 2016, if the amount payable for benefits in a year exceeds a specified threshold and the plans’ aggregate solvency ratio is more than 2% below the target for that year, a supplementary contribution equal to such excess (such supplementary contribution being capped at $25 million on the first occurrence only of

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such an excess). Should a plan move into surplus during the 2011-2020 period, it will cease to be subject to this funding relief. After 2020, the funding rules in place at the time will apply to any remaining deficit.

In addition to our agreement not to terminate voluntarily any of our pension plans in Quebec before the Emergence Date, AbiBow Canada’s has undertaken to:

• Not pay a dividend at any time when the weighted average solvency ratio of its pension plans in Quebec is less than 80%;

• Abide by the compensation plan detailed in the Plans of Reorganization with respect to salaries, bonuses and severance;

• Direct at least 60% of the maintenance and value-creation investments earmarked for the Company’s Canadian pulp and paper operations to projects in Quebec;

• Invest at least $75 million in strategic projects in Quebec over a five-year period;

• Maintain the Company’s head office and the current related functions in Quebec;

• Make a $75 additional solvency deficit reduction contribution to its pension plans over four years for each metric ton of capacity reduced in the event of downtime of more than 6 consecutive months or 9 cumulative months over a period of 18 months; and

• Create a diversification fund by contributing $2 million per year for five years for the benefit of the municipalities and workers in the Company’s Quebec operating regions.

The adoption of satisfactory funding relief regulations in the provinces of Quebec and Ontario in respect of the material aggregate solvency deficits in the registered pension plans is a condition precedent to the implementation of the Plans of Reorganization. The province of Quebec’s enactment of the funding relief regulations described above is conditional upon the province of Ontario taking equivalent measures for the Company pension plans under its jurisdiction. We are now moving forward with similar discussions with the province of Ontario’s pension and finance authorities. There can be no assurance that those discussions will be successful.

ACH Limited Partnership

We are currently in the process of evaluating the potential sale of ACH Limited Partnership (“ACH”), in which we own a 75% interest. ACH operates three hydroelectric facilities in the province of Ontario. ACH was not a debtor in the Creditor Protection Proceedings (as defined below under “—Plans of Reorganization”), and ACH’s Cdn$255 million of debt (approximately US$239 million) is expected to be assumed by the buyer in any sale. No final determinations have been made with respect to the sale of ACH and we expect any such sale will not be consummated until after we have emerged from the Creditor Protection Proceedings. If any sale is completed within six months of the Emergence Date, we will use the cash proceeds from any such sale to reduce the principal amount of the Convertible Notes to be issued in the Rights Offering (as such terms are defined below under “—Plans of Reorganization”).

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Escrow offering

This offering is occurring in connection with our emergence from the Creditor Protection Proceedings. The Plans of Reorganization (as defined below under “—Plans of Reorganization”) have not yet been confirmed. Confirmation hearings with respect to the Plans of Reorganization are scheduled with the U.S. Court (as defined below under “—Plans of Reorganization”) and Canadian Court (as defined below under “—Plans of Reorganization”) for September 24, 2010 and September 20, 2010, respectively.

The notes will be issued by the Escrow Issuer, a wholly-owned subsidiary of AbitibiBowater created solely to issue the notes. The Escrow Issuer will deposit the net proceeds of this offering into a segregated escrow account until the date that the Escrow Conditions are satisfied. The net proceeds of the notes, together with cash necessary to fund any required special mandatory redemption, will be pledged as security for the benefit of the noteholders and upon satisfaction of the Escrow Conditions, the net proceeds will be released to AbitibiBowater and used as set forth under “Use of proceeds.”

If the Escrow Conditions are satisfied, the Escrow Issuer will merge with and into AbitibiBowater, with AbitibiBowater as the surviving entity. Upon the consummation of the merger, AbitibiBowater will assume all of the obligations of the Escrow Issuer, the guarantees of the guarantors will become effective and the notes and the guarantees will be secured as provided under “Description of notes—Security.” If the Escrow Conditions are not fulfilled on or prior to December 31, 2010, the notes will be redeemed at 101% of the issue price of the notes (as set forth on the cover of this offering memorandum) plus accrued and unpaid interest to, but excluding the date of redemption. Upon consummation of this offering, the escrow account will be funded with the net proceeds of the offering and cash provided by AbitibiBowater in an amount sufficient to fund the redemption of the notes and accrued and unpaid interest to, but excluding the date of the redemption. The net proceeds from the sale of the notes, together with cash to fund the redemption, will be pledged as security for the benefit of the noteholders and upon satisfaction of the Escrow Conditions, the net proceeds from the sale of the notes will be used as described under “Use of Proceeds.”

The indenture governing the notes will restrict the activities of the Escrow Issuer and AbitibiBowater prior to the Assumption. See “Description of notes—Escrow of proceeds; release conditions.”

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Our corporate structure

The chart below provides a simplified chart of our expected corporate and debt structure upon completion of the Transactions (as defined below in “—Plans of Reorganization”) and the application of the use of proceeds as described under “Use of proceeds.” Not all of our subsidiaries will be guarantors of the notes. For more information see “Description of the notes—Note guarantees.”

(1) On the Emergence Date (as defined below in “—Plans of Reorganization”), we do not expect that there will be any amounts outstanding under the ABL Credit Facility, but expect to have issued approximately $52 million in letters of credit under such facility.

(2) ABI Escrow Corporation, a wholly-owned subsidiary of AbitibiBowater Inc., will be the issuer of the notes prior to the Assumption.

(3) Estimated amount based on our projected liquidity on the Emergence Date as described under “Use of proceeds.” See “Description of certain indebtedness—Convertible Notes” for a description of how changes in our liquidity will impact the principal amount of the Convertible Notes issued.

(4) Does not reflect closed or currently idled mills.

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Plans of Reorganization

On April 16, 2009 and December 21, 2009, AbitibiBowater Inc. and certain of its U.S. and Canadian subsidiaries filed voluntary petitions (collectively, the “Chapter 11 Cases”) in the United States Bankruptcy Court for the District of Delaware (the “U.S. Court”) for relief under the provisions of Chapter 11 (“Chapter 11”) of the United States Bankruptcy Code, as amended (the “Bankruptcy Code”). In addition, on April 17, 2009, certain of AbitibiBowater Inc.’s Canadian subsidiaries sought creditor protection (the “CCAA Proceedings”) under the Companies’ Creditors Arrangement Act (the “CCAA”) with the Superior Court of Quebec in Canada (the “Canadian Court”). On April 17, 2009, Abitibi and its wholly-owned subsidiary, Abitibi-Consolidated Company of Canada (“ACCC”), each filed a voluntary petition for provisional and final relief (the “Chapter 15 Cases”) in the U.S. Court under the provisions of Chapter 15 of the United States Bankruptcy Code, as amended, to obtain recognition and enforcement in the United States of certain relief granted in the CCAA Proceedings and also on that date, AbitibiBowater Inc. and certain of its subsidiaries in the Chapter 11 Cases obtained orders under Section 18.6 of the CCAA in respect thereof (the “18.6 Proceedings”). The Chapter 11 Cases, the Chapter 15 Cases, the CCAA Proceedings and the 18.6 Proceedings are collectively referred to as the “Creditor Protection Proceedings.” For a discussion of the events leading up to the commencement of the Creditor Protection Proceedings, see “Management’s discussion and analysis of financial condition and results of operations—Events leading to our creditor protection filings.” The entities subject to the Creditor Protection Proceedings are referred to herein as the “Debtors.” The U.S. Court and the Canadian Court are collectively referred to as the “Courts.” On February 2, 2010, our wholly-owned subsidiary that operates the Bridgewater, United Kingdom operations filed for administration in the United Kingdom pursuant to the United Kingdom Insolvency Act. Our subsidiary that operates the Mokpo, South Korea operations and almost all of our less than wholly-owned subsidiaries continue to operate outside of the Creditor Protection Proceedings.

We initiated the Creditor Protection Proceedings in order to enable us to pursue reorganization efforts under the protection of Chapter 11 and the CCAA, as applicable. The Creditor Protection Proceedings have allowed us to reassess our business strategy with a view to developing a comprehensive financial and business restructuring plan. We remain in possession of our assets and properties and continue to operate our business and manage our properties as “debtors in possession” under the jurisdiction of the Courts and in accordance with the applicable provisions of Chapter 11 and the CCAA.

In order to successfully exit from Chapter 11 and the CCAA, we are required to propose and obtain approval from certain affected or impaired creditors and confirmation by the Courts of a plan or plans of reorganization that satisfy the requirements of Chapter 11 (the “Chapter 11 Plan of Reorganization”) and the CCAA (the “CCAA Plan of Reorganization”) (the Chapter 11 Plan of Reorganization and the CCAA Plan of Reorganization are referred to collectively as the “Plans of Reorganization”). Hearings to consider confirmation of the Plans of Reorganization are currently scheduled to be held before the U.S. Courts on September 24, 2010 and before the Canadian Court on September 20, 2010. In order for the Chapter 11 Plan of Reorganization to be confirmed by the U.S. Court pursuant to section 1129 of the Bankruptcy Code, among other things, at least one class of impaired claims must accept the Chapter 11 Plan of Reorganization, determined without including votes to accept the Plans of Reorganization cast by “insiders,” as that term is defined in section 101(31) of the Bankruptcy Code. A class of claims has accepted a Chapter 11

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plan of reorganization if such plan of reorganization has been accepted by creditors that hold at least two-thirds in amount and more than one-half in number of the allowed claims of such class held by creditors that have voted to accept or reject such plan of reorganization. In order for the CCAA Plan of Reorganization to be approved by the Canadian Court pursuant to the CCAA, among other things, such CCAA Plan of Reorganization must be approved by the affirmative vote of a majority in number, representing not less than two-thirds in value of the voting claims, of the creditors of each class of creditors that will be affected by the CCAA Plan of Reorganization and must be determined as being fair, reasonable and equitable. Following confirmation, the Plans of Reorganization will be consummated upon the satisfaction of certain conditions. The date of such consummation is referred to as the “Emergence Date.”

The Plans of Reorganization would, among other things, provide for a coordinated restructuring and compromise of our prepetition obligations, set forth the revised capital structure of the newly reorganized entities and certain elements of our corporate governance following our exit from the Creditor Protection Proceedings.

As currently proposed, the Plans of Reorganization include, in addition to the issuance of the notes in this offering, the following key elements:

• each of the Debtors will continue to operate its business in substantially its current form;

• all amounts outstanding under the Senior Secured Superpriority Debtor-in-Possession Credit Agreement dated as of April 21, 2009 among the Company, Bowater and certain other subsidiaries of the Company and the lenders party thereto (the “DIP Facility”) will be paid in full in cash (approximately $40 million as of August 31, 2010) and the facility will be terminated;

• all outstanding receivables interests purchased under the Second Amended and Restated Receivables Purchase Agreement, dated as of June 16, 2009 among Abitibi and certain of its affiliates and Citibank, N.A. as agent (the “Securitization Facility”) will be repurchased in cash for a price equal to the par amount thereof and the Securitization Facility will be terminated (approximately $120 million as of August 31, 2010);

• the prepetition Bowater U.S. and Canadian secured credit facilities (which consist of separate credit agreements entered into by Bowater and separately by its subsidiary Bowater Canadian Forest Products, Inc.) will be paid in full in cash (aggregate of approximately $354 million, comprised of approximately $216 million under the U.S. facility and approximately $138 million under the Canadian facility); both facility amounts include principal, accrued interest and professional fees assuming an Emergence Date of October 14, 2010, while the Canadian facility amount assumes Canadian dollar borrowings are converted to U.S. dollars at an exchange rate of Cdn$1.0309 to US$1.00;

• the prepetition ACCC term loan (the “ACCC Term Loan”) will be repaid in full in cash (approximately $363 million), including principal, accrued interest and professional fees and assuming an Emergence Date of October 14, 2010;

• the outstanding ACCC 13.75% Senior Secured Notes due 2011 will be paid in full in cash (approximately $347 million), including principal, accrued interest and professional fees and assuming an Emergence Date of October 14, 2010;

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• the outstanding Bowater floating rate industrial revenue bonds due 2029 will be repaid in full in cash (approximately $34 million as of August 31, 2010);

• certain holders of allowed claims arising from the Debtors’ prepetition unsecured indebtedness will receive their pro rata share of the new common stock to be issued by the reorganized Company upon emergence and will be entitled, to the extent eligible, to participate in the Rights Offering (as defined below);

• pension and post retirement obligations related to prior service costs, which had been classified as liabilities subject to compromise, will be reclassified, subject to resolution of funding relief;

• holders of the prepetition unsecured claims with individual claim amounts of $5,000 or less (or reduced to such amount) may be paid in cash in an amount equal to 50% of their claim amount (approximately $15 million as of August 31, 2010), but under certain circumstances, these claim holders may be treated instead like all other holders of claims arising from prepetition unsecured indebtedness;

• all equity interests in the Company existing immediately prior to the Emergence Date will be discharged, cancelled, released and extinguished;

• the Debtors will conduct a rights offering (the “Rights Offering”) for the issuance of 10% convertible senior subordinated notes (the “Convertible Notes”). Under the Rights Offering, each eligible unsecured creditor will receive a non-transferable right entitling such creditor to purchase its proportionate share of up to $500 million of Convertible Notes to be issued by the reorganized Company on the Emergence Date. Under certain circumstances, the amount of Convertible Notes may thereafter be increased by up to an additional $110 million (the “Escrow Notes”). The amount of Escrow Notes that we may issue will be reduced on a pro rata basis to the extent we issue less than $500 million of Convertible Notes in the Rights Offering. Based on our current expected liquidity on the Emergence Date, we currently expect to issue approximately $125 million of Convertible Notes (excluding the Escrow Notes). The Convertible Notes are expected to bear interest at the rate of 10% per annum (11% per annum if we elect to pay a portion of the interest through the issuance of additional Convertible Notes). We have entered into a backstop commitment agreement that has been approved by the Courts and which provides for the purchase by certain investors (including the Initial Purchasers and/or their affiliates) of Convertible Notes to the extent that the Rights Offering is under-subscribed; and

• the reorganized Company will enter into a senior secured asset-based revolving credit facility in an amount of $600 million (the “ABL Credit Facility”) under which the Company will have issued $52 million in letters of credit.

On the Emergence Date, the terms of the Plans of Reorganization confirmed by the Courts will be binding upon the Debtors and all other parties affected by the Plans of Reorganization. Parties will have 14 days to file a notice of appeal following entry of a confirmation order by the U.S. Court, and 21 days to file a notice of appeal with respect to a sanction order entered by the Canadian Court. Even if a notice of appeal is timely filed, the Debtors expect to proceed to consummate the Plans of Reorganization confirmed by the Courts in accordance with its terms,

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unless the party seeking the appeal also obtains a stay of implementation of the Plans of Reorganization pending appeal of the confirmation or sanction order, in which event the Debtors will not be able to implement the terms of the Plans of Reorganization confirmed by the Courts unless and until the stay is lifted. An appeal of the confirmation or sanction order may be initiated even if there is no stay pending appeal of the confirmation order and, in such circumstances, the appeal may be dismissed as moot if the Debtors have implemented the Plans of Reorganization to the point of “substantial consummation.”

In this offering memorandum unless otherwise indicated, the “Transactions” refer, collectively, to the consummation of the Plans of Reorganization and related transactions, including the application of Fresh Start Accounting principles, the completion of certain intercompany reorganization transactions to simplify our corporate structure as contemplated by the Plans of Reorganization, the entry into the ABL Credit Facility, the issuance of the notes offered hereby and the Convertible Notes and the application of the net proceeds thereof as further described under “Use of proceeds.” The Transactions will significantly de-lever the Debtors’ capital structure, leaving the Company with approximately $1.1 billion (excluding the Escrow Notes) in outstanding debt on the Emergence Date.

Impact of emergence from Creditor Protection Proceedings—Fresh Start Accounting

As discussed in detail in the section titled “Unaudited pro forma consolidated financial information,” our emergence from the Creditor Protection Proceedings, the implementation of the Plans of Reorganization and our application of Fresh Start Accounting principles will affect our future reported results of operations and make it difficult to compare our historical, pre-emergence results of operations with those that we report in the future.

As noted in the unaudited pro forma consolidated financial information, initial Fresh Start Accounting valuations are preliminary and have been made solely for purposes of developing the unaudited pro forma consolidated financial information. Updates to such preliminary valuations will be completed as of the Emergence Date and, to the extent such updates reflect a valuation different than those used in the unaudited pro forma consolidated financial information, there may be adjustments in the carrying values of certain assets and liabilities. To the extent actual valuations and allocations differ from those used in calculating the unaudited pro forma consolidated financial information, these differences will be reflected on our balance sheet upon emergence under Fresh Start Accounting and may also affect the amount of expenses which would be recognized in the statement of operations post-emergence from the Creditor Protection Proceedings. Any such differences could be material.

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Summary unaudited pro forma and historical consolidated financial information

The following tables set forth our summary unaudited pro forma and historical consolidated financial information for the periods ended and as of the dates set forth below. The summary historical financial data as of and for the fiscal years ended December 31, 2009 and 2008 have been derived from our audited consolidated financial statements and related notes and management’s discussion and analysis, which are included elsewhere in this offering memorandum. The summary historical financial information as of June 30, 2010 and for the six month periods ended June 30, 2010 and 2009 have been derived from our unaudited interim consolidated financial statements and related notes and management’s discussion and analysis, included elsewhere in this offering memorandum. In the opinion of management, our unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of our financial position, results of operations and cash flows. The results of operations for the six month period ended June 30, 2010 are not necessarily indicative of the operating results to be expected for the full year.

The unaudited consolidated statement of operations data for the twelve months ended June 30, 2010 have been derived by adding the unaudited interim consolidated statement of operations for the six months ended June 30, 2010 to the audited consolidated statement of operations for the year ended December 31, 2009, then deducting the unaudited interim consolidated statement of operations for the six months ended June 30, 2009.

The unaudited pro forma consolidated financial data set forth in the table below has been derived by applying the pro forma adjustments described under “Unaudited pro forma consolidated financial information” to our unaudited interim consolidated financial statements as of June 30, 2010 and to our unaudited consolidated statement of operations data for the twelve months ended June 30, 2010, as derived in the manner described above. The summary unaudited pro forma consolidated statement of operations data has been prepared to give effect to the consummation of the Plans of Reorganization and related transactions, including the application of Fresh Start Accounting principles, the entry into the ABL Credit Facility, and the issuance of the notes offered hereby and the application of the net proceeds thereof in each case as if they had occurred on the first day of each period presented. The summary unaudited pro forma consolidated balance sheet data has been prepared to give effect to the Transactions as if they had occurred on June 30, 2010.

The summary unaudited pro forma consolidated financial data is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial position that would have actually been reported had such Transactions been completed at the beginning of each period presented or as of June 30, 2010, respectively, nor is it indicative of our future results of operations or financial position.

The pro forma consolidated financial data should be read in conjunction with “Use of proceeds,” “Capitalization,” “Unaudited pro forma consolidated financial information,” “Selected historical financial information” and our historical consolidated financial statements and related notes which are included elsewhere in this offering memorandum.

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	Historical year ended December 31,				Historical six months ended June 30,				Historical twelve months ended June 30, 2010		Pro forma twelve months ended June 30, 2010
(dollars in millions)	2008		2009		2009		2010
Statement of operations data:
Sales	$6,771		$4,366		$2,149		$2,282		$4,499		$4,499
Cost of sales, excluding depreciation, amortization and cost of timber harvested	5,144		3,343		1,572		1,866		3,637		3,649
Depreciation, amortization and cost of timber harvested	726		602		314		257		545		246
Distribution costs	757		487		234		278		531		531
Selling, general and administrative expenses	332		198		111		69		156		166
Impairment of goodwill	810		—		—		—		—		—
Closure costs, impairment and other related charges	481		202		270		8		(60	)	(60	)
Net gain on disposition of assets	(49	)	(91	)	(53	)	(13	)	(51	)	(51	)
Operating income (loss)	(1,430	)	(375	)	(299	)	(183	)	(259	)	18
Interest expense	(706	)	(597	)	(335	)	(318	)	(580	)	(118	)
Other (expense) income, net	93		(71	)	(31	)	38		(2	)	(10	)
Loss before reorganization items and income taxes	(2,043	)	(1,043	)	(665	)	(463	)	(841	)	(110	)
Reorganization items, net	—		(639	)	(99	)	(353	)	(893	)	—
Extraordinary loss on expropriation of assets	(256	)	—		—		—		—		—
Net income (loss) including noncontrolling interests	(2,207	)	(1,560	)	(723	)	(806	)	(1,643	)	(19	)
Net income (loss) attributable to AbitibiBowater Inc.	(2,234	)	(1,553	)	(728	)	(797	)	(1,622	)	—
Other financial data:
EBITDA(1)	(611	)	(483	)	(115	)	(241	)	(609	)	254
Adjusted EBITDA(1)	589		343		217		70		196		184
Capital expenditures	186		101		53		26		74		74
Historical selected operations data:
Newsprint volume sold (in thousands of metric tons)	4,746		3,157		1,484		1,558		3,231		—
Newsprint revenue per metric ton ($)	682		571		630		570		552		—
Coated papers volume sold (in thousands of short tons)	748		571		274		325		622		—
Coated papers revenue per short ton ($)	882		730		759		677		699		—
Specialty papers volume sold (in thousands of short tons)	2,425		1,819		856		924		1,887		—
Specialty papers revenue per short ton ($)	754		731		786		680		680		—
Market pulp volume sold (in thousands of metric tons)	895		946		425		466		987		—
Market pulp revenue per metric ton ($)	700		548		515		720		642		—
Wood products volume sold (in millions of board feet)	1,556		1,143		524		665		1,284		—
Wood products revenue per thousand board feet ($)	269		254		207		315		325		—

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(dollars in millions)	Historical as of June 30, 2010		Pro forma as of June 30, 2010
Balance sheet data:
Cash and cash equivalents	$	708	$	203
Working capital(2)		1,451		1,194
Total current assets		2,171		1,655
Total assets		6,649		6,001
Total secured debt		1,340		875
Total debt not subject to compromise		1,579		1,114
Total current liabilities		1,820		461
Total liabilities subject to compromise		7,065		—
Total liabilities		9,437		3,132

	Pro forma twelve months ended June 30, 2010
Credit statistics:
Deficiency of earnings to fixed charges(3)	$	111
Ratio of secured debt to Adjusted EBITDA(1)		3.7x
Ratio of total debt to Adjusted EBITDA(1)		5.0x

(1) EBITDA is defined as net earnings (loss) before interest, taxes and depreciation, amortization and cost of timber harvested. Adjusted EBITDA is EBITDA plus certain elements primarily associated with gain or loss on foreign currency translation, reorganization related expenses, closure costs, impairment of goodwill and other related charges, asset write offs or inventory write downs, gains on disposition of assets and extraordinary loss on expropriation of assets. EBITDA and Adjusted EBITDA include alternative fuel mix tax credits of $0, $276 million, $118 million, $0 and $158 million for the years ended December 31, 2008 and 2009, the six months ended June 30, 2009 and 2010 and the pro forma twelve months ended June 30, 2010, respectively. See “Reconciliation of non-GAAP information” for a reconciliation of EBITDA and Adjusted EBITDA. Secured debt and total debt is net of cash and cash equivalents.

(2) Working capital is defined as current assets less current liabilities, excluding short-term bank debt, secured borrowings and current portion of long-term debt, but including debtor in possession financing.

(3) For purposes of determining the deficiency of earnings to fixed charges, earnings consist of loss before income taxes and noncontrolling interests plus fixed charges (excluding capitalized interest). Fixed charges consist of total interest expense (including capitalized interest) plus that portion of rental expense representative of the interest factor (deemed to be one-third of rental expense) plus amortized premium and discount related to indebtedness. For the pro forma twelve months ended June 30, 2010, earnings were inadequate to cover fixed charges.

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EX-99.3

Exhibit 99.3

Risk factors

Any investment in the notes involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in this offering memorandum before deciding whether to purchase the notes. The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of those risks actually occurs, our business, financial condition and results of operations would suffer. The risks discussed below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See the section titled “Forward-looking statements.”

Risks relating to our business

Developments in alternative media could continue to adversely affect the demand for our products, especially in North America, and our responses to these developments may not be successful.

Trends in advertising, electronic data transmission and storage and the Internet could have further adverse effects on the demand for traditional print media, including our products and those of our customers. Neither the timing nor the extent of those trends can be predicted with certainty. Our newspaper, magazine and catalog publishing customers may increasingly use, and compete with businesses that use, other forms of media and advertising and electronic data transmission and storage, including television, electronic readers and the Internet, instead of newsprint, coated papers, uncoated specialty papers or other products made by us. The demand for certain of our products weakened significantly over the last several years. For example, RISI indicates that North American newsprint demand has been in decline for several years and has experienced annual declines of 5.5% in 2005, 6.1% in 2006, 10.3% in 2007, 11.2% in 2008 and 25.3% in 2009. We have seen a continued decline in newspaper demand in 2010 and RISI further indicates that these declines in newsprint demand could continue beyond 2010 due to conservation measures taken by publishers, reduced North American newspaper circulation, less advertising and substitution to other uncoated mechanical grades.

One of our responses to the declining demand for our products has been to curtail our production capacity. If demand continues to decline for our products, it may become necessary to curtail production even further or permanently shut down even more machines or facilities. Curtailments or shutdowns could result in goodwill or asset impairments and additional cash costs at the affected facilities, including restructuring charges and exit or disposal costs, and could negatively impact our cash flows and materially affect our results of operations and financial condition.

Currency fluctuations may adversely affect our results of operations and financial condition, and changes in foreign currency exchange rates can affect our competitive position, selling prices and manufacturing costs.

We compete with North American, European and Asian producers in most of our product lines. Our products are sold and denominated in U.S. dollars, Canadian dollars and selected foreign currencies. A substantial portion of our manufacturing costs are denominated in Canadian dollars. In addition to the impact of product supply and demand, changes in the relative strength

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or weakness of such currencies, particularly the U.S. dollar, may also affect international trade flows of these products. A stronger U.S. dollar may attract imports into North America from foreign producers, increase supply and have a downward effect on prices, while a weaker U.S. dollar may encourage U.S. exports and increase manufacturing costs that are in Canadian dollars or other foreign currencies. Variations in the exchange rates between the U.S. dollar and other currencies, particularly the Euro and the currencies of Canada, Sweden and certain Asian countries, will significantly affect our competitive position compared to many of our competitors.

We are sensitive to changes in the value of the Canadian dollar versus the U.S. dollar. The impact of these changes depends primarily on our production and sales volume, the proportion of our production and sales that occur in Canada, the proportion of our financial assets and liabilities denominated in Canadian dollars, our hedging levels and the magnitude, direction and duration of changes in the exchange rate. We expect exchange rate fluctuations to continue to impact costs and revenues; however, we cannot predict the magnitude or direction of this effect for any quarter, and there can be no assurance of any future effects. During the last two years, the relative value of the Canadian dollar ranged from US$1.02 in March 2008 to US$0.77 in October 2008 and increased back to US$0.95 as of December 31, 2009. Based on exchange rates and operating conditions projected for 2010, and prior to the impact of our Plans of Reorganization, we project that a one-cent increase in the Canadian-U.S. dollar exchange rate would decrease our pre-tax income (loss) for 2010 by approximately $18 million.

If the Canadian dollar continues to remain strong or gets stronger versus the U.S. dollar, it could influence the foreign exchange rate assumptions that are used in our evaluation of long-lived assets for impairment and, consequently, result in asset impairment charges.

We face intense competition in the forest products industry and the failure to compete effectively would have a material adverse effect on our business, financial condition or results of operations.

We compete with numerous forest products companies, many of which have great or greater financial resources than we do. There has been a continued trend toward consolidation in the forest products industry, leading to new global producers. These global producers are typically large, well-capitalized companies that may have greater flexibility in pricing and financial resources for marketing, investment and expansion than we do. The markets for our products are all highly competitive. Actions by competitors can affect our ability to sell our products and can affect the volatility of the prices at which our products are sold. While the principal basis for competition is price, we also compete on the basis of customer service, quality and product type. There has also been an increasing trend toward consolidation among our customers. With fewer customers in the market for our products, our negotiation position with these customers could be weakened. In addition, the Creditor Protection Proceedings may be used by our competitors in an attempt to divert our existing customers or may discourage future customers from purchasing our products under long-term agreements.

In addition, our industry is capital intensive, which leads to high fixed costs. Some of our competitors may be lower-cost producers in some of the businesses in which we operate. Global newsprint capacity, particularly Chinese and European newsprint capacity, has been increasing, which may result in lower prices, volumes or both for our exported products. We believe that new hardwood pulp capacity at South American pulp mills has unit costs that are significantly below those of our hardwood kraft pulp mills. Other actions by competitors, such as reducing costs or adding low-cost capacity, may adversely affect our competitive position in the products we manufacture and

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consequently, our sales, operating income and cash flows. We may not be able to compete effectively and achieve adequate levels of sales and product margins. Failure to compete effectively would have a material adverse effect on our business, financial condition or results of operations.

The forest products industry is highly cyclical. Fluctuations in the prices of, and the demand for, our products could result in small or negative profit margins, lower sales volumes and curtailment or closure of operations.

The forest products industry is highly cyclical. Historically, economic and market shifts, fluctuations in capacity and changes in foreign currency exchange rates have created cyclical changes in prices, sales volume and margins for our products. Most of our paper and wood products are commodities that are widely available from other producers and even our coated and specialty papers are susceptible to these fluctuations. Because our commodity products have few distinguishing qualities from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand. The overall levels of demand for the products we manufacture and distribute and consequently, our sales and profitability, reflect fluctuations in levels of end-user demand, which depend in part on general economic conditions in North America and worldwide. In 2008 and 2009, we experienced lower demand and decreased pricing for our wood products due to a weaker U.S. housing market. As a result, during 2008, we announced the curtailment of annualized capacity of approximately 1.3 billion board feet of lumber in the provinces of Quebec and British Columbia and during 2009, we continued our wood products’ operating rate at extremely low levels. We are not expecting any significant improvements in the U.S. housing market in 2010 and there is significant uncertainty with respect to near-term prospects for recovery in the market. Curtailments or shutdowns could result in asset impairments at the affected facilities and could materially and adversely affect our results of operations or financial condition.

Our degree of leverage upon emergence may limit our financial and operating activities.

As of June 30, 2010, after giving effect to the Transactions, our total debt would have been approximately $1.1 billion (excluding $52 million of undrawn letters of credit issued under our new ABL Credit Facility and $548 million of additional undrawn revolving commitments under our new ABL Credit Facility). Our historical capital requirements have been considerable and our future capital requirements could vary significantly and may be affected by general economic conditions, currency exchange rates, industry trends, performance, interest rates and many other factors that are not within our control. Subject to the limits contained in the credit agreement governing our ABL Credit Facility, the indenture governing the notes and our other debt instruments, we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our high level of debt could intensify. Our substantial level of indebtedness has, in the past, had and could, in the future, have important consequences, including the following:

• making it more difficult for us to satisfy our obligations with respect to the notes and our other debt;

• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, product developments, acquisitions or other general corporate requirements;

• requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures and other general corporate purposes;

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• increasing our vulnerability to general adverse economic and industry conditions;

• exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under the ABL Credit Facility, will be at variable rates of interest;

• limiting our flexibility in planning for and reacting to changes in our industry;

• placing us at a disadvantage compared to other, less leveraged competitors; and

• increasing our cost of borrowing.

In addition, the indentures governing the notes and the Convertible Notes and the credit agreement governing our new ABL Credit Facility contain restrictive covenants that will limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debts.

Our operations require substantial capital and we may not have adequate capital resources to provide for all of our capital requirements.

Our businesses are capital intensive and require regular capital expenditures in order to maintain our equipment, increase our operating efficiency and comply with environmental laws. In addition, significant amounts of capital may be required to modify our equipment to produce alternative grades with better demand characteristics or to make significant improvements in the characteristics of our current products. If our available cash resources and cash generated from operations are not sufficient to fund our operating needs and capital expenditures, we would have to obtain additional funds from borrowings or other available sources or reduce or delay our capital expenditures. Current global credit conditions and the downturn in the global economy have resulted in a significant decline in the credit markets and the overall availability of credit. Our indebtedness upon emergence from the Creditor Protection Proceedings could adversely affect our financial health, limit our operations and impair our ability to raise additional capital. See “—Our degree of leverage upon emergence may limit our financial and operating activities” above. We may not be able to obtain additional funds on favorable terms or at all. If we cannot maintain or upgrade our equipment as we require, we may become unable to manufacture products that compete effectively. At this time, we cannot predict the impact of the Creditor Protection Proceedings on our capital expenditure program. An inability to make required capital expenditures in a timely fashion could have a material, adverse effect on our growth, business, financial condition and results of operations.

We may not be successful in implementing our strategies to increase our return on capital.

We are targeting a higher return on capital, which may require significant capital investments with uncertain return outcomes. Our strategies include improving our business mix, reducing our costs and increasing operational flexibility, targeting export markets with better newsprint demand and exploring strategic alternatives. There are risks associated with the implementation of these strategies, which are complicated and involve a substantial number of mills, machines, capital and personnel. To the extent we are unsuccessful in achieving these strategies, our results of operations may be adversely affected.

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Our manufacturing businesses may have difficulty obtaining wood fiber at favorable prices, or at all.

Wood fiber is the principal raw material we use in our business. We use both virgin fiber (wood chips and logs) and recycled fiber (old newspapers and magazines) as fiber sources for our paper mills. The primary source for wood fiber is timber. Environmental litigation and regulatory developments have caused, and may cause in the future, significant reductions in the amount of timber available for commercial harvest in Canada and the United States. In addition, future domestic or foreign legislation, litigation advanced by Aboriginal groups and litigation concerning the use of timberlands, the protection of endangered species, the promotion of forest biodiversity and the response to and prevention of catastrophic wildfires could also affect timber supplies. Availability of harvested timber may further be limited by factors such as fire and fire prevention, insect infestation, disease, ice storms, wind storms, drought, flooding and other natural and man-made causes, thereby reducing supply and increasing prices. As is typical in the industry, we do not maintain insurance for any loss to our outstanding timber from natural disasters or other causes.

Wood fiber is a commodity and prices historically have been cyclical, are subject to market influences and may increase in particular regions due to market shifts. Pricing of recycled fiber is also subject to market influences and has experienced significant fluctuations. During the last two years, the prices of old newspapers have ranged from a high of $195 average per ton during the third quarter of 2008 to a low of $76 average per ton during the first quarter of 2009 and averaged $131 per ton during the fourth quarter of 2009. There can be no assurance that prices of recycled fiber will remain at their current level or at levels that are economic for us to use. Any sustained increase in fiber prices would increase our operating costs and we may be unable to increase prices for our products in response. Such condition could have a material adverse effect on our profitability, results of operations and financial condition.

There can be no assurance that access to fiber will continue at the same levels achieved in the past. The cost of softwood fiber and the availability of wood chips may be affected. If our cutting rights pursuant to the forest licenses or forest management agreements are reduced or if any third-party supplier of wood fiber stops selling or is unable to sell wood fiber to us, our financial condition or operating results could suffer.

An increase in the cost of our purchased energy and other raw materials would lead to higher manufacturing costs, thereby reducing our margins.

Our operations consume substantial amounts of energy, such as electricity, natural gas, fuel oil, coal and wood waste. We buy energy and raw materials, including chemicals, wood, recovered paper and other raw materials, primarily on the open market.

The prices for raw materials and energy are volatile and may change rapidly, directly affecting our results of operations. The availability of raw materials and energy may also be disrupted by many factors outside our control, adversely affecting our operations. Energy prices, particularly for electricity, natural gas and fuel oil, have been volatile in recent years and prices every year since 2005 have exceeded long-term historical averages. As a result, fluctuations in energy prices will impact our manufacturing costs and contribute to earnings volatility.

We are a major user of renewable natural resources such as water and wood. Accordingly, significant changes in climate and forest diseases or infestation could affect our financial

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condition or results of operations. The volume and value of timber that we can harvest or purchase may be limited by factors such as fire and fire prevention, insect infestation, disease, ice storms, wind storms, drought, flooding and other natural and man-made causes, thereby reducing supply and increasing prices. As is typical in the industry, we do not maintain insurance for any loss to our standing timber from natural disasters or other causes. Also, we can provide no assurance that we will be able to maintain our rights to utilize water or to renew them at conditions comparable to those currently in effect.

For our commodity products, the relationship between industry supply and demand for these products, rather than changes in the cost of raw materials, will determine our ability to increase prices. Consequently, we may be unable to pass along increases in our operating costs to our customers. Any sustained increase in energy, chemical or raw material prices without any corresponding increase in product pricing would reduce our operating margins and potentially require us to limit or cease operations of one or more of our machines.

The global financial crisis and economic downturn could continue to negatively impact our liquidity, results of operations and financial condition and it may cause a number of the risks that we currently face to increase in likelihood, magnitude and duration.

The current financial crisis and economic downturn has adversely affected economic activity globally. Our operations and performance depend significantly on worldwide economic conditions. Customers across all our businesses have been delaying and reducing their expenditures in response to deteriorating macroeconomic and industry conditions and uncertainty, which has had a significant negative impact on the demand for our products and therefore the cash flows of our businesses, and could continue to have a negative impact on our liquidity and capital resources.

Our newsprint, coated papers and specialty papers demand has been and is expected to be negatively impacted by higher unemployment and lower gross domestic product growth rates. We believe that some consumers have reduced newspaper and magazine subscriptions as a direct result of their financial circumstances in the current economic downturn, contributing to lower demand for our products by our customers. Additionally, advertising demand in magazines and newspapers, including classified advertisements, automotive dealerships and real estate agencies, have been impacted by higher unemployment, lower automobile sales and the distressed real estate environment. Lower demand for print advertisements leads to less pages in newspaper, magazines and other advertisement circulars and periodicals, decreasing the demand for our products. Furthermore, consumer and advertising driven demand for our paper products may not recover, even with an economic recovery, as purchasing habits may be permanently changed with a prolonged economic downturn.

The economic downturn has had a profoundly negative impact on the U.S. housing industry, which sets the prices for many of our lumber and other wood based products. U.S. housing starts declined from approximately 1,355,000 in 2007 to approximately 554,000 in 2009, reflecting a 59% decline, according to the U.S. Census Bureau. With this low level of primary demand for our lumber and other wood based products, our business and others in the industry may be cash flow negative until there is a meaningful recovery in new residential construction demand. With less demand for saw logs at saw mills throughout North America and lower saw log prices, our timberland values may have declined, impacting some of our financial options. Additionally, with less lumber demand, saw mills have generated less sawdust and wood chips and shavings that we and our competition use for fiber for our mills. The price of sawdust and wood chips for our mills

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that need to purchase their furnish on the open market may also continue to be at elevated levels, until there is a meaningful recovery in new residential demand in the U.S.

Changes in laws and regulations could adversely affect our results of operations.

We are subject to a variety of foreign, federal, state, provincial and local laws and regulations dealing with trade, employees, transportation, taxes, timber and water rights and the environment. Changes in these laws or regulations or their interpretations or enforcement have required in the past, and could require in the future, substantial expenditures by us and adversely affect our results of operations. For example, changes in environmental laws and regulations have in the past, and could in the future, require us to spend substantial amounts to comply with restrictions on air emissions, wastewater discharge, waste management and landfill sites, including remediation costs. Environmental laws are becoming increasingly stringent. Consequently, our compliance and remediation costs could increase materially.

Changes in the political or economic conditions in Canada, the United States or other countries in which our products are manufactured or sold could adversely affect our results of operations.

We manufacture products in Canada, the United States and South Korea and sell products throughout the world. Paper prices are tied to the health of the economies of North and South America, Asia and Europe, as well as to paper inventory levels in these regions. The economic and political climate of each region has a significant impact on our costs and the prices of, and demand for, our products. Changes in regional economies or political instability, including acts of war or terrorist activities, can affect the cost of manufacturing and distributing our products, pricing and sales volume, directly affecting our results of operations. Such changes could also affect the availability or cost of insurance.

We may be required to record additional environmental liabilities.

We are subject to a wide range of general and industry-specific laws and regulations relating to the protection of the environment, including those governing air emissions, wastewater discharges, timber harvesting, the storage, management and disposal of hazardous substances and waste, the clean-up of contaminated sites, landfill and lagoon operation and closure, forestry operations, endangered species habitat and health and safety. As an owner and operator of real estate and manufacturing and processing facilities, we may be liable under environmental laws for cleanup and other costs and damages, including tort liability and damages to natural resources, resulting from past or present spills or releases of hazardous or toxic substances on or from our current or former properties. We may incur liability under these laws without regard to whether we knew of, were responsible for, or owned the property at the time of, any spill or release of hazardous or toxic substances on or from our property, or at properties where we arranged for the disposal of regulated materials. Claims may also arise out of currently unknown environmental conditions or aggressive enforcement efforts by governmental or private parties. As a result of the above, we may be required to record additional environmental liabilities. For a more detailed description of environmental matters, see Note 15 to our unaudited interim consolidated financial statements and Note 22 to our consolidated financial statements contained elsewhere in this offering memorandum.

We are subject to physical and financial risks associated with climate change.

Our operations are subject to climate variations, which impact the productivity of forests, the distribution and abundance of species and the spread of disease or insect epidemics, which may

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adversely or positively affect timber production. Over the past several years, changing weather patterns and climatic conditions have added to the unpredictability and frequency of natural disasters such as hurricanes, earthquakes, hailstorms, wildfires, snow and ice storms, which could also affect our woodlands or cause variations in the cost for raw materials such as fiber. Changes in precipitation resulting in droughts could adversely affect our hydroelectric facilities’ production, increasing our energy costs, while increased precipitation may generally have positive effects.

To the extent climate change impacts raw material availability or our electricity production, it may also impact our costs and revenues. Furthermore, should financial markets view climate change as a financial risk, our ability to access capital markets or to receive acceptable terms and conditions could be affected.

We may be required to record additional long-lived asset impairment charges.

Losses related to impairment of long-lived assets are recognized when circumstances indicate the carrying values of the assets may not be recoverable, such as continuing losses in certain locations. When certain indicators that the carrying value of a long-lived asset may not be recoverable are triggered, we evaluate the carrying value of the asset group in relation to our expected undiscounted future cash flows. If the carrying value of the asset group is greater than the expected undiscounted future cash flows, an impairment charge is recorded based on the excess of the long-lived asset group’s carrying value over its fair value.

It is possible that we could record additional non-cash long-lived asset impairment charges in future periods when there is a triggering event. If we are required to record such impairment charges, such charges would be recorded as operating expenses and would directly and negatively impact our reported operating income (loss) and net income (loss), which could have a negative impact on the trading prices of our equity and debt securities.

We have net liabilities with respect to our pension plans and the actual cost of our pension plan obligations could exceed current provisions.

As of December 31, 2009, our defined benefit pension plans were under-funded by an aggregate of approximately Cdn $424 million on a financial accounting basis. Our future funding obligations for the defined benefit pension plans depend upon changes to the level of benefits provided by the plans, the future performance of assets set aside in trust for these plans, the level of interest rates used to determine minimum funding levels, actuarial data and demographic experience (e.g., mortality and retirement rates) and any changes in government laws and regulations. Any adverse change to any of these factors may require us to increase our cash contributions to our pension plans and those additional contributions could have a material adverse effect on our cash flows and results of operations. These cash payments could become significant and potentially impact our cash flow, financial flexibility and access to capital.

We obtained an order from the Canadian Court on May 8, 2009 specifying that the payment of special contributions for past service to Canadian pension plans maintained by Abitibi and Bowater could be temporarily suspended. Abitibi and Bowater continue to make their respective Canadian pension plan contributions for current service costs.

The determination of projected benefit obligations and the recognition of expenses related to our pension plan obligations are dependent on assumptions used in calculating these amounts. These assumptions include, among other things, expected rates of return on plan assets, which are developed using our historical experience applied to our target allocation of investments in

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conjunction with market-related data for each individual country in which such plans exist. All assumptions are reviewed periodically with third-party actuarial consultants and adjusted as necessary. Any deterioration in the global securities markets could impact the value of the assets included in our defined benefit pension plans, which could materially impact future minimum cash contributions.

Abitibi and Bowater sponsor several registered pension plans for their employees and retirees in Canada. These plans include 15 defined benefit plans registered in Québec or Ontario, which have a material aggregate solvency deficit for which funding relief has been sought. Employees will cease to accrue credited service in these defined benefit plans effective December 31, 2010, and will be enrolled in target benefit pension plans (unionized employees) or defined contribution pension plans (non-unionized employees) from January 1, 2011.

It is a condition precedent to the implementation of the CCAA Plan that funding relief regulations be adopted in form and substance satisfactory to the CCAA Debtors: i) pursuant to the Supplemental Pension Plans Act (Québec); and (ii) pursuant to the Pension Benefits Act (Ontario) for the benefit of the Company and its subsidiaries with respect to the funding of their respective defined benefit pension plans registered in each such province.

We have reached an agreement with the Quebec provincial government pursuant to which we made a number of undertakings on behalf of AbiBow Canada as a condition precedent to the government adopting the necessary funding relief regulations. See “Summary – Recent developments.”

Consistent with our previously disclosed agreement in principle with the Quebec pension authorities, the funding relief regulations are expected to provide, among other things, that AbiBow Canada’s aggregate annual contribution in respect of the solvency deficits in its material Canadian registered pension plans for each year from 2011 through 2020 will be limited to the following: (i) a Cdn$50 million basic contribution; (ii) beginning in 2013, if the plans’ aggregate solvency ratio falls below a specified target for a year, an additional contribution equal to 15% of free cash flow up to Cdn$15 million per year; and (iii) beginning in 2016, if the amount payable for benefits in a year exceeds a specified threshold and the plans’ aggregate solvency ratio is more than 2% below the target for that year, a supplementary contribution equal to such excess (such supplementary contribution being capped at Cdn$25 million on the first occurrence only of such an excess). Should a plan move into surplus during the 2011-2020 period, it will cease to be subject to this funding relief. After 2020, the funding rules in place at the time will apply to any remaining deficit.

The province of Quebec’s enactment of the funding relief regulations described above is conditional upon the province of Ontario taking equivalent measures for the Company pension plans under its jurisdiction. We are now moving forward with similar discussions with the province of Ontario’s pension and finance authorities. There can be no assurance that those discussions will be successful.

We are of the view that our ability to obtain the commercial exit financing we require will also depend on the satisfaction of this condition precedent without which our viability remains uncertain.

Implementation of the funding relief is subject to reaching agreement on the detailed parameters thereof and to adoption by the Québec and Ontario governments of the requisite

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funding relief regulations. We expect that we will be required to send detailed information packages on the proposed funding relief to plan beneficiaries and unions.

If funding relief regulations are adopted in form and substance satisfactory to us, we may lose the benefit of such regulations if we fail to satisfy the conditions of any such regulations or related agreement with Canadian authorities, which could have a material adverse effect on our profitability, liquidity, results of operations and financial condition.

We may not be compensated for the expropriation of certain assets by the Government of Newfoundland and Labrador.

On December 16, 2008, following our December 4, 2008 announcement of the permanent closure of our Grand Falls newsprint mill, the province of Newfoundland and Labrador passed legislation under Bill 75 to expropriate, among other things, all of our timber rights, water rights, leases and hydroelectric assets in the province of Newfoundland and Labrador, whether partially or wholly owned through our subsidiaries and affiliated entities. The province also announced that it did not plan to compensate us for the loss of the water and timber rights, but indicated that it may compensate us for certain of our hydroelectric assets. However, it made no commitment to ensure that such compensation would represent the fair market value of such assets.

On February 25, 2010, we filed a Notice of Arbitration against the Government of Canada under NAFTA, asserting that the expropriation was arbitrary, discriminatory and illegal. Our claim sought direct compensation for damages of approximately Cdn$500 million, plus additional costs and relief. We negotiated with the Canadian Government in an effort to come to a settlement and avoid protracted NAFTA proceedings and on August 24, 2010, we announced a formal settlement agreement. Under the agreement, the Government of Canada would pay our new Canadian operating subsidiary Cdn$130 million (approximately US$125 million) following our emergence from the Creditor Protection Proceedings. The settlement agreement is subject to the approval of its terms by each of the Courts, as well as the Courts’ approval of the Plan of Reorganization. A hearing on the terms of the agreement is scheduled for September 15, 2010. There can be no assurance that the Courts will approve the terms of the agreement or that they will approve the Plans of Reorganization.

We could be compelled to remediate certain sites we formerly owned and/or operated in the province of Newfoundland and Labrador.

On March 31, 2010, the Canadian Court dismissed a motion for declaratory judgment brought by the province of Newfoundland and Labrador, awarding costs in favor of us, and thus confirmed our position that the five orders the province issued under Section 99 of its Environmental Protection Act on November 12, 2009 are subject to the stay of proceedings pursuant to the CCAA Proceedings. The province of Newfoundland and Labrador’s orders could have required us to proceed immediately with the environmental remediation of various sites we formerly owned or operated, some of which the province expropriated in December 2008 with Bill 75. If the province requests an extension to the applicable Canadian Court-imposed deadline by which its claim had to be filed in order to receive any distribution in the CCAA Proceedings, a request we can contest, and if the Canadian Court grants the request, the province’s claim based on the environmental orders would be subject to the existing claims process and would be subject to compromise. The province sought leave to appeal the Canadian Court’s judgment to the Quebec Court of Appeal, which was denied on May 18, 2010. The province filed notice of application for leave to appeal the Quebec Court of Appeal’s judgment to the Supreme Court of Canada on

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August 16, 2010. The matter is now pending with the Supreme Court. Any additional environmental remediation payments required to be made by us could have a material, adverse effect on our profitability, liquidity and financial condition. For a more detailed description of environmental matters, see Note 15 to our unaudited interim consolidated financial statements and Note 22 to our consolidated financial statements contained elsewhere in this offering memorandum.

The continued decline in the global economy may significantly inhibit our ability to sell assets.

Non-core asset sales have been and may continue to be a source of additional liquidity and debt repayment. We periodically review timberlands and other assets and sell such assets as a source of additional liquidity. However, as a result of the current global economy and credit conditions, it may be difficult for potential purchasers to obtain the financing necessary to buy such assets. As a result, we may be forced to sell the assets for significantly lower amounts than planned or may not be able to sell them at all.

We could lose any or all of our equity interest in ANC.

On June 15, 2009, we filed a motion with the U.S. Court to reject an amended and restated call agreement (the “Call Agreement”) in respect of Augusta Newsprint Inc., an indirect subsidiary of The Woodbridge Company Limited (“Woodbridge”) and our partner in ANC. ANC is the partnership that owns and operates the Augusta newsprint mill. The Call Agreement obligated Abitibi Consolidated Sales Corporation, an indirect, wholly-owned subsidiary of AbitibiBowater (“ACSC”), to either buy out ANC at a price well above market, or risk losing all of its equity in the joint venture pursuant to forced sale provisions. The U.S. Court granted our motion on October 27, 2009 and approved the rejection of the Call Agreement. Our counterparties to the Call Agreement filed a Notice of Appeal on November 3, 2009. If the U.S. Court’s judgment is not upheld and a forced sale is consummated, there can be no assurance that we would be able to recover any or all of our 52.5% equity interest in ANC, which as of December 31, 2009, had a book value of approximately $100 million.

Also, on March 9, 2010, Woodbridge filed a motion in the U.S. Court to force ACSC to reject the partnership agreement governing ANC (the “Augusta Partnership Motion”). If ACSC were forced to reject the partnership agreement, the future of the Augusta mill would be uncertain. We filed an objection to the Augusta Partnership Motion on April 9, 2010. The Augusta Partnership Motion is pending before the U.S. Court. The loss of the Augusta newsprint mill or the joint venture interests or an adverse determination with respect to this dispute could have a material, adverse effect on our financial condition and results of operation.

We could experience disruptions in operations or increased labor costs due to labor disputes.

As of June 30, 2010, we employed approximately 11,200 people, of whom approximately 8,100 were represented by bargaining units. Our unionized employees are represented predominantly by the Communications, Energy and Paper workers Union (the “CEP”) in Canada and predominantly by the United Steelworkers International in the U.S.

A significant number of our collective bargaining agreements with respect to our paper operations in Eastern Canada expired at the end of April 2009. At the beginning of March 2010, we reached an agreement in principle with the CEP and the Confederation des syndicats nationaux (the “CSN”), subject to the resolution of ongoing discussions with the governments of Quebec and Ontario regarding funding relief in respect of the material solvency deficits in

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pension plans sponsored by Abitibi and Bowater. In April, May and June 2010, we entered into new collective bargaining agreements with many of our unionized employees. We are still negotiating the renewal of collective bargaining agreements with other unions.

The employees at the Mokpo facility have complied with all conditions necessary to strike, but the possibility of a strike or lockout of those employees is not clear; we served the six-month notice necessary to terminate the collective bargaining agreement related to the Mokpo facility on June 19, 2009.

We may not be able to reach satisfactory agreements with all of our employees, which could result in strikes or work stoppages by affected employees. Renewals could also result in higher wage or benefit costs. We could therefore experience a disruption of our operations or higher ongoing labor costs, which could affect our business, financial condition or results of operations.

The occurrence of natural or man-made disasters could disrupt our supply chain and the delivery of our products, and adversely affect our financial condition and results of operation.

The success of our businesses is largely contingent on the availability of direct access to raw materials and our ability to ship products on a timely basis. As a result, any event that disrupts or limits transportation or delivery services would materially and adversely affect our business. In addition, our operating results are dependent on the continued operation of our various production facilities and the ability to complete construction and maintenance projects on schedule. Material operating interruptions at our facilities, including interruptions caused by the events described below, may materially reduce the productivity and profitability of a particular manufacturing facility, or our business as a whole, during and after the period of such operational difficulties.

Although we take precautions to enhance the safety of our operations and minimize the risk of disruptions, our operations are subject to hazards inherent in our business and the transportation of raw materials, products and wastes. These potential hazards include:

• explosions;

• fires;

• severe weather and natural disasters;

• mechanical failure;

• unscheduled downtimes;

• supplier disruptions;

• labor shortages or other labor difficulties;

• transportation interruptions;

• remediation complications;

• discharges or releases of toxic or hazardous substances or gases;

• other environmental risks; and

• terrorist acts.

Some of these hazards may cause personal injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations, the shutdown of affected facilities and the imposition of civil or criminal penalties. Furthermore, except for claims that are addressed by the Plan of Reorganization, we also will continue to be subject to present and future claims with respect to workplace exposure, exposure of contractors on our premises as well as other persons located nearby, workers’ compensation and other matters.

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We maintain property, business interruption, product, general liability, casualty and other types of insurance, including pollution and legal liability, that we believe are in accordance with customary industry practices, but we are not fully insured against all potential hazards incident to our business, including losses resulting from natural disasters, war risks or terrorist acts. Changes in insurance market conditions have caused, and may in the future cause, premiums and deductibles for certain insurance policies to increase substantially and, in some instances, for certain insurance to become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, we might not be able to finance the amount of the uninsured liability on terms acceptable to us or at all, and might be obligated to divert a significant portion of our cash flow from normal business operations.

Shared control or lack of control of joint ventures may delay decisions or actions regarding the joint ventures.

A portion of our operations currently are, and may in the future be, conducted through joint ventures, where control may be exercised by or shared with unaffiliated third parties. We cannot control the actions of our joint venture partners, including any nonperformance, default or bankruptcy of joint venture partners. The joint ventures that we do not control may also lack adequate internal controls systems.

In the event that any of our joint venture partners do not observe their joint venture obligations, it is possible that the affected joint venture would not be able to operate in accordance with our business plans or that we would be required to increase our level of commitment in order to give effect to such plans. As with any such joint venture arrangements, differences in views among the joint venture participants may result in delayed decisions or in failures to agree on major matters, potentially adversely affecting the business and operations of the joint ventures and in turn our business and operations.

Bankruptcy of a significant customer could have a material adverse effect on our liquidity, financial position and results of operations.

Trends in alternative media continue to impact the operations of our newsprint customers. See “—Developments in alternative media could continue to adversely affect the demand for our products, especially in North America, and our responses to these developments may not be successful” above. If a customer is forced into bankruptcy as a result of these trends, any receivables related to that customer prior to the date of filing of such customer may not be realized. In addition, such a customer may choose to reject its contracts with us, which could result in a larger claim arising prior to the date of filing of such customer that also may not be realized.

The impact of cancellation of indebtedness and changes in other tax attributes may significantly diminish the availability and value of our tax attributes and could significantly increase the amount of taxes we would otherwise pay in the future.

As a result of the Creditor Protection Proceedings, the Company will recognize significant cancellation of indebtedness income (“COD”) for U.S. federal income tax purposes. When COD is recognized for U.S. federal income tax purposes pursuant to a plan of reorganization, it is not required to be included in taxable income for U.S. federal income tax purposes, but certain tax attributes (e.g., including net operating losses, income tax credits and tax basis in certain assets), that would otherwise be available to offset any future taxable income, are required to be

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reduced or eliminated by the amount of such COD. Similarly, gain on the settlement of debt pursuant to the CCAA Proceedings will reduce tax attributes under Canadian tax laws. In addition, under U.S. federal income tax law, to the extent tax attributes survive, these attributes may be significantly limited as to their future use pursuant to Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. The attribute reduction and Section 382 and 383 limits described above could significantly diminish the availability and value of our tax attributes and could significantly increase the amount of taxes we would otherwise pay in the future.

Risks related to the Creditor Protection Proceedings

Our Creditor Protection Proceedings raise substantial doubt about our ability to continue as a going concern.

Because of the risks and uncertainties associated with our Creditor Protection Proceedings, we cannot predict the ultimate outcome of the reorganization process, or predict or quantify the potential impact on our business, financial condition or results of operations. Consequently, there is substantial doubt about our ability to continue as a going concern and our audited and unaudited interim consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Creditor Protection Proceedings and our debtor in possession financing arrangements, which are discussed under “Management’s discussion and analysis of financial conditions and results of operations—Liquidity and capital resources,” have provided us with a period of time to stabilize our operations and financial condition and develop our Plans of Reorganization. Management believes that these actions make the going concern basis of presentation appropriate. However, given the uncertainty involved in these proceedings, the realization of assets and discharge of liabilities are each subject to significant uncertainty. Further, our ability to continue as a going concern is dependent on market conditions and our ability to obtain the approval of the Plans of Reorganization from affected creditors and the Courts, successfully implement the Plans of Reorganization, improve profitability, obtain exit financing to replace our debtor in possession financing arrangements and renew or extend our current debtor in possession financing arrangements if the need to do so should arise. However, it is not possible to predict whether the actions taken in our restructuring will result in improvements to our financial condition sufficient to allow us to continue as a going concern. If the going concern basis is not appropriate, adjustments will be necessary to the carrying amounts and/or classification of our assets and liabilities.

Because our financial statements will reflect Fresh Start Accounting adjustments upon our emergence from the Creditor Protection Proceedings, information reflecting our results of operations and financial condition will not be comparable to prior periods and may vary significantly from the Fresh Start Accounting adjustments used to calculate the pro forma financial data that is included in this offering memorandum.

Upon our emergence from the Creditor Protection Proceedings, we will apply Fresh Start Accounting. As a result, book value of our long-lived assets and the related depreciation and amortization schedules, among other things, will change. Following our emergence from the Creditor Protection Proceedings, you will not be able to compare certain information reflecting our results of operations and financial condition to those for historical periods prior to emergence from Creditor Protection Proceedings.

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Under Fresh Start Accounting, our calculated enterprise value will be allocated to our assets based on their respective fair values. Any portion not attributed to specific tangible or identified intangible assets will be an indefinite-lived intangible asset referred to as “reorganization value in excess of value” and reported as goodwill.

We have obtained preliminary valuations of our tangible and intangible assets at our estimated Emergence Date, and our reorganization value has been allocated to specific assets in accordance with such preliminary valuations, as reflected in “Unaudited pro forma consolidated financial information.” However, updates to such preliminary valuations will be completed as of the date we emerge from the Creditor Protection Proceedings and, to the extent such updates reflect a valuation different than estimated, we anticipate that there may be adjustments in the carrying values of certain assets as a result. To the extent actual valuations and allocations may differ from those used in calculating the unaudited pro forma consolidated financial information, these differences will be reflected on our balance sheet upon emergence pursuant to Fresh Start Accounting rules and may also affect the amount of depreciation and amortization expense we recognize on our statements of earnings post-emergence.

We may not achieve the financial performance projected under the Plans of Reorganization.

The financial projections we prepared in connection with our seeking confirmation of the Plans of Reorganization are the projections of future performance of our operations on a consolidated basis through fiscal year 2014, after giving effect to the Plans of Reorganization and do not purport to represent what our actual financial position will be upon emergence from the Creditor Protection Proceedings or represent what the fair value of our assets and liabilities will be at the effective date. We prepared the projected financial information to demonstrate to the Courts the feasibility of the Plans of Reorganization and our ability to continue operations upon our emergence from the Creditor Protection Proceedings. These projections are not included in this offering memorandum and have not been incorporated by reference into this offering memorandum and should not be relied upon in connection with the offering or sale of the notes. Furthermore, our independent accountants have not examined, compiled or performed any procedures with respect to such projections and have assumed no responsibility for such projections. These projections were prepared solely for the purpose of the Creditor Protection Proceedings and not for the purpose of an offering of the notes and have not been, and will not be, updated on an ongoing basis. At the time they were prepared, the projections reflected numerous assumptions. In addition, asset impairments, asset disposition and restructuring activities (including mill and paper machine closures and idlings) could also impact our financial projections. These financial projections were based on numerous estimates of values and assumptions including the timing, confirmation and consummation of the Plans of Reorganization in accordance with their terms, the anticipated future performance of the Company, industry performance, general business and economic conditions and other matters, many of which are beyond our control and some or all of which may not materialize. These estimates and assumptions were based on management’s judgment based on facts available and determinations made at the time the financial projections were prepared, and may turn out to have been incorrect over time, which could have a material effect on our ability to meet the financial projections. It is also not possible to predict with certainty that the actions taken in connection with the Creditor Protection Proceedings based on the estimates and assumptions will result in an improved financial and operating condition that ensures the long-term viability of the Company. In addition, achievement of the financial performance under the Plans of Reorganization will be dependent upon our ability to achieve substantial cost savings.

While management expects to be able to achieve these cost savings, there can be no assurance that such cost savings can be realized within the anticipated timeframes or at all.

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In addition, unanticipated events and circumstances occurring after the date the Plans of Reorganization were filed may affect the actual financial results of our operations. We do not intend to update the financial projections after the date of finalization; thus, the financial projections will not reflect the impact of any subsequent events not already accounted for in the assumptions underlying the financial projections.

Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks and assumptions underlying the projections and/or valuation estimates may prove to be wrong in material respects. Actual results may vary significantly from those contemplated by the projections. As a result, you should not rely upon the projections in deciding whether to invest in the notes.

Certain liabilities will not be fully extinguished as a result of the confirmation of the Plans of Reorganization by the Courts.

While a significant amount of our existing liabilities will be discharged upon emergence from the Creditor Protection Proceedings, a number of obligations may remain in effect following the effective date of the Plans of Reorganization. Various agreements and liabilities are expected to remain in place, such as certain employee benefit and pension obligations, potential environmental liabilities related to sites in operation or formerly owned or operated by the Company and other contracts that, even if modified during the Creditor Protection Proceedings, may still subject us to substantial obligations and liabilities. Other claims, such as those alleging toxic tort or product liability, or environmental liability related to formerly owned or operated sites, may not be extinguished.

Other circumstances in which claims and other obligations that arose prior to Creditor Protection Proceedings may not have been discharged include instances where a claimant had inadequate notice of the Creditor Protection Proceedings or a valid argument as to when its claim arose as a matter of law or otherwise.

We cannot be certain that the Creditor Protection Proceedings will not adversely affect our operations going forward.

Although we will emerge from the Creditor Protection Proceedings upon consummation of the Plans of Reorganization, we cannot assure you that having been subject to the Creditor Protection Proceedings protection will not adversely affect our operations going forward, including our ability to negotiate favorable terms from suppliers, hedging counterparties and others and to attract and retain customers. The failure to obtain such favorable terms and retain customers could adversely affect our financial performance.

Occurrence of the effective date of the Plans of Reorganization is subject to a number of significant conditions.

Although we believe that the effective date of the Plans of Reorganization will occur on or about October 14, 2010, there can be no assurance as to such timing or that all conditions precedent will be satisfied. The occurrence of the effective date is subject to certain conditions precedent as described in the Plans of Reorganization, including, among others, those relating to the exit financing facilities and the backstop commitment agreement we entered into in contemplation of the issuance of the Convertible Notes on the Emergence Date, the receipt or filing of all applicable approvals or applications with applicable government entities, certain agreements with unions having been executed and ratified and regulations for funding relief in respect of certain of the Company’s pension plans in Ontario and Québec shall have been adopted to our satisfaction. It is also possible that a party objecting to the confirmation of the Plans of

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Reorganization may seek and obtain a stay of the confirmation order pending its appeal. Failure to meet any of these conditions could result in the Plans of Reorganization not being consummated or the approval orders being vacated.

It is possible that the Plans of Reorganization that are confirmed and effected may be materially different from the Plans of Reorganization that we have presently proposed and that funds will nonetheless be released from escrow to fund our emergence from bankruptcy.

It is possible that Plans of Reorganization that materially differ from our proposed Plans of Reorganization may be approved and that the other escrow release conditions to fund our emergence will be satisfied. All the pro forma and financial information that reflects our emergence from bankruptcy is based upon the proposed Plans of Reorganization. Based on the status of the Creditor Protection Proceedings, we believe that there will not be any material changes to the Plans of Reorganization from the perspective of investors in the notes and that the Plans of Reorganization or substantially similar Plans of Reorganization will be timely approved and consummated. However, investors are subject to the risk that this will not be the case. In the event the escrow release conditions cannot timely be satisfied, we may seek a waiver of the conditions or the requirements to effect a special mandatory redemption from holders of not less than 75% of the aggregate principal amount of the notes under the indenture governing the notes. Non-consenting noteholders would be bound by that waiver and would not be permitted to the special mandatory redemption.

Risks related to the notes

We may not be able to generate sufficient cash to service all of our indebtedness, including the notes, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations, including the notes, depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to fund our day-to-day operations or to pay the principal, premium, if any, and interest on our indebtedness, including the notes.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay capital expenditures or to sell assets or operations, seek additional capital or restructure or refinance our indebtedness, including the notes. We may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet our scheduled debt service obligations. The credit agreement governing our new ABL Credit Facility and the indentures governing the notes and the Convertible Notes will restrict our ability to dispose of assets and use the proceeds from any such dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. See “Description of certain indebtedness” and “Description of notes.”

In addition, we conduct our operations through our subsidiaries, certain of which will not be guarantors of the notes or our other indebtedness. Accordingly, repayment of our indebtedness,

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including the notes, is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, debt repayment or otherwise. Unless they are guarantors of the notes, our subsidiaries do not have any obligation to pay amounts due on the notes or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness, including the notes. Each subsidiary is a distinct legal entity and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. Although the indenture governing the notes and the agreements governing certain of our other existing indebtedness will limit the ability of certain of our subsidiaries to incur consensual restrictions on their ability to pay dividends or make other intercompany payments to us, these limitations are subject to certain qualifications and exceptions. In the event that we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the notes.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations and our ability to satisfy our obligations under the notes.

If we cannot make scheduled payments on our debt, we will be in default and, as a result, holders of notes could declare all outstanding principal and interest to be due and payable, the lenders under the new ABL Credit Facility could terminate their commitments to loan money, our secured lenders could foreclose against the assets securing such borrowings and we could be forced into bankruptcy or liquidation, in each case, which could result in your losing your investment in the notes.

Despite current indebtedness levels, we may still be able to incur substantially more debt. This could further exacerbate the risks described above.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the indenture governing the notes offered hereby and the credit agreement which will govern our new ABL Credit Facility contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions and the additional indebtedness incurred in compliance with these restrictions could be substantial. If we incur any additional indebtedness that ranks equally with the notes, subject to collateral arrangements, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us. This may have the effect of reducing the amount of proceeds paid to you. Additionally, our ABL Credit Facility provides commitments of up to $600 million in the aggregate, none of which is expected to be drawn as of the Emergence Date (excluding approximately $52 million of letters of credit that will be issued). All of those borrowings would be secured indebtedness. If new debt is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify. See the sections titled “Description of notes” and “Description of certain indebtedness.”

The terms of our new ABL Credit Facility and the indenture governing the notes, may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The indenture governing the notes issued hereby and the credit agreement governing our new ABL Credit Facility will contain a number of restrictive covenants that impose significant

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operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including, among other things, restrictions on our ability to:

• incur, assume or guarantee additional indebtedness;

• issue redeemable stock and preferred stock;

• pay dividends or make distributions or redeem or repurchase capital stock;

• prepay, redeem or repurchase certain debt;

• make loans and investments;

• incur liens;

• restrict dividends, loans or asset transfers from our subsidiaries;

• sell or otherwise dispose of assets, including capital stock of subsidiaries;

• consolidate or merge with or into, or sell substantially all of our assets to, another person;

• enter into transactions with affiliates; and

• enter into new lines of business.

In addition, the restrictive covenants in the credit agreement governing our ABL Credit Facility will require us to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet them.

A breach of the covenants under the indenture that will govern the notes offered hereby or under the credit agreement governing the ABL Credit Facility could result in an event of default under the applicable indebtedness. Such default may allow the holders to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the credit agreement governing our ABL Credit Facility would permit the lenders under our ABL Credit Facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under our ABL Credit Facility, those lenders could proceed against the ABL Priority Collateral granted to them to secure that indebtedness. In the event our lenders or holders of notes accelerate the repayment of our borrowings, we cannot assure that we and our subsidiaries would have sufficient assets to repay such indebtedness. As a result of these restrictions, we may be:

• limited in how we conduct our business;

• unable to raise additional debt or equity financing to operate during general economic or business downturns; or

• unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our plans.

A portion of the Collateral securing the notes is subject to control by creditors with first priority liens.

The notes will be secured, in part, on a second priority basis by the ABL Priority Collateral. Our obligations under our ABL Credit Facility are secured, in part, by a first priority lien on those same assets. The liens securing the notes with respect to the ABL Priority Collateral will be subordinated to the first priority liens on the ABL Priority Collateral securing our ABL Credit Facility. If there is a default and foreclosure sale of the ABL Priority Collateral, the proceeds from the sale may not be sufficient to satisfy our obligations under the notes. Any such proceeds

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would be distributed to our creditors under the ABL Credit Facility before any proceeds would be available for payment to holders of the notes. The holders of the notes will not receive any proceeds from the sale of ABL Priority Collateral unless and until all obligations under the ABL Credit Facility are repaid in full.

Under the security documents, at any time the obligations that have the benefit of the first-priority liens are outstanding, any action that may be taken in respect of the ABL Priority Collateral, including the commencement and control of enforcement proceedings against the ABL Priority Collateral and any amendment to, release of Collateral from, or waiver of past defaults under the collateral documents, will be at the direction of the holders of the obligations secured by the first priority liens on the ABL Priority Collateral. See “Description of notes—Security.”

The Collateral securing the notes, including the ABL Priority Collateral, will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections as may be accepted by the holders of the obligations secured by first priority liens, whether on or after the date the notes are issued. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Collateral securing the notes as well as the ability of the trustee to realize or foreclose on such Collateral.

The notes will be structurally subordinated to all indebtedness of our existing and future subsidiaries that are not and do not become guarantors of the notes.

The notes will be guaranteed by each of our existing and subsequently acquired or organized direct or indirect wholly-owned U.S. subsidiaries. Except for such subsidiary guarantors of the notes, our subsidiaries, including all of our non-domestic subsidiaries, will have no obligation, contingent or otherwise, to pay amounts due under the notes or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment. The notes will be structurally subordinated to all indebtedness and other obligations of any non-guarantor subsidiary such that, in the event of insolvency, liquidation, reorganization, dissolution or other winding up of any subsidiary that is not a guarantor, all of such subsidiary’s creditors (including trade creditors and preferred stockholders, if any) would be entitled to payment in full out of such subsidiary’s assets before we would be entitled to any payment.

On a pro forma basis after giving effect to the Transactions, on June 30, 2010, our non-guarantor subsidiaries would have had approximately $4 billion in assets and $239 million of indebtedness (representing indebtedness of ACH, for which we are seeking a buyer (see “Summary—Recent developments”)) that would have been structurally senior to the notes. For the six months ended June 30, 2010, our non-guarantor subsidiaries had aggregate revenues of $955 million and EBITDA of $(239) million.

There may not be sufficient Collateral to pay all or any of the notes.

No appraisal of the value of the Collateral has been made in connection with this offering and the value of the Collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. Consequently, liquidating the Collateral securing the notes may not result in proceeds in an amount sufficient to pay any amounts due on the notes. To the extent that pre-existing liens, liens permitted under the indenture and other rights, including liens on excluded assets, such as those securing purchase money obligations and capital lease obligations granted to other parties (in addition to the holders of obligations

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secured by first priority liens), encumber any of the Collateral securing the notes and the guarantees, those parties have or may exercise rights and remedies with respect to the Collateral that could adversely affect the value of the Collateral and the ability of the collateral agent, the trustee under the indenture or the holders of the notes to realize or foreclose on the Collateral.

Under the terms of the security documents, the proceeds of any collection, sale, disposition or other realization of ABL Priority Collateral received in connection with the exercise of remedies (including distributions of cash, securities or other property on account of the value of the Collateral in a bankruptcy, insolvency, reorganization or similar proceedings) will be applied first to repay amounts due under our ABL Credit Facility before the holders of notes receive any proceeds from the disposition of such ABL Priority Collateral. As a result, the claims of holders of notes to such proceeds will rank behind the claims, including interest, of the lenders and the letter of credit issuers under our ABL Credit Facility. In addition, the terms of the indenture relating to the notes will permit the incurrence of additional debt that may be secured on a first-priority basis with the notes.

The fair market value of the Collateral securing the notes is subject to fluctuations based on factors that include, among others, the condition of the markets for the Collateral, the ability to sell the Collateral in an orderly sale, general economic conditions, the availability of buyers and similar factors. The amount to be received upon a sale of the Collateral would be dependent on numerous factors, including but not limited to the actual fair market value of the Collateral at such time and the timing and the manner of the sale. By its nature, portions of the Collateral may be illiquid and may have no readily ascertainable market value. In addition, in conjunction with our emergence from bankruptcy we will be required to adopt Fresh Start Accounting. As a result, we can make no assurance that our historical book values will approximate fair value or that such fair value will be sufficient to fully collateralize the notes offered hereby. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, we cannot assure you that the proceeds from any sale or liquidation of this Collateral will be sufficient to pay our obligations under the notes.

We will in most cases have control over the Collateral, and the sale of particular assets by us could reduce the pool of assets securing the notes and the guarantees.

The collateral documents will allow us to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from, the Collateral securing the notes and the guarantees.

The Collateral securing the notes may be diluted under certain circumstances.

The Collateral that will secure the notes will also secure, on a second priority basis, our obligations under the ABL Credit Facility. This Collateral may also secure additional senior indebtedness, including additional notes, that we incur in the future, subject to restrictions on our ability to incur debt and liens under our ABL Credit Facility and the indenture governing the notes. Your rights to the Collateral would be diluted by any increase in the indebtedness secured by this Collateral.

Certain assets will be excluded from the Collateral.

Certain assets are excluded from the Collateral securing the notes as described in the section titled “Description of notes—Security” including all assets described as “Excluded Assets” in such section. If an event of default occurs and the notes are accelerated, the notes and guarantees will rank equally with the holders of other unsubordinated and unsecured indebtedness of the relevant entities with respect to such excluded assets.

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Your rights in the Collateral may be adversely affected by the failure to perfect security interests in certain Collateral acquired in the future.

Applicable law requires that a security interest in certain tangible and intangible assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. The liens on the Collateral may not be perfected with respect to the claims of the notes if the collateral agent does not take the actions necessary to perfect any of these liens. Also, applicable law requires that certain property and rights acquired after the grant of a general security interest only be perfected at the time such property and rights are acquired and identified. Although the indenture governing the notes will contain customary further assurance covenants, there can be no assurance that the trustee or the collateral agent will monitor, or that we will inform the trustee or the collateral agent of, the future acquisition of property and rights that constitute Collateral, and that the necessary action will be taken to properly perfect the security interest in such after-acquired Collateral. The collateral agent for the notes has no obligation to monitor the acquisition of additional property or rights that constitute Collateral or the perfection of any security interest in favor of the notes against third-parties. Such failure may result in a loss of the security interest in the Collateral or the priority of the security interest in favor of the notes against third parties.

The value of the Collateral securing the notes may not be sufficient to secure post-petition interest.

In the event of a future bankruptcy, liquidation, dissolution, reorganization or similar proceeding against us, holders of notes will only be entitled to post-petition interest under the Bankruptcy Code to the extent that the value of their security interest in the Collateral is greater than their pre-bankruptcy claim. Holders of notes that have a security interest in the Collateral with a value equal or less than their pre-bankruptcy claim will not be entitled to post-petition interest or applicable fees, costs or charges under the Bankruptcy Code. No appraisal of the fair market value of the Collateral has been prepared in connection with this offering and we therefore cannot assure you that the value of the holders’ interest in the Collateral equals or exceeds the principal amount of the notes.

The imposition of certain permitted liens could materially adversely affect the value of the Collateral.

The Collateral securing the notes may also be subject to liens permitted under the terms of the indenture governing the notes, whether arising on or after the date the notes are issued. The existence of any permitted liens could materially and adversely affect the value of the Collateral that could be realized by the holders of the notes, as well as the ability of the collateral agent to realize or foreclose on such Collateral.

In the event the Escrow Conditions are not satisfied on or before December 31, 2010, the notes will be redeemed and subsequent purchasers of the notes may not recover their full investment in the notes.

The net proceeds from the sale of the notes will be placed in escrow and held as Collateral security for our obligations in respect of the notes pending satisfaction of the Escrow Conditions,

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as discussed under “Description of notes—Escrow of proceeds; release conditions.” If the Escrow Conditions are not fulfilled on or prior to December 31, 2010, the notes will be redeemed at 101% of the issue price, plus accrued and unpaid interest to, but excluding, the redemption date. Therefore, if you purchase the notes subsequent to their initial issuance at a price greater than the special mandatory redemption price, you may lose a portion of your investment upon any such special mandatory redemption and you may not be able to reinvest the proceeds from the redemption in an investment that yields comparable value. See “Description of the notes—Escrow of proceeds; release conditions.”

We may not be able to repurchase the notes upon a change of control.

Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all outstanding notes at 101% of their principal amount, plus accrued and unpaid interest to the purchase date. Additionally, under the ABL Credit Facility, a change of control (as defined therein) constitutes an event of default that permits the lenders to accelerate the maturity of borrowings under the respective agreements and the commitments to lend would terminate. The source of funds for any purchase of the notes and repayment of borrowings under our ABL Credit Facility will be our available cash or cash generated from our subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the notes upon a change of control because we may not have sufficient financial resources to purchase all of the debt securities that are tendered upon a change of control and repay our other indebtedness that will become due. We may require additional financing from third parties to fund any such purchases, and we cannot assure you that we would be able to obtain financing on satisfactory terms or at all. Further, our ability to repurchase the notes may be limited by law. In order to avoid the obligations to repurchase the notes and events of default and potential breaches of the credit agreement governing our new ABL Credit Facility, we may have to avoid certain change of control transactions that would otherwise be beneficial to us.

The definition of change of control in the indenture governing the notes includes a phrase relating to the sale of “all or substantially all” of our assets. There is no precise established definition of the phrase “substantially all” under applicable law. Accordingly, the ability of a holder of notes to require us to repurchase its notes as a result of a sale of less than all our assets to another person may be uncertain. In addition, certain important corporate events, such as leveraged recapitalizations, may not, under the indenture governing the notes, constitute a “change of control” that would require us to repurchase the notes, notwithstanding the fact that such corporate events could increase the level of our indebtedness or otherwise adversely affect our capital structure, credit ratings or the value of the notes. See “Description of notes—Repurchase at the option of holders—Change of control.”

In the event of a future bankruptcy of us or any of the guarantors, holders of the notes may be deemed to have an unsecured claim to the extent that our obligations in respect of the notes exceed the fair market value of the Collateral securing the notes.

In any bankruptcy proceeding with respect to us or any of the guarantors, it is possible that the bankruptcy trustee, the debtor-in-possession or competing creditors will assert that the fair market value of the Collateral with respect to the notes on the date of the bankruptcy filing was less than the then-current principal amount of the notes. Upon a finding by the bankruptcy court that the notes are under-collateralized, the claims in the bankruptcy proceeding with respect to the notes would be bifurcated between a secured claim in an amount equal to the value of the

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Collateral and an unsecured claim with respect to the remainder of the holders’ of the notes claim which would not be entitled to the benefits of security in the Collateral. Other consequences of a finding of under-collateralization would be, among other things, a lack of entitlement on the part of the notes to receive post-petition interest and a lack of entitlement on the part of the unsecured portion of the notes to receive “adequate protection” under federal bankruptcy laws. In addition, if any payments of post-petition interest had been made at any time prior to such a finding of under-collateralization, those payments would be recharacterized by the bankruptcy court as a reduction of the principal amount of the secured claim with respect to the notes.

In the event of a future bankruptcy, the ability of the holders of notes to realize upon the Collateral will be subject to certain bankruptcy law limitations.

The ability of holders of notes to realize upon the Collateral will be subject to certain bankruptcy law limitations in the event of our future bankruptcy. Under applicable U.S. federal bankruptcy laws, upon the commencement of a bankruptcy case, an automatic stay goes into effect which, among other things, stays:

• the commencement or continuation of any action or proceeding against the debtor that was or could have been commenced before the commencement of the bankruptcy case to recover a claim against the debtor that arose before the commencement of the bankruptcy case;

• any act to obtain possession of, or control over, property of the bankruptcy estate or the debtor;

• any act to create, perfect or enforce any lien against property of the bankruptcy estate; and

• any act to collect or recover a claim against the debtor that arose before the commencement of the bankruptcy case.

Thus, upon the commencement of a bankruptcy case, secured creditors are prohibited from, among other things, repossessing their collateral from a debtor, or from disposing of such collateral repossessed from such a debtor, without bankruptcy court approval. Moreover, applicable federal bankruptcy laws generally permit the debtor to continue to use, sell or lease collateral in the ordinary course of its business even though the debtor is in default under the applicable debt instruments. Upon request from a secured creditor, the bankruptcy court will prohibit or condition such use, sale or lease of collateral as is necessary to provide “adequate protection” of the secured creditor’s interest in the collateral. The meaning of the term “adequate protection” may vary according to the circumstances, but is intended generally to protect the value of the secured creditor’s interest in the collateral at the commencement of the bankruptcy case and may include cash payments or the granting of additional security, if and at such times as the court in its discretion determines any diminution in the value of the collateral occurs as a result of the debtor’s use, sale or lease of the collateral during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a bankruptcy court, we cannot predict whether or when payments under the notes would be made following commencement of and during a bankruptcy case, whether or when the trustee or collateral agent under the indenture for the notes could foreclose upon or sell the Collateral or whether or to what extent holders of notes would be compensated for any delay in payment or loss of value as a result of the use, sale or lease of their Collateral through the requirement of “adequate protection.” We also cannot predict when holders of the notes would realize any recovery with respect thereto in any bankruptcy, the

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amount (if any) of such recovery, and/or the form thereof. A creditor may seek relief from the stay from the bankruptcy court to take any of the acts described above that would otherwise be prohibited by the automatic stay. However, bankruptcy courts have broad discretionary powers in determining whether to grant a creditor relief from the stay.

In addition, because a significant portion of our operations are conducted by subsidiaries organized outside the United States, any future bankruptcy proceedings may involve other jurisdictions, such as Canada, and we cannot predict what impact any creditor protection proceedings in such jurisdictions will have on any U.S. bankruptcy proceedings and vice versa.

The Collateral is subject to casualty risks and potential environmental liabilities.

We intend to maintain insurance or otherwise insure against hazards in a manner appropriate and customary for our business. There are, however, certain losses that may be either uninsurable or not economically insurable, in whole or in part. Insurance proceeds may not compensate us fully for our losses. If there is a complete or partial loss of any of the pledged Collateral, the insurance proceeds may not be sufficient to satisfy all of the secured obligations, including the notes and the guarantees.

In the event of a total or partial loss to any of the mortgaged facilities, certain items of equipment, fixtures and other improvements may not be easily replaced. Accordingly, even though there may be insurance coverage, the extended period that may be needed to replace such items could cause significant delay in our ability to continue normal operations.

Moreover, the collateral agent may need to evaluate the impact of potential liabilities before determining to foreclose on Collateral consisting of real property because owners and operators of real property may be held liable under environmental laws for the costs of remediating or preventing the release or threatened release of regulated materials at such real property. Consequently, the collateral agent may decline to foreclose on such Collateral or exercise remedies available in respect thereof if it does not receive indemnification to its satisfaction from the holders of notes.

Rights of holders of notes in the Collateral may be adversely affected by the failure to create or perfect security interests in certain Collateral on a timely basis, and a failure to create or perfect such security interests on a timely basis or at all may result in a default under the indenture and other agreements governing the notes.

We have agreed to secure the notes and the note guarantees by granting first priority liens, subject to permitted liens, on the Notes Priority Collateral and by granting a second-priority lien on the ABL Priority Collateral. See “Description of notes—Security.”

If we, or any subsidiary guarantor, were to become subject to a future bankruptcy proceeding, any liens recorded or perfected after the Emergence Date would face a greater risk of being invalidated than if they had been recorded or perfected on the Emergence Date. Liens recorded or perfected after the Emergence Date may be treated under bankruptcy law as if they were delivered to secure previously existing indebtedness. In bankruptcy proceedings commenced within 90 days of lien perfection, a lien given to secure previously existing debt is materially more likely to be avoided as a preference by the bankruptcy court than if delivered and promptly recorded on the issue date of the indebtedness. Accordingly, if we or a subsidiary guarantor were to file for bankruptcy protection after the Emergence Date and the liens had been perfected less than 90 days before commencement of such bankruptcy proceeding, the liens securing the notes

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may be especially subject to challenge as a result of having been perfected after the Emergence Date. To the extent that such challenge succeeded, you would lose the benefit of the security that the Collateral was intended to provide.

Additionally, a failure, for any reason that is not permitted or contemplated under the security documents relating to the Collateral that will secure the notes, to perfect the security interests in the properties and assets included in the Collateral securing the notes may result in a default under the indenture and other agreements governing the notes.

State law may limit the ability of the collateral agent, on behalf of the holders of the notes, to foreclose on real property and improvements included in the Collateral.

The notes and guarantees will be secured by, among other things, liens on real property and improvements located in various states. State laws may limit the ability of the collateral agent to foreclose on the improved real property Collateral located therein. State laws govern the perfection, enforceability and foreclosure of mortgage liens against real property which secure debt obligations such as the notes and the guarantees. These laws may impose procedural requirements for foreclosure different from and necessitating a longer time period for completion than the requirements for foreclosure of security interests in personal property. Debtors may have the right to reinstate defaulted debt (even if it has been accelerated) before the foreclosure date by paying the past due amounts and a right of redemption after foreclosure. Governing law may also impose security first and one form of action rules, which rules can affect the ability to foreclose or the timing of foreclosure on real and personal property collateral regardless of the location of the collateral and may limit the right to recover a deficiency following a foreclosure.

The collateral agent, acting on the noteholders’ behalf, also may be limited in its ability to enforce a breach of the “no liens” covenant. Some decisions of certain state courts have placed limits on a lender’s ability to accelerate debt as a result of a breach of this type of covenant. Under these decisions, a lender seeking to accelerate debt secured by real property upon breach of covenants prohibiting the creation of certain junior liens or leasehold estates may need to demonstrate that enforcement is reasonably necessary to protect against impairment of the lender’s security or to protect against an increased risk of default. Although the foregoing court decisions may have been preempted, at least in part, by certain federal laws, the scope of such preemption, if any, is uncertain. Accordingly, a court could prevent the collateral agent and the holders of the notes from declaring a default and accelerating the notes by reason of a breach of this covenant, which could result in the dilution or preemption of the noteholders’ security interest in the Collateral and materially adversely affect the value of the noteholders’ security interest in such Collateral.

There are circumstances other than repayment or discharge of the notes under which the Collateral securing the notes and note guarantees will be released automatically, without your consent or the consent of the trustee.

Under various circumstances, Collateral securing the notes will be released automatically, including:

• in whole or in part, as applicable, with respect to Collateral which has been taken by eminent domain, condemnation or other similar circumstances;

• in part, upon a sale, transfer or other disposal of such Collateral in a transaction not prohibited under the indenture;

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• in part, with respect to Collateral held by a guarantor, upon the release of such guarantor from its note guarantee;

• in part, in accordance with the applicable provisions of the indenture and security documents; or

• in whole or in part with the consent of holders with 66 ²/3% of the notes.

In addition, the note guarantee of a subsidiary guarantor will be automatically released in connection with a sale of such subsidiary guarantor in a transaction permitted under the indenture.

The indenture will also permit us to designate one or more of our restricted subsidiaries that is a guarantor of the notes as an unrestricted subsidiary. If we designate a subsidiary guarantor as an unrestricted subsidiary for purposes of the indenture governing the notes, all of the liens on any Collateral owned by such subsidiary or any of its subsidiaries and any guarantees of the notes by such subsidiary or any of its subsidiaries will be released under such indenture. Designation of an unrestricted subsidiary will reduce the aggregate value of the Collateral securing the notes to the extent that liens on the assets of the unrestricted subsidiary and its subsidiaries are released. In addition, the creditors of the unrestricted subsidiary and its subsidiaries will have a senior claim relative to the notes on the assets of such unrestricted subsidiary and its subsidiaries.

There are significant restrictions on your ability to transfer or resell your notes.

The notes are being offered and sold pursuant to an exemption from registration under U.S. and applicable state securities laws and, except in limited circumstances, we do not intend to file a registration statement with respect to the notes with the SEC. Therefore, you may transfer or resell the notes in the United States only in a transaction registered under or exempt from the registration requirements of the U.S. and applicable state securities laws, and you may be required to bear the risk of your investment for an indefinite period of time. See “Transfer restrictions.”

We have agreed to file, under limited circumstances, a resale registration statement with the SEC and to use our reasonable best efforts to cause such registration statement to become and remain effective with respect to the notes. The SEC, however, has broad discretion to declare any registration statement effective and may delay, defer or suspend the effectiveness of any registration statement for a variety of reasons.

Your ability to transfer the notes may be limited by the absence of an active trading market and an active trading market may not develop for the notes.

The notes will be new issues of securities for which there is no established trading market. We expect the notes to be eligible for trading by “qualified institutional buyers,” as defined under Rule 144A, but we do not intend to list the notes on any national securities exchange or include the notes in any automated quotation system. The Initial Purchasers of the notes have advised us that they intend to make a market in the notes as permitted by applicable laws and regulations; however, the Initial Purchasers are not obligated to make a market in the notes and, if commenced, they may discontinue their market-making activities at any time without notice.

Therefore, an active market for the notes may not develop or be maintained, which would adversely affect the market price and liquidity of the notes. In such case, the holders of notes may not be able to sell their notes at a particular time or at a favorable price.

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Even if an active trading market for the notes does develop, there is no guarantee that it will continue. Historically, and particularly in recent months, the market for non-investment grade debt has been subject to severe disruptions that have caused substantial volatility in the prices of securities similar to the notes. The market, if any, for the notes may experience similar disruptions and any such disruptions may adversely affect the liquidity in such market and/or the prices at which you may sell your notes. In addition, subsequent to their initial issuance, the notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, our performance and other factors.

The notes may be issued with OID.

If the stated principal amount of the notes exceeds their issue price by more than a de minimis amount, the notes will be issued with OID for United States federal income tax purposes. As a result, in addition to the stated interest on the notes, a holder subject to U.S. federal income taxation will be required to include such OID in gross income (as ordinary income) as it accrues, in advance of the receipt of cash attributable to such income and regardless of the holder’s regular method of accounting for United States federal income tax purposes. See “Certain United States federal income tax considerations.”

In the event of a future bankruptcy, holders may not have a claim with respect to original issue discount on the notes constituting “unmatured interest” under the Bankruptcy Code.

Under the Bankruptcy Code, the principal amount of each note in excess of its issue price is treated as unmatured interest. The claim of the holder of a note in a future bankruptcy proceeding in respect of the notes with respect to this original issue discount would be limited to the portion thereof that had accreted prior to the date of the commencement of the bankruptcy case. Holders of the notes would not be entitled to receive any additional portion of the original issue discount that accreted during the commencement of a future bankruptcy proceeding. Realization values may be substantially different from carrying values shown in our financial statements.

Federal and state fraudulent transfer laws may permit a court to void the notes, the note guarantees and/or the grant of Collateral and, if that occurs, you may not receive any payments on the notes.

Federal and state fraudulent transfer and conveyance statutes may apply to the issuance of the notes and the incurrence of the guarantees of such notes. Under federal bankruptcy law and comparable provisions of state fraudulent transfer or conveyance laws, which may vary from state to state, the notes or the guarantees thereof (or the grant of Collateral securing any such obligations) could be voided as a fraudulent transfer or conveyance if we or any of the guarantors, as applicable, (a) issued the notes or incurred the note guarantees with the intent of hindering, delaying or defrauding creditors, or (b) received less than reasonably equivalent value or fair consideration in return for either issuing the notes or incurring the note guarantees and, in the case of (b) only, one of the following is also true at the time thereof:

• we or any of the guarantors, as applicable, were insolvent or rendered insolvent by reason of the issuance of the notes or the incurrence of the note guarantees;

• the issuance of the notes or the incurrence of the note guarantees left us or any of the guarantors, as applicable, with an unreasonably small amount of capital or assets to carry on the business;

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• we or any of the guarantors intended to, or believed that we or such guarantor would, incur debts beyond our or such guarantor’s ability to pay as they mature; or

• we or any of the guarantors were a defendant in an action for money damages, or had a judgment for money damages docketed against us or such guarantor if, in either case, after final judgment, the judgment is unsatisfied.

As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent debt is secured or satisfied. A court would likely find that by virtue of the fact that the notes were issued by us (following the Assumption) for our direct benefit, and only indirectly for any guarantor’s benefit, that a guarantor did not receive reasonably equivalent value or fair consideration for its note guarantee, to the extent such guarantor did not obtain a reasonably equivalent benefit directly or indirectly from the issuance of the notes.

We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were insolvent at the relevant time or, regardless of the standard that a court uses, whether the notes or the note guarantees would be subordinated to our or any of our guarantors’ other debt. In general, however, a court would deem an entity insolvent if:

• the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets;

• the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

• it could not pay its debts as they became due.

Although each guarantee entered into by a subsidiary may contain a provision intended to limit that guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer, this provision may not be effective to protect those guarantees from being voided under fraudulent transfer law, or may reduce that guarantor’s obligation to an amount that effectively makes its guarantee worthless. In a recent Florida bankruptcy case, this kind of provision was found to be ineffective to protect the guarantees.

If a court were to find that the issuance of the notes, the incurrence of a note guarantee or the grant of security was a fraudulent transfer or conveyance, the court could void the payment obligations under the notes or such note guarantee or void the grant of Collateral or subordinate the notes or such note guarantee to presently existing and future indebtedness of ours or of the related guarantor, or require the holders of notes to repay any amounts received with respect to such note guarantee. In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the notes or the guarantees. Further, the avoidance of the notes could result in an event of default with respect to our and our subsidiaries’ other debt that could result in acceleration of such debt.

Furthermore, in the event that a future bankruptcy were to be commenced under the Bankruptcy Code, claims could be asserted, with respect to any payments we made within 90 days prior to the commencement of such a case, that we were insolvent at the time any such payments were made and that all or a portion of such payments, which could include payments on the notes or

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repayments of amounts due under the notes, might be deemed to constitute a preference under the Bankruptcy Code, and that such payments should be voided by the courts and recovered from the recipients for the benefit of the entire bankruptcy estate. See the risk factor titled “—Rights of holders of notes in the Collateral may be adversely affected by the failure to create or perfect security interests in certain Collateral on a timely basis, and a failure to create or perfect such security interests on a timely basis or at all may result in a default under the indenture and other agreements governing the notes.”

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EX-99.4

Exhibit 99.4

Use of proceeds

The net proceeds of this offering will be placed into a segregated escrow account on the closing date together with cash provided by the Company in an amount sufficient to fund the redemption of the notes and accrued and unpaid interest to, but excluding, January 4, 2011. The funds in the escrow account will be held as Collateral security for our obligations in respect of the notes pending satisfaction of the Escrow Conditions. If the Escrow Conditions are not fulfilled on or prior to December 31, 2010, the notes will be redeemed at 101% of the issue price of the notes, plus accrued and unpaid interest to, but excluding the date of redemption. Following the satisfaction of the Escrow Conditions, the escrowed funds will be released and we will thereafter use the net proceeds from this offering to repay indebtedness as described below in connection with the implementation of the Plans of Reorganization. Prior to release from escrow, the proceeds will be invested in cash and certain cash equivalents.

We estimate that the net proceeds to us from this offering of notes, after deducting estimated transaction fees associated with the notes, will be approximately $712 million. Such net proceeds, together with the net proceeds from the sale of the Convertible Notes in the Rights Offering, cash on hand and the other sources described below, will be used to repay outstanding indebtedness as specified below pursuant to the terms of the Plans of Reorganization. Actual amounts may differ from these estimates.

(dollars in millions)	Amount			Amount
Sources of Funds			Uses of Funds
Cash(1)	$	496	Repayment of existing secured debt(5)	$	1,258
Notes offered hereby(2)		750	Administrative and priority claims(6)		137
NAFTA Settlement(3)		125	Other secured and convenience claims		43
Convertible Notes(4)		125	Financing fees		58
Total sources	$	1,496	Total uses	$	1,496

(1) Represents cash expected to be on hand on the Emergence Date that will be used to fund the uses of funds outlined herein and assumes an emergence date of October 14, 2010. The actual amount of cash available as of the Emergence Date could result in a change in the principal amount of Convertible Notes issued in the Rights Offering. See “Description of certain indebtedness—Convertible Notes.”

(2) Represents aggregate principal amount of notes expected to be sold in this offering and does not give effect to any original issue discount.

(3) Represents funds expected to be received from the government of Canada regarding the 2008 expropriation of certain of our assets and rights in the province of Newfoundland and Labrador (Canada). See “Summary—Recent developments—NAFTA settlement.”

(4) Represents the estimated aggregate principal amount of 10% Convertible Senior Subordinated Notes to be issued to unsecured creditors in the Rights Offering pursuant to the Plans of Reorganization. The amount of Convertible Notes issued on the Emergence Date may be higher or lower than the $125 million reflected above depending on our actual liquidity on the Emergence Date. See “Description of certain indebtedness—Convertible Notes” for a description of how changes in our liquidity will impact the principal amount of Convertible Notes issued. In addition, the Convertible Notes reflected in the table above do not include any Escrow Notes that may subsequently be released to holders of certain unresolved claims as of the Emergence Date if such claims are later determined to be allowable claims. Upon the release of any of the Escrow Notes, the corresponding escrowed subscription price for such Escrow Notes will also be released to us.

(5) Represents the following estimated amounts, which include principal, accrued interest and professional fees, assuming an emergence date of October 14, 2010: (i) $40 million outstanding under the Company’s DIP Facility, (ii) $120 million outstanding under Abitibi’s Securitization Facility, (iii) $354 million outstanding under the Bowater Prepetition U.S. and Canadian Credit Facilities, (iv) $363 million under the prepetition ACCC Term Loan, (v) $347 million of outstanding ACCC 13.75% Senior Secured Notes due 2011, and (vi) $34 million outstanding under the Bowater floating rate industrial revenue bonds.

(6) Represents estimated administrative and priority claims including professional success fees, restructuring reorganization award and other fees.

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EX-99.5

Exhibit 99.5

Capitalization

The following table sets forth our cash and cash equivalents, restricted cash and capitalization on a historical basis as of June 30, 2010 and on a pro forma basis as of June 30, 2010 to reflect the consummation of the Transactions pursuant to the Plans of Reorganization including the application of Fresh Start Accounting principles, the entry into the ABL Credit Facility, the issuance of the notes offered hereby and the Convertible Notes and the application of the proceeds thereof.

You should read this table together with “Unaudited pro forma consolidated financial information” for additional detail concerning the pro forma adjustments described above. You should also read the table below in connection with the sections of this offering memorandum entitled “Use of proceeds,” “Selected historical financial information,” and our historical consolidated financial statements and related notes included elsewhere in this offering memorandum.

	As of June 30, 2010
(dollars in millions)	Historical			Pro forma
Cash and cash equivalents(1)	$	708		$	203
Restricted cash(2)		211			85
Total cash, cash equivalents and restricted cash		919			288
ABL Credit Facility(3)		—			—
Notes offered hereby(4)		—			750
Convertible Notes(5)		—			125
Other debt(6)		1,579			239
Debt subject to compromise(7)		4,851			—
Total debt		6,430			1,114
Total shareholders’ (deficit)/equity attributable to AbitibiBowater		(2,901	)		2,600
Total capitalization	$	3,529		$	3,714

(1) Pro forma cash and cash equivalents represents June 30, 2010 amounts offset by net payments made in connection with our Plans of Reorganization and by the financing adjustments described under “Unaudited pro forma consolidated financial information.” Cash includes $74 million of Non-Debtor cash.

(2) Restricted cash includes cash reserves required in connection with the Company’s operational transactions, asset sale transactions, treasury management activities and letter of credit collateralizations.

(3) On the closing date, we will enter into the $600 million ABL Credit Facility. On the Emergence Date, we do not expect that there will be any amounts outstanding under the ABL Credit Facility, but expect to have issued approximately $52 million in letters of credit under such facility.

(4) Notes offered hereby with aggregate principal amount of $750 million.

(5) Represents the aggregate principal amount of 10% Convertible Senior Subordinated Notes to be issued to unsecured creditors in the Rights Offering pursuant to the Plans of Reorganization. The amount of Convertible Notes issued on the Emergence Date may be higher or lower than the $125 million reflected above depending on our actual liquidity on the Emergence Date. See “Description of certain indebtedness—Convertible Notes” for a description of how changes in our liquidity will impact the principal amount of Convertible Notes issued. In addition, the Convertible Notes reflected in the table above do not include any Escrow Notes that may subsequently be released to holders of certain unresolved claims as of the Emergence Date if such claims are later determined to be allowable claims. Upon the release of any of the Escrow Notes, the corresponding escrowed subscription price for such Escrow Notes will also be released to us.

(6) As of June 30, 2010, consists of the following items (and principal amounts outstanding): (i) DIP Facility ($206 million); (ii) Securitization Facility ($120 million); (iii) Prepetition Bowater Credit Facilities ($333 million); (iv) Prepetition ACCC Term Loan ($347 million); (v) Prepetition ACCC 13.75% Senior Secured Notes due 2011 ($300 million); (vi) Prepetition 7.132% notes due 2017 of ACH ($239 million); and (vii) Prepetition floating rate industrial revenue bonds due 2029, which will be paid from a letter of credit under the Bowater credit facility ($34 million). The pro forma amount represents the prepetition 7.132% notes due 2017 of ACH ($239 million).

(7) Consists of all other prepetition debt.

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EX-99.6

Exhibit 99.6

Unaudited pro forma consolidated financial information

The following unaudited pro forma consolidated financial information has been derived by the application of pro forma adjustments to the historical consolidated financial statements included elsewhere in the offering memorandum. The unaudited pro forma consolidated financial information should be read in conjunction with “Use of proceeds,” “Capitalization,” “Selected historical financial information,” “Management’s discussion and analysis of financial conditions and results of operations” and our audited consolidated financial statements and related notes as of and for the year ended December 31, 2009 and unaudited consolidated financial statements and related notes as of and for the six months ended June 30, 2010 and 2009, which are included elsewhere in this offering memorandum.

The unaudited pro forma consolidated financial information gives effect to the following categories of adjustments (the “Adjustments”). Each of these adjustments is described more fully below and within the notes to the unaudited pro forma consolidated financial information:

• the restructuring transactions contemplated by the Plans of Reorganization, including this notes offering; and

• our application of Fresh Start Accounting upon emergence from bankruptcy, in accordance with FASB ASC 852, “Reorganizations.”

The unaudited pro forma consolidated balance sheet gives effect to adjustments for transactions that (i) are directly attributable to the restructuring transactions; and (ii) are factually supportable regardless of whether they have a continuing impact on the Company or are non-recurring. The unaudited pro forma consolidated statement of operations gives effect to adjustments that are (i) directly attributable to the restructuring transactions; and (ii) are factually supportable and are expected to have a continuing impact on the Company. The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances.

Basis of pro forma presentation

The unaudited pro forma consolidated balance sheet as of June 30, 2010 is based on the unaudited interim consolidated balance sheet of AbitibiBowater as of June 30, 2010 included elsewhere in this offering memorandum. The unaudited pro forma consolidated balance sheet has been prepared as if the Adjustments described above had been recorded on June 30, 2010.

The unaudited pro forma consolidated statement of operations for the twelve months ended June 30, 2010 is based on the historical consolidated statement of operations data of AbitibiBowater for the twelve months ended June 30, 2010, as derived by adding (i) the audited consolidated statement of operations of AbitibiBowater for the year ended December 31, 2009, to (ii) the unaudited interim consolidated statement of operations of AbitibiBowater for the six months ended June 30, 2010, and then deducting (iii) the unaudited interim consolidated statement of operations for the six months ended June 30, 2009. The audited consolidated statement of operations for the year ended December 31, 2009 and the unaudited interim consolidated statements of operations for the six months ended June 30, 2010 and 2009 are included elsewhere in this offering memorandum. The unaudited pro forma consolidated statement of operations has been prepared as if the Adjustments described above had been recorded on July 1, 2009.

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The unaudited pro forma consolidated financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations or financial position that would have been reported had the Transactions in fact occurred on June 30, 2010 for the unaudited pro forma consolidated balance sheet, and on July 1, 2009 for the unaudited pro forma consolidated statement of operations, or indicative of our future financial position or results. In addition, the historical financial statements of the Company will not be comparable to the financial statements of the Company following emergence from bankruptcy due to the effects of the Adjustments (see “—Adjustments relating to Fresh Start Accounting” below).

Additionally, the unaudited pro forma consolidated financial information has been prepared for an offering that is exempt from registration under the Securities Act and does not comply in important respects with the rules of the SEC for pro forma consolidated financial information and is materially different from the format, presentation and amounts presented in accordance with such rules.

In addition, the amount of new stockholders’ equity in the unaudited pro forma consolidated balance sheet is not an estimate of the market value of our common stock as of the Emergence Date or at any other time. We make no representations as to the market value, if any, of our common stock.

The unaudited pro forma consolidated financial information has been prepared assuming the consistent application of accounting policies as described in the historical consolidated financial statements of the Company.

Adjustments relating to the Plans of Reorganization

The “Plans” column in the unaudited pro forma consolidated balance sheet gives effect to the Plans of Reorganization and the implementation of the transactions contemplated by the Plans of Reorganization, including the discharge of administrative claims and of estimated claims allowed by the Courts upon confirmation and our recapitalization upon emergence from our Creditor Protection Proceedings, including this notes offering. These adjustments give effect to the terms of the Plans of Reorganization which include the following:

• issuance of $750 million principal amount of notes in this offering net of estimated financing fees of $38 million;

• issuance of $125 million of Convertible Notes net of estimated financing fees of $20 million;

• payment of the balance outstanding under the DIP Facility in cash ($206 million as of June 30, 2010, $40 million as of August 31, 2010);

• cash repurchase of all outstanding receivables interests under the Securitization Facility for a price equal to the par amount thereof ($120 million as of June 30, 2010); the Securitization Facility will be terminated upon emergence;

• payment in full in cash of the prepetition Bowater U.S. and Canadian secured credit facilities (which consist of separate credit agreements entered into by Bowater and separately by its subsidiary Bowater Canadian Forest Products, Inc.) (aggregate of $346 million, comprised of $211 million under the U.S. facility, and $135 million under the Canadian facility as of June 30, 2010) and payment of $34 million related to the Bowater’s floating rate industrial revenue bonds;

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• payment of the prepetition ACCC Term Loan in full in cash ($355 million as of June 30, 2010);

• payment of the outstanding ACCC 13.75% Senior Secured Notes due 2011 in full in cash ($332 million as of June 30, 2010);

• issuance to holders of the Debtors’ prepetition unsecured indebtedness of their pro rata share of the new common stock to be issued by the reorganized Company (holders will be entitled, to the extent eligible, to participate in the Rights Offering);

• the Debtors’ obligations to fund the prior service costs related to their pension and other post retirement benefit plans will be reclassified, subject to the resolution of funding relief;

• payment to certain holders of the Debtors’ prepetition unsecured indebtedness with individual claim amounts less than $5,000, 50% of their claim amount in cash (approximately $15 million in the aggregate);

• payments in cash of the administrative and priority claims of $77 million, reclamation claims, liens and other secured claims of $28 million, professional success fees of $53 million and other restructuring expense of $7 million;

• extinguishment of all equity interests in the Company existing immediately prior to the Emergence Date; and

• entry by the reorganized Company into the ABL Credit Facility, under which the Company will have issued $52 million in letters of credit.

• approval by the Courts and receipt of payment in connection with the NAFTA final settlement.

The estimated reorganization gain of approximately $3.6 billion resulting from the settlement of liabilities pursuant to the Plans of Reorganization have been reflected in the unaudited pro forma consolidated balance sheet but have not been reflected in the unaudited pro forma consolidated statement of operations as this gain is non-recurring.

For additional information regarding adjustments relating to the Plans of Reorganization, see the notes to the unaudited pro forma consolidated financial information.

Adjustments relating to Fresh Start Accounting

The “Fresh Start” column of the unaudited pro forma consolidated balance sheet gives effect to adjustments relating to Fresh Start Accounting pursuant to ASC 852. Under Fresh Start Accounting, reorganization value represents the fair value of the entity before considering debt and approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring. Reorganization value is reduced by the fair value of debt in deriving management’s estimate of reorganized equity value. Pursuant to Fresh Start Accounting, our reorganization equity value has been allocated to the estimated fair value of assets and liabilities in conformity with FASB ASC 805 “Business Combinations” (Accounting for “Business Combinations”). Under ASC 852, reorganization value is allocated first to tangible and identifiable intangible assets, with the remaining reorganization value representing the excess of amounts allocable to identifiable assets (“Excess Reorganization Value”) allocated to goodwill, which is subject to periodic evaluation for impairment.

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In accordance with ASC 852, if the reorganization value of the assets of the emerging entity immediately before the date of confirmation is less than the total of all post-petition liabilities and allowed claims, and if holders of existing voting shares immediately before confirmation receive less than 50 percent of the voting shares of the emerging entity, the entity shall adopt fresh start reporting upon its emergence from Chapter 11. The loss of control contemplated by the reorganization plan must be substantive and not temporary. That is, the new controlling interest must not revert to the shareholders existing immediately before the plan was filed or confirmed. We have concluded that we will meet the criteria under ASC 852 to adopt fresh start reporting upon emergence. The Fresh Start adjustments are based on management’s current best preliminary estimate of the reorganized Company’s equity value of approximately $2.6 billion.

These initial valuations of assets and liabilities in accordance with ASC 805 are preliminary based on information available to management and have been made solely for purposes of developing the unaudited pro forma consolidated financial information. Updates to such preliminary valuations will be completed as of the date we emerge from bankruptcy and, to the extent such updates reflect a valuation different than those used in the unaudited pro forma consolidated balance sheet, there will be adjustments in the carrying values of certain assets. To the extent actual valuations and allocations differ from those used in calculating the unaudited pro forma consolidated financial information, these differences will be reflected on our balance sheet upon emergence under Fresh Start Accounting and may also affect the amount of expenses which would be recognized in the statement of operations post-emergence from bankruptcy. For example, if the valuation of definite lived intangibles were to be increased, our amortization expense would increase correspondingly. As such, the following unaudited pro forma consolidated financial information may not accurately represent our post-emergence financial condition and results of operations and any differences may be material.

For additional information regarding adjustments relating to Fresh Start Accounting, see the notes to the unaudited pro forma consolidated financial information.

Significant non-recurring items in the unaudited pro forma AbitibiBowater consolidated statement of operations

The unaudited pro forma AbitibiBowater consolidated statement of operations include the following expenses that were not eliminated by a pro forma adjustment as they are not directly attributable to the Transactions.

Closure costs, impairment and other related charges

Mill closure costs, fixed asset impairments, severance and other related charges which are not associated with our work towards a comprehensive restructuring plan, are classified as “Closure costs, impairment and other related charges” on our consolidated statement of operation. These expenses are not eliminated by a pro forma adjustment as they are not directly attributable to the Transactions.

Results of operations for facilities permanently closed or indefinitely idled

Results of operations for facilities or paper machines which have been permanently closed or idled have not been eliminated from our pro forma consolidated statements of operations for the 12 month period ending June 30, 2010 as such operations are part of the historical operations of the Company, and the decision to permanently close or indefinitely idle is not directly attributable to the Transactions.

4

During the 12 month period ending June 30, 2010 we took actions to permanently close or indefinitely idle certain non-profitable facilities, including:

• our Dolbeau facility, which has been effectively idled since July 7, 2009, representing 244,000 short tons of specialty papers capacity. We announced the permanent closure of this facility on August 24, 2010;

• in September 2009, we announced the indefinite idling of our Beaupre, Quebec paper mill, representing 241,000 metric tons of specialty papers capacity annually. The mill was subsequently closed permanently and sold;

• in September 2009, we announced the indefinite idling of a specialty paper machine at our Fort Frances facility, representing 70,000 metric tons of capacity annually;

• in September 2009, we announced the indefinite idling of a newsprint machine at our Coosa Pines, Alabama paper mill, representing 170,000 metric tons capacity annually;

• in August 2009, we announced the indefinite idling of our two newsprint machines at our Thunder Bay facility, representing 392,000 metric tons of capacity annually, one of which (with 235,000 metric tons of capacity) was restarted in February 2010;

• on March 11, 2010, we announced the indefinite idling of one of our newsprint machines at our Thorold facility, representing 207,000 metric tons of capacity annually; and

• in May 2010, we announced the indefinite idling of our Gatineau paper mill, representing 360,000 metric tons of capacity annually. We announced the permanent closure of this facility on August 24, 2010.

Additionally, on February 2, 2010, our Bridgewater Paper Company Limited (“BPCL”) subsidiary filed for administration in the United Kingdom pursuant to the United Kingdom Insolvency Act 1986, as amended. As a result, effective as of the date of the BPCL Administration filing, we no longer consolidate BPCL in our consolidated financial statements. The results of operations for BPCL prior to February 2, 2010 are included in our consolidated statements of operations.

5

AbitibiBowater Inc.

Unaudited pro forma consolidated balance sheet

As of June 30, 2010

	Adjustments
(dollars in millions)	Historical			Plans				Fresh Start				Pro Forma
Assets
Current assets:
Cash and cash equivalents	$	708		$	(505	)	a					$	203
Accounts receivable, net		828											828
Inventories, net		515											515
Assets held for sale		9											9
Other current assets		111			(11	)	b,c						100
Total current assets		2,171			(516	)							1,655
Fixed assets, net		3,402							(637	)	n		2,765
Goodwill		53							609		o		662
Amortizable intangible assets, net		462							96		p		558
Other assets		561			(86	)	c		(114	)	q		361
Total assets	$	6,649		$	(602	)		$	(46	)		$	6,001
Liabilities and shareholders’ (deficit) equity
Liabilities not subject to compromise:
Current liabilities:
Accounts payable and accrued liabilities	$	511		$	(53	)	d					$	458
Debtor in possession financing		206			(206	)	e						—
Secured borrowings		120			(120	)	f						—
Short-term bank debt		680			(680	)	g						—
Current portion of long-term debt		300			(300	)	h						—
Liabilities associated with assets held for sale		3											3
Total current liabilities		1,820			(1,359	)			—				461
Long-term debt, net of current portion		273			841		i						1,114
Pension and other postretirement projected benefit obligations		96			786		j		492		r		1,374
Other long-term liabilities		87											87
Deferred income taxes		96							—		s		96
Total liabilities not subject to compromise		2,372			268				492				3,132
Liabilities subject to compromise		7,065			(7,065	)	k						—
Total liabilities		9,437			(6,797	)			492				3,132
Commitments and contingencies
Shareholders’ (deficit) equity:
AbitibiBowater Inc. shareholders’ (deficit) equity:
Common stock		55			(55	)	l						—
Exchangeable shares		173			(173	)	l						—
Additional paid-in capital		2,525			2,828		l		(2,753	)	t		2,600
Shareholders’ (deficit) equity		(5,188	)		3,595		m		1,593		t		—
Accumulated other comprehensive loss		(466	)						466		t		—
Total AbitibiBowater Inc. shareholders’ (deficit) equity		(2,901	)		6,195				(694	)			2,600
Noncontrolling interests		113							156		u		269
Total shareholders’ (deficit) equity		(2,788	)		6,195				(538	)			2,869
Total liabilities and shareholders’ (deficit) equity	$	6,649		$	(602	)		$	(46	)		$	6,001

See accompanying notes to unaudited pro forma consolidated financial information.

6

AbitibiBowater Inc.

Unaudited pro forma consolidated statement of operations for the twelve months ended June 30, 2010

(dollars in millions)	Historical			Adjustments			Pro forma
Sales	$	4,499					$	4,499
Costs and expenses:
Cost of sales, excluding depreciation, amortization and cost of timber harvested		3,637		12		3		3,649
Depreciation, amortization and cost of timber harvested		545		(299	)	1, 2		246
Distribution costs		531						531
Selling and administrative expense		156		10		3		166
Closure costs, impairment and other related charges		(60	)					(60	)
Net gain on disposition of assets		(51	)					(51	)
Operating income (loss)		(259	)	277				18
Interest expense		(580	)	462		4		(118	)
Other (expense) income, net		(2	)	(8	)	5		(10	)
Loss before reorganization items and income taxes		(841	)	731				(110	)
Reorganization items, net		(893	)	893		6		—
Loss before income taxes		(1,734	)	1,624				(110	)
Income tax (expense) benefit		91		—		7		91
Net (loss) income including noncontrolling interests		(1,643	)	1,624				(19	)
Net loss (income) attributable to noncontrolling interests		21		(2	)	8		19
Net loss attributable to AbitibiBowater Inc.		(1,622	)	1,622		9, 10		—

See accompanying notes to unaudited pro forma consolidated financial information.

7

AbitibiBowater Inc.

Notes to unaudited pro forma consolidated

financial information

The pro forma consolidated balance sheet has been prepared as if the Transactions had been completed on June 30, 2010. Pro forma adjustments have been made:

a. To record the following cash activity:

Description	(dollars in millions)
Historical cash and cash equivalents				$	708
Exit Financing Sources:
Senior Secured Notes Offering, less financing fees of $38 million	$	712
Convertible Notes, less financing fees of $20 million		105
Net Proceeds from exit financing					817
Proceeds from NAFTA settlement					125
Repayment of Secured Borrowings:
Bowater DIP Facility		(206	)
Bowater’s secured bank credit facilities, including accrued interest of $13 million		(346	)
Abitibi’s 13.75% Senior Secured Note Claims, including accrued interest of $32 million		(332	)
Abitibi’s senior secured term loan, including accrued interest of $8 million		(355	)
Abitibi’s accounts receivable securitization facility Bowater’s floating rate industrial revenue bonds		(120 (34	)  )
					(1,393	)
Payments related to Plans of Reorganization:
Administrative and priority claims Other secured claims (reclamation, liens and other)		(77 (28	)  )
Convenience claims		(15	)
Reorganization expenses related to professional success fees		(53	)
Restructuring recognition award and other		(7	)
					(180	)
Release of restricted and escrow cash					126
Pro forma cash and cash equivalents				$	203

b. To record prepaid asset for restructuring recognition award of $6 million paid at emergence. The associated expense will be recognized ratably over 12 months post-emergence ($0.5 million per month). Also, to record the release of $17 million of restricted cash related to the securitization program (see the following note “c”).

c. To record write-off of deferred financing costs of $35 million upon repayment of secured debt and to record deferred financing costs associated with the exit financing facilities of $58 million and to record the release of restricted cash of $109 million from “Other assets.”

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During our Creditor Protection Proceedings, certain cash received from the sale of assets was placed in escrow and restricted as to its use pending further court orders. This restricted cash is included in “Other assets” in our unaudited consolidated balance sheet. The restricted cash is as follows:

(dollars in millions)	June 30, 2010		Cash released (deposited)			Pro forma restricted cash
ULC guarantee to Alcoa (1)	$	49	$	(27	)	$	76
ULC DIP Facility (2)		47		47			—
Proceeds related to a third-party’s sale of timberlands (3)		27		27			—
Proceeds from asset sales (4)		59		59			—
Other		12		3			9
Net cash released from “Other assets”	$	194	$	109		$	85
Restricted cash released from “Other current assets” relating to the securitization program		17		17			—
Total pro forma restricted cash	$	211	$	126		$	85

(1) The restricted cash associated with the guarantee to Alcoa will increase to $76 million at emergence and will remain in place until the guarantee is no longer required.

(2) The ULC DIP Facility will terminate on the earliest of: (i) December 31, 2010, (ii) the effective date of a plan or plans of reorganization or a plan of compromise or arrangement confirmed by order of the Courts or (iii) the acceleration of the ULC DIP Facility or the occurrence of an event of default.

(3) Proceeds related to a third-party’s sale of timberlands held in trust pending further orders from the court. Restrictions on these proceeds will terminate upon emergence from bankruptcy.

(4) Proceeds from asset sales represents proceeds from the sale of various assets, including our Mackenzie paper mill and sawmills, our recycling division’s material recycling facilities, our West Tacoma, Washington paper mill, our Donnacona, Dalhousie and Beaupre paper mills and other assets. Restrictions on these proceeds will terminate upon emergence from bankruptcy.

d. To record payment of accrued interest on the 13.75% Senior Secured Notes of $32 million and interest on the ACCC Term Loan and Bowater’s secured bank credit facilities of $21 million.

e. To record payment of the Bowater DIP Facility of $206 million.

f. To record repayment of $120 million under our accounts receivable securitization facility, which will be cancelled upon emergence.

g. To record payment of Secured Bank Debt of $680 million, which consists of the ACCC Term Loan and Bowater’s and BCFPI’s U.S. and Canadian secured bank credit facilities.

h. To record repayment of 13.75% Senior Secured Note Claims of $300 million.

i. To record the liabilities for the exit financing facilities, consisting of the $750 million for the Senior Secured Notes and $125 for the Convertible Notes and to record the payment of existing secured debt as of June 30, 2010 of $34 million for Bowater’s floating rate industrial

9

revenue bonds due 2029. Surviving pre-reorganization debt consists of $239 million, 7.132% loan due 2017 for our ACH Limited Partnership in addition to the exit financing facilities. The debt reflected on a pro-forma basis does not include accounting consideration for any embedded derivatives. Accounting for embedded derivatives associated with this debt would result in a decrease in the debt balance and an offsetting increase in the balance of “Other long-term liabilities” on the balance sheet.

j. To record reclassification of pension and other post-retirement benefits of $786 million from liabilities subject to compromise.

k. To record payment of accrued administrative and priority claims of $77 million, other secured claims of $28 million, payment of convenience claims of $15 million, to reclassify pension liabilities of $786 million and to extinguish remaining liabilities subject to compromise of $6.2 billion pursuant to the Plans.

The amounts currently classified as liabilities subject to compromise may be subject to future adjustments depending on Court actions, further developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, or other events, and could materially affect this amount.

l. Elimination of historical common stock and exchangeable shares and issuance of new common stock and additional paid-in-capital for a total equity value of $2.6 billion.

m. To record the gain on extinguishment of debt of $3.6 billion, net of professional fees of $53 million and write off of deferred financing costs of $35 million and other costs of $1 million, offset by $125 million gain on the settlement of the NAFTA claim.

n. To record Fresh Start adjustments made to reflect fixed asset values at estimated fair value. We have performed a preliminary valuation to determine the fair value for the tangible assets. Preliminary estimates of fair value represent the Company’s best estimates, which are based on industry data and trends, by reference to relevant market rates and transactions, discounted cash flow valuation methods, and cost approach valuation methods, among other factors. A weighted average estimated useful life of approximately 20 years has been used for buildings and a weighted average estimated useful life of approximately 12 years has been used for machinery and equipment. The estimated fair value of fixed assets by category as of June 30, 2010 is as follows:

(dollars in millions)	Range of useful lives in years	Fair value			Estimated annual depreciation
Land and land improvements		$	94		$	—
Buildings	2-27		239			12
Machinery and equipment	2-16		2,432			212
Total			2,765			224
Historical value			3,402			519
Pro forma adjustment		$	(637	)	$	(295	)

o. The following table summarizes the preliminary allocation as of June 30, 2010 of the reorganization value to the fair value of our assets and liabilities and the identified intangible assets pursuant to Fresh Start Accounting. Under ASC 852, reorganization value is

10

allocated first to tangible and identifiable intangible assets, with the remaining reorganization value (“Excess Reorganization Value”) allocated to goodwill. In this preliminary allocation, the fair value of other current assets and other non-current assets have been assumed to be equal to their carrying amounts after adjustments relating to the plans of reorganization, if any. Preliminary valuations have identified excess reorganization value; however, this amount is subject to change based on final valuations of assets and liabilities at the date of emergence.

(dollars in millions)	Amounts
New common stock	$	2,600
Senior Secured Notes		750
Convertible Notes		125
Other debt		239
Joint venture related deferred tax liability		38
Noncontrolling interests		269
Estimated reorganization value		4,021
Non-interest bearing liabilities		1,980
Estimated total asset value to be allocated		6,001
Cash		203
Other current assets		1,452
Fixed assets		2,765
Other non-current assets		361
Identifiable intangibles		558
Excess reorganization value (goodwill)		662
Existing goodwill as of June 30, 2010		53
Pro forma adjustment to goodwill		609

p. To record Fresh Start adjustments made to reflect intangible asset values at estimated fair value. Preliminary estimates of fair value represent the Company’s best estimates, which are based on industry data and trends, by reference to relevant market rates and transactions, discounted cash flow valuation methods, and cost approach valuation methods, among other factors. Our preliminary valuation of potential intangible assets has identified fair value for power purchase agreements, water rights, cutting rights and customer relationships. In Canada, water rights are generally owned by the provincial governments, which also have the right to control water levels. We have agreements with different governmental authorities in Canada to have rights to use water in order to produce power mainly to be consumed in our pulp and paper manufacturing process. Generally, terms of these agreements vary from 10 to 50 years and are generally renewable, under certain conditions, for additional periods well ahead of the expiration date, while in certain occasions, water rights are granted without expiration dates. Management believes that the Company generally will be able to continue meeting the conditions for future renewals.

11

(dollars in millions)	Estimates useful lives in years	Fair value		Estimated annual amortization
Water rights	40	$	155	$	4
Power purchase agreements	40		273		7
Cutting rights	20		70		4
Customer relationships	9		60		7
Total			558		22
Historical value			462		26
Pro forma adjustment		$	96	$	(4	)

q. To adjust the value of unconsolidated investments in joint ventures from $66 million to fair value of $82 million and to adjust pension assets for funded plans from $133 million to $3 million (see the following note “r”).

r. To adjust the projected benefit obligation of pension liabilities as follows:

(dollars in millions)	Funded pension plans			Underfunded pension plans, post-retirement & post employment benefits
Assets held by defined benefit plan, at fair value	$	57		$	4,833
Benefit obligations at fair value		54			6,255
Excess (deficiency) of assets over benefit obligations		3			(1,422	)
Less: Recorded prepaid pension asset (obligation)		133			(930	)
Increase in pension obligation	$	(130	)	$	(492	)

The projected benefit obligation was calculated as of June 30, 2010 based on certain assumptions, including the following: (i) all union negotiations relating to pensions were accepted by the Canadian government and the respective union employees; (ii) upon emergence, all defined benefit pension plans will be converted to defined contribution plans; and (iii) projected benefit obligations were calculated with a discount rate of 5.75% in the U.S. and 5.50% in Canada. These assumptions, including the discount rate assumed for these calculations could change materially prior to emergence, and would materially affect projected benefit obligations.

s. It is assumed that any tax benefits arising from the Transactions will require a full valuation allowance. Thus, no entry is made for tax effects of the Transactions in this pro forma. An assessment of the effect of Fresh Start Accounting is still ongoing and could materially affect deferred taxes.

t. To record the elimination of retained earnings and accumulated comprehensive loss to additional paid-in capital under Fresh Start Accounting to reflect new shareholders’ equity value of $2.6 billion.

u. To record the net effect of the adjustment to fair value of assets and liabilities related to our non-controlling interests.

12

The pro forma consolidated statement of operations has been prepared as if the Transactions had been completed on July 1, 2009. Because the estimates of the fair value of identifiable assets and useful lives of certain assets are preliminary, it is possible that the actual adjustment based on fair values at the Emergence Date may be materially different compared to the presented adjustments. Pro forma adjustments have been made as follows:

1. To eliminate historical depreciation for property, plant and equipment for the 12 months ended June 30, 2010 of $519 million and record $224 million of depreciation of its newly estimated fair value of $2,765 million with a weighted-average estimated useful life of 12 years.

2. To eliminate historical amortization for intangible assets for the twelve months ended June 30, 2010 of $26 million and record $22 million of amortization of the recorded $558 million finite-life intangible assets on a straight line basis with a weighted-average estimated useful life of approximately 25 years.

3. To adjust pension and other postretirement benefit costs that would be incurred as a result of the renegotiations of the plans.

4. To reflect interest expense related to pro forma debt financing at emergence ($750 million for the notes offered hereby at an assumed rate of 10% and $125 million for the Convertible Notes at 10%), unused ABL line fee (0.75%), interest expense on the ACH Limited Partnership loan $239 million at 7.132%, plus amortization of $38 million of deferred financing fees for the Senior Secured Notes over 8 years and $20 million of deferred financing fees for the Convertible Notes over 7 years.

(dollars in millions)
Interest expense on Senior Secured Notes	75
Interest expense on Convertible Notes	13
Interest expense on ACH Limited Partnership Loan	17
Unused line fee for ABL	5
Interest expense before amortization of deferred financing fees	110
Amortization of deferred financing fees	8
Pro forma interest expense	118
Historical interest expense	580
Pro forma adjustment	(462	)

• The interest expense on the Convertible Notes to be issued pursuant to the Rights Offering assumes payment in cash at 10%. If the company elects to pay the interest through issuance of additional Convertible Notes, the interest rate would increase to 11% and the amount of interest expense would increase by $1 million.

• The interest expense on the notes offered hereby is payable at an assumed rate of 10%. An increase in the interest rate by 1% on $750 million of debt results in a $8 million annual increase in the pre-tax interest expense.

5. To eliminate expenses for loss on sale of receivables relating to the securitization facility ($10 million) and gains on translation of Canadian-denominated debt ($18 million).

13

6. To eliminate non-recurring reorganization items such as certain expenses, provisions for losses and other direct charges directly associated with or resulting from the reorganization and restructuring of the business that have been realized or incurred in the Creditor Protection Proceedings.

(dollars in millions)
Professional fees	$	104
Provision for repudiated or rejected executory contracts		359
Charges related to indefinite idlings		506
Gains on disposition of assets		(60	)
Gain on deconsolidation of BPCL		(27	)
Gain on deconsolidation of a VIE		(16	)
Debtor in possession financing costs		7
Other		20
Reorganization items, net	$	893

7. No income tax is assumed for the Transactions, since any taxes that could be recorded would be offset by the reversal of tax valuation allowances.

8. To record noncontrolling interest portion relating to the adjustment to depreciation.

9. For purposes of this proforma, the NAFTA settlement of $125 million is a non-recurring gain that will be recorded in connection with the Plans of Reorganization and has therefore not been reflected as a pro forma adjustment.

10. This proforma does not include any adjustments that will result from labor savings and changes in supplier and operating agreements.

14

Reconciliation of non-GAAP information

Neither EBITDA nor Adjusted EBITDA is a recognized financial measure under U.S. GAAP. In this offering memorandum, EBITDA and Adjusted EBITDA are presented because we believe they are useful measures of our operating performance and are frequently used by securities analysts, investors and other interested parties in the evaluation of companies, like ours, with substantial financial leverage. However, EBITDA and Adjusted EBITDA should not be considered as alternatives to cash flows from operating activities as a measure of our liquidity or as alternatives to operating income (loss) or net income (loss) as indicators of our operating performance or any other measure of performance in accordance with U.S. GAAP.

The use of EBITDA and Adjusted EBITDA instead of net income (loss) or cash flows from operations has limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• EBITDA and Adjusted EBITDA do not reflect our current cash expenditure requirements, or future requirements, for capital expenditures or contractual commitments;

• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;

• EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and

• our measures of EBITDA and Adjusted EBITDA are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as discretionary cash available to us for working capital, debt service and other purposes.

15

The following tables show how we calculate EBITDA and Adjusted EBITDA:

Historical EBITDA and Adjusted EBITDA

	Historical Year ended December 31,						Historical Six months ended June 30,						Historical twelve months ended June 30, 2010			Historical twelve months ended July 31, 2010
(dollars in millions)	2008			2009			2009			2010
Net loss, including noncontrolling interests	$	(2,207	)	$	(1,560	)	$	(723	)	$	(806	)	$	(1,643	)	$	(1,568	)
Interest expense		706			597			335			318			580			582
Income tax (benefit) expense		(92	)		(122	)		(41	)		(10	)		(91	)		(95	)
Depreciation, amortization and cost of timber harvested		726			602			314			257			545			531
EBITDA		(611	)		(483	)		(115	)		(241	)		(609	)		(550	)
(Gain) Loss on foreign currency translation		(72	)		59			4			(37	)		(18	)		5
Reorganization costs		—			639			99			353			893			893
Closure costs, impairment and other related charges		481			202			270			8			(60	)		(60	)
Impairment of goodwill		810			—			—			—			—			—
Inventory write-downs included in cost of sales		30			17			12			—			5			5
Gain on disposition of assets		(49	)		(91	)		(53	)		(13	)		(51	)		(51	)
Extraordinary loss on expropriation of assets		256			—			—			—			—			—
Adjusted EBITDA	$	589		$	343		$	217		$	70		$	196		$	242

	Historical one month ended July 31,
(dollars in millions)	2009			2010
Net loss, including noncontrolling interests	$	(144	)	$	(69	)
Interest expense		40			42
Income tax (benefit) expense		4			—
Depreciation, amortization and cost of timber harvested		53			39
EBITDA		(47	)		12
(Gain) Loss on foreign currency translation		38			(26	)
Reorganization costs		9			9
Closure costs, impairment and other related charges		—			—
Impairment of goodwill		—			—
Inventory write-downs included in cost of sales		—			—
Gain on disposition of assets		—			—
Adjusted EBITDA	$	—		$	47

16

Pro forma EBITDA and Adjusted EBITDA

(dollars in millions)	Pro forma twelve months ended June 30, 2010
Net loss, including noncontrolling interests	$(19)
Interest expense	118
Income tax (benefit) expense	(91)
Depreciation, amortization and cost of timber harvested	246
Pro forma EBITDA	254
(Gain) Loss on foreign currency translation	36
Reorganization costs	—
Closure costs, impairment and other related charges	(60)
Impairment of goodwill	—
Inventory write-downs included in cost of sales	5
Gain on disposition of assets	(51)
Pro forma Adjusted EBITDA	$184
Pension expense increase from restructuring	22
Securitization expense decrease from restructuring	(10)
Historical twelve months ended June 30, 2010 Adjusted EBITDA	$196

17

EX-99.7

Exhibit 99.7

Liquidity and Capital Resources

Historical

Overview

In addition to cash-on-hand and cash provided by operations, our external sources of liquidity are comprised of the following (which are defined and discussed below): (i) the Bowater DIP Agreement, (ii) the ULC DIP Facility and (iii) the Abitibi and Donohue accounts receivable securitization program.

The commencement of the Creditor Protection Proceedings constituted an event of default under substantially all of our pre-petition debt obligations, and those debt obligations became

1

automatically and immediately due and payable by their terms, although any action to enforce such payment obligations is stayed as a result of the commencement of the Creditor Protection Proceedings.

Non-core asset sales have been and may continue to be a source of additional liquidity. We expect to continue to review non-core assets and seek to divest those that no longer fit within our long-term strategic business plan. It is unclear how current global credit conditions may impact our ability to sell any of these assets. In addition, for the duration of the Creditor Protection Proceedings, any divestiture not subject to certain de minimis asset sale thresholds under the Creditor Protection Proceedings must be approved by the applicable Court or the Monitor, as applicable. No assurances can be provided that such approvals will be obtained or as to the timing of any such approvals. Proceeds generated as a result of any divestiture: (i) may be deposited in trust with the Monitor and require Court approval to release the proceeds or (ii) may have to be used to repay amounts outstanding pursuant to the terms of our debtor in possession financing arrangements or pre-petition secured indebtedness. During the six months ended June 30, 2010, we sold, with Court or Monitor approval, as applicable, various mills and other assets for proceeds of $62 million, including our Mackenzie paper mill and sawmills and four previously permanently closed paper mills that were bundled and sold together.

During the first six months of 2010, we incurred significant costs associated with our Creditor Protection Proceedings and will continue to incur similar significant costs, which have and will continue to adversely affect our liquidity, results of operations and financial condition. In the three and six months ended June 30, 2010, we paid $28 million and $47 million, respectively, relating to reorganization items. For additional information, see Note 3, “Creditor Protection Proceedings Related Disclosures—Reorganization items, net,” to our unaudited interim consolidated financial statements. Partially offsetting these increased payments were lower cash payments for interest. We are currently making cash payments for interest on the Bowater DIP Agreement (as defined below), the Abitibi and Donohue accounts receivable securitization program, the Bowater and BCFPI pre-petition U.S. and Canadian secured bank credit facilities, the ACCC Term Loan, the ACCC 13.75% Senior Secured Notes due 2011 and Bowater’s floating rate industrial revenue bonds due 2029. As a result, cash payments for interest were $40 million and $64 million in the three and six months ended June 30, 2010, respectively, compared to $49 million and $164 million, respectively, in the same periods of 2009. Additionally, in the third quarter of 2009, we announced that we would continue to work on SG&A austerity measures with a target reduction of approximately $100 million on an annualized basis, as compared to 2008. The SG&A reduction efforts included, among other items, a 25% corporate headcount reduction and the suspension of 2009 incentive compensation plans, including equity awards.

Abitibi and Donohue liquidity

Abitibi’s and Donohue’s primary sources of liquidity and capital resources are cash-on-hand, cash provided by operations, the ULC DIP Facility (defined below) and an accounts receivable securitization program. As of June 30, 2010, Abitibi and Donohue had cash and cash equivalents of approximately $205 million and $19 million, respectively. As of June 30, 2010, Abitibi had $94 million of availability under its ULC DIP Facility, of which $47 million was included in “Cash and cash equivalents” and $47 million was included as restricted cash in “Other assets” in our Consolidated Balance Sheets. Abitibi and Donohue also had the ability to receive additional proceeds of up to $33 million under their accounts receivable securitization program.

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ULC DIP Facility

On December 9, 2009, Abitibi entered into a Cdn$230 million ($218 million) Super Priority Debtor-In-Possession Credit Facility (the “ULC DIP Facility”) with 3239432 Nova Scotia Company, a wholly-owned subsidiary of ACCC (the “ULC”), which is an intercompany facility that was created upon the sale of MPCo and was funded by a portion of the sale proceeds. On the same date, Cdn$130 million ($123 million) of the ULC DIP Facility was drawn pursuant to the Canadian Court’s approval. Subsequent draws of up to Cdn$50 million ($47 million, based on the exchange rate in effect on June 30, 2010) in the aggregate will be advanced upon not less than five business days’ notice, subject to meeting certain draw down requirements and certain conditions determined by the Canadian Court, and the remaining Cdn$50 million ($47 million, based on the exchange rate in effect on June 30, 2010) will become available only upon further order of the Canadian Court.

The obligations of Abitibi under its ULC DIP Facility are guaranteed by certain of Abitibi’s subsidiaries and secured by superpriority liens on all present and after-acquired property of Abitibi and the subsidiary guarantors, but subordinate to: (i) an administrative charge in the aggregate amount not exceeding Cdn$6 million ($6 million) of professional fees and disbursements in connection with the CCAA Proceedings; (ii) a directors’ charge not exceeding Cdn$22.5 million ($21 million) and (iii) the Cdn$140 million ($130 million) charge granted by the Canadian Court in connection with Abitibi’s former debtor in possession financing arrangement (but only to the extent of the subrogation rights of certain secured creditors of Abitibi, estimated to be in an aggregate amount of approximately Cdn$40 million ($38 million)). These U.S. dollar amounts reflect the exchange rate to U.S. dollars in effect on December 9, 2009.

Loans made under the ULC DIP Facility bear no interest, except in the case of an overdue payment. All loans advanced under the ULC DIP Facility are to be repaid in full and the ULC DIP Facility will terminate on the earliest of: (i) December 31, 2010, (ii) the effective date of a plan or plans of reorganization or a plan of compromise or arrangement confirmed by order of the Courts or (iii) the acceleration of the ULC DIP Facility or the occurrence of an event of default. Loans must be prepaid to the extent the ULC does not have sufficient funds to make a payment under the guarantee agreement with Alcoa Canada Ltd. (“Alcoa”), which was our partner in MPCo. As of June 30, 2010, the ULC maintained an approximate Cdn$52 million ($49 million) reserve for this purpose, which was included as restricted cash in “Other assets” in our Consolidated Balance Sheets.

The ULC DIP Facility contains usual and customary events of default and covenants for debtor in possession financings of this type, including, among other things, the obligation for Abitibi to provide to Alcoa and the trustee for ACCC’s 13.75% Senior Secured Notes due 2011 a weekly cash flow forecast and certain monthly financial information.

In accordance with its stated purpose, the proceeds of the loans under the ULC DIP Facility can be used by Abitibi and certain of its subsidiaries for working capital and other general corporate purposes, costs of the Creditor Protection Proceedings and fees and expenses associated with the ULC DIP Facility.

Abitibi and Donohue accounts receivable securitization program

Abitibi and ACSC, a subsidiary of Donohue, (the “Participants”) participate in an accounts receivable securitization program (the “Program”) whereby the Participants share among themselves the proceeds received under the Program. On June 16, 2009, with the approval of the

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Courts, the former accounts receivable securitization program was amended and restated in its entirety and, as further amended on June 11, 2010, with the approval of the Courts, now provides for a maximum outstanding limit of $180 million (the “Purchase Limit”) for the purchase of ownership interests in the Participants’ eligible trade accounts receivable by the third-party financial institutions party to the agreement (the “Banks”).

The Participants sell most of their receivables to Abitibi-Consolidated U.S. Funding Corp. (“Funding”), which is a bankruptcy-remote, special-purpose, indirect consolidated subsidiary of Donohue. On a revolving basis, Funding transfers to the agent for the Banks (the “Agent”) undivided percentage ownership interests (“Receivable Interests”) in the pool of receivables that Funding acquired from the Participants. The outstanding balance of Receivable Interests increases as new Receivable Interests are transferred to the Agent and decreases as collections reduce previously transferred Receivable Interests. The amount of Receivable Interests that can be transferred to the Agent depends on the amount and nature of the receivables available to be transferred and cannot result in the outstanding balance of Receivable Interests exceeding the Purchase Limit. The pool of receivables is collateral for the Receivable Interests transferred to the Agent. The Banks can pledge or sell their Receivable Interests, but cannot pledge or sell any receivable within the pool of receivables.

As discussed in Note 1, “Organization and Basis of Presentation—Recently adopted accounting guidance,” to our unaudited interim consolidated financial statements, effective January 1, 2010, we prospectively applied new accounting guidance relating to the transfers of financial assets. As a result, transfers of the Receivable Interests to the Agent no longer qualify as sales. Such transfers and the proceeds received from the Banks are now accounted for as secured borrowings in accordance with FASB ASC 860, “Transfers and Servicing.” As of June 30, 2010, the weighted average interest rate charged by the Banks to Funding on the secured borrowings was 6.25% per annum and the commitment fee for the unused portion of the Purchase Limit was 0.75% per annum. These amounts, which totaled approximately $3 million and $7 million for the three and six months ended June 30, 2010, respectively, are included in “Interest expense” in our Consolidated Statements of Operations. For the three and six months ended June 30, 2009, the transfer of Receivable Interests were recorded as a sale to the Banks, and the proceeds received from the Banks were net of an amount based on the Banks’ funding cost plus a margin, which resulted in a loss on the sale of ownership interests in accounts receivable of $4 million and $7 million, respectively, which was included in “Other expense, net” in our Consolidated Statements of Operations.

As of June 30, 2010, the balance of the pool of receivables, net of an allowance for doubtful accounts was included in “Accounts receivable, net” in our Consolidated Balance Sheets. The outstanding balance of the proceeds received from the Banks was approximately $120 million and was recorded as “Secured borrowings” in our Consolidated Balance Sheets. In addition, based on the level and eligibility of the pool of receivables as of June 30, 2010, we could have borrowed an additional $33 million.

Abitibi and ACSC act as servicing agents and administer the collection of the receivables under the Program. The fees received from the Banks for servicing their Receivable Interests approximate the value of services rendered.

In connection with the Program, Abitibi and ACSC maintain lockboxes into which certain collection receipts are deposited. These lockbox accounts are in Abitibi’s or Funding’s name, but are controlled by the Banks. The cash balances in these lockbox accounts, which totaled

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approximately $17 million and $18 million as of June 30, 2010 and December 31, 2009, respectively, were included as restricted cash in “Other current assets” in our Consolidated Balance Sheets.

The Program contains usual and customary events of termination and covenants for accounts receivable securitization programs of this type, including, among other things, the requirement for Funding to provide to the Agent financial statements and other reports and to provide to the Agent copies of any reports the Participants or their subsidiaries file with the SEC or any other U.S., Canadian or other national or provincial securities exchange.

Unless terminated earlier due to the occurrence of certain events of termination, or the substantial consummation of a plan or plans of reorganization or a plan of compromise or arrangement confirmed by order of the Courts, the Program, as further amended on June 11, 2010, will terminate on June 10, 2011.

As consideration for entering into the amendment to the Program on June 11, 2010, we incurred fees of approximately $4 million during the second quarter of 2010. These fees were recorded in “Reorganization items, net” in our Consolidated Statements of Operations for the three and six months ended June 30, 2010 (see Note 3, “Creditor Protection Proceedings Related Disclosures—Reorganization items, net,” to our unaudited interim consolidated financial statements).

Bowater liquidity

Bowater’s primary sources of liquidity and capital resources are cash-on-hand, cash provided by operations and the Bowater DIP Agreement (defined below). As of June 30, 2010, Bowater had cash and cash equivalents of approximately $484 million.

Bowater DIP Agreement

In the Creditor Protection Proceedings, we sought and obtained final approval by the Courts to enter into a debtor in possession financing facility for the benefit of AbitibiBowater Inc., Bowater and certain of Bowater’s subsidiaries. On April 21, 2009, we entered into a Senior Secured Superpriority Debtor In Possession Credit Agreement (the “Bowater DIP Agreement”) among AbitibiBowater Inc., Bowater and Bowater Canadian Forest Products, Inc. (“BCFPI”), as borrowers, Fairfax Financial Holdings Limited (“Fairfax”), as administrative agent, collateral agent and an initial lender, and Avenue Investments, L.P., as an initial lender. On May 8, 2009, Law Debenture Trust Company of New York replaced Fairfax as the administrative agent and collateral agent under the Bowater DIP Agreement.

The Bowater DIP Agreement provides for term loans in an aggregate principal amount of $206 million (the “Initial Advance”), consisting of a $166 million term loan facility to AbitibiBowater Inc. and Bowater (the “U.S. Borrowers”) and a $40 million term loan facility to BCFPI. Following the payment of fees payable to the lenders in connection with the Bowater DIP Agreement, the U.S. Borrowers and BCFPI received aggregate loan proceeds of $196 million. The Bowater DIP Agreement also permits the U.S. Borrowers to request, subject to the approval of the requisite lenders under the Bowater DIP Agreement, an incremental term loan facility (the “Incremental Facility”) and an asset based-revolving credit facility (the “ABL Facility”), provided that the aggregate principal amount of the Initial Advance and the Incremental Facility may not exceed $360 million and the aggregate principal amount of the Initial Advance, Incremental Facility and the ABL Facility may not exceed $600 million. In connection with an amendment we

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entered into on July 15, 2010, which was approved by the U.S. Court on July 14, 2010 and the Canadian Court on July 21, 2010, we prepaid $166 million of the outstanding principal amount of the Initial Advance on July 21, 2010, which reduced the outstanding principal balance to $40 million. As amended, the outstanding principal amount of loans under the Bowater DIP Agreement, plus accrued and unpaid interest, will be due and payable on the earliest of: (i) December 31, 2010, (ii) the effective date of a plan or plans of reorganization or (iii) the acceleration of loans and termination of the commitments (the “Maturity Date”).

Borrowings under the Bowater DIP Agreement bear interest, at our election, at either a rate tied to the U.S. Federal Funds Rate (the “base rate”) or the London interbank offered rate for deposits in U.S. dollars (“LIBOR”), in each case plus a specified margin. The interest margin for base rate loans was 6.50% through April 20, 2010 and effective April 21, 2010 was 7.00%, with a base rate floor of 4.50%. The interest margin for base rate loans was reduced to 5.00% effective July 15, 2010 in connection with the July 15, 2010 amendment. The interest margin for LIBOR loans was 7.50% through April 20, 2010 and effective April 21, 2010 was 8.00%, with a LIBOR floor of 3.50%. The interest margin for LIBOR loans was reduced to 6.00% with a LIBOR floor of 2.00% effective July 15, 2010 in connection with the July 15, 2010 amendment. We incurred an extension fee and an amendment fee in connection with the May 5, 2010 extension and the July 15, 2010 amendment, respectively, in each case in an amount of 0.5% of the outstanding principal balance of $206 million, or approximately $1 million for each. We will be required to pay a duration fee of 0.5% of the outstanding principal balance (estimated to be $40 million), or approximately $200,000, if the aggregate principal amount of the advances under the Bowater DIP Agreement have not been repaid in full on or prior to October 15, 2010. In addition, on the earlier of the final Maturity Date or the date that the Bowater DIP Agreement is repaid in full, an exit fee of 2.00% of the aggregate amount of the advances will be payable to the lenders.

The obligations of the U.S. Borrowers under the Bowater DIP Agreement are guaranteed by AbitibiBowater Inc., Bowater, Bowater Newsprint South LLC (“Newsprint South”), a direct, wholly-owned subsidiary of AbitibiBowater Inc., and each of the U.S. subsidiaries of Bowater and Newsprint South that are debtors in the Chapter 11 Cases (collectively, the “U.S. Guarantors”) and secured by all or substantially all of the assets of each of the U.S. Borrowers and the U.S. Guarantors. The obligations of BCFPI under the Bowater DIP Agreement are guaranteed by the U.S. Borrowers and the U.S. Guarantors and each of the Bowater Canadian subsidiaries (other than BCFPI) that are debtors in the CCAA Proceedings (collectively, the “Canadian Guarantors”) and secured by all or substantially all of the assets of the U.S. Borrowers, the U.S. Guarantors, BCFPI and the Canadian Guarantors. On June 24, 2009, Bowater Canadian Finance Corporation was released from its obligations under the Bowater DIP Agreement.

The Bowater DIP Agreement contains customary covenants for debtor in possession financings of this type, including, among other things: (i) requirements to deliver financial statements, other reports and notices; (ii) restrictions on the incurrence and repayment of indebtedness; (iii) restrictions on the incurrence of liens; (iv) restrictions on making certain payments; (v) restrictions on investments; (vi) restrictions on asset dispositions and (vii) restrictions on modifications to material indebtedness. Additionally, the Bowater DIP Agreement contains certain financial covenants, including, among other things: (i) maintenance of a minimum consolidated EBITDA; (ii) compliance with a minimum fixed charge coverage ratio and (iii) a maximum amount of capital expenditures.

In accordance with its stated purpose, the proceeds of the Bowater DIP Agreement can be used by us for, among other things, working capital, general corporate purposes, to pay adequate

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protection to holders of secured debt under Bowater’s and BCFPI’s pre-petition secured bank credit facilities, to pay the costs associated with administration of the Creditor Protection Proceedings and to pay transaction costs, fees and expenses in connection with the Bowater DIP Agreement.

As consideration for the May 5, 2010 extension of the Bowater DIP Agreement to July 21, 2010, during the second quarter of 2010, we incurred fees of approximately $1 million. These fees were recorded in “Reorganization items, net” in our Consolidated Statements of Operations for the three and six months ended June 30, 2010 (see Note 3, “Creditor Protection Proceedings Related Disclosures—Reorganization items, net,” to our unaudited interim consolidated financial statements).

Flow of funds

Summary of cash flows

A summary of cash flows for the six months ended June 30, 2010 and 2009 was as follows:

(Unaudited, in millions)	2010			2009
Net cash (used in) provided by operating activities	$	(3	)	$	63
Net cash (used in) provided by investing activities		(19	)		60
Net cash (used in) provided by financing activities		(26	)		164
Net (decrease) increase in cash and cash equivalents	$	(48	)	$	287

Cash (used in) provided by operating activities

The $66 million decrease in cash provided by operating activities in the first six months of 2010 compared to the same period of 2009 was primarily related to an increase in accounts receivable, as well as the alternative fuel mixture tax credits in 2009, partially offset by an increase in accounts payable and accrued liabilities and a reduction in our pension contributions in 2010.

Cash (used in) provided by investing activities

The $79 million decrease in cash provided by investing activities in the first six months of 2010 compared to the same period of 2009 was primarily due to an increase in restricted cash in 2010 and a decrease in deposit requirements for letters of credit in 2009, partially offset by reductions in cash invested in fixed assets.

Capital expenditures for both periods include compliance, maintenance and projects to increase returns on production assets. We continue to take a restricted approach to capital spending until market conditions improve and translate into positive cash flow. In light of the Creditor Protection Proceedings, any significant capital spending is subject to the approval of the applicable Court, and there can be no assurance that such approval would be granted.

Cash (used in) provided by financing activities

The $190 million decrease in cash provided by financing activities in the first six months of 2010 compared to the same period of 2009 was primarily due to the debtor in possession financing arrangements in the first six months of 2009.

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Pro forma

As part of our agreement with the providers of the backstop commitment for our Rights Offering, our pro forma liquidity is expected to be at least $600 million at the time of emergence. The $600 million of liquidity is expected to include cash plus the amount of commitment financing available to us under our new ABL Credit Facility, which is the greater of the committed facility, $600 million, or its borrowing base, less the usage under that facility. We expect that after taking into account the letters of credit that will be issued under the ABL Credit Facility on the Emergence Date we will have approximately $495 million of availability under the ABL Credit Facility at the Emergence Date based on our expected borrowing base as of such date.

Contractual Obligations

Historical

In addition to our debt obligations as of December 31, 2009, we had other commitments and contractual obligations that require us to make specified payments in the future. The commencement of the Creditor Protection Proceedings constituted an event of default under substantially all of our pre-petition debt obligations, and those debt obligations became automatically and immediately due and payable by their terms, although any action to enforce such payment obligations is stayed as a result of the Creditor Protection Proceedings. As part of the Creditor Protection Proceedings, we have rejected and repudiated a number of contracts and leases, including leases of real estate and equipment, and have assumed or assigned certain others.

As of December 31, 2009, the scheduled maturities of our contractual obligations as of December 31, 2009, based on the original payment terms specified in the underlying agreements or contracts, were as follows (and exclude certain obligations that were due in 2009 that were stayed as a result of the Creditor Protection Proceedings):

(dollars in millions)	Total		1 Year		2-3 Years		4-5 Years		After 5 Years
Long-term debt, including current portion of long-term debt and debt classified as liabilities subject to compromise(1)	$	8,809	$	1,424	$	2,132	$	1,657	$	3,596
Debtor in possession financing, including interest payments		213		213		—		—		—
Non-cancelable operating lease obligations(2)		50		11		16		10		13
Capital lease obligation(3)		49		9		18		18		4
Purchase obligations(4)		593		70		117		109		297
Tax reserves		206		13		18		19		156
Pension and OPEB funding(5)		247		247		—		—		—
Severance obligations(6)		87		87		—		—		—
	$	10,254	$	2,047	$	2,301	$	1,813	$	4,066

(1) Long-term debt commitments include interest payments but exclude related discounts and revaluation of debt of $637 million as of December 31, 2009, as these items require no cash outlay.

(2) We lease approximately 40,000 acres of timberlands, certain office premises, office equipment and transportation equipment under operating leases.

(3) The capital lease obligation includes interest payments and relates to a building and equipment lease for our Bridgewater cogeneration facility.

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(4) As of December 31, 2009, purchase obligations include, among other things, two fiber supply contracts for our Coosa Pines operations with commitments totaling $50 million through 2014, a cogeneration power supply contract for our Bridgewater operations with commitments totaling $69 million through 2015, a steam supply contract for our Thorold operations with commitments totaling $22 million through 2015, a power supply contract for our Coosa Pines operations with commitments totaling $36 million through 2019, a steam supply contract for our Dolbeau operations with commitments totaling $172 million through 2023 (which has been repudiated in the Creditor Protection Proceedings) and a bridge and railroad contract for our Fort Frances operations with commitments totaling $133 million through 2044.

(5) Pension and other postretirement projected benefit (“OPEB”) funding is calculated on an annual basis for the following year only, although the payment and amount of these funding obligations is uncertain.

(6) The payment and timing of our severance obligations is uncertain and accordingly, for this presentation, the total severance obligation is included above under “1 Year.” For additional information regarding our severance obligations See Note 15, “Severance Related Liabilities,” to our consolidated financial statements for the year ended December 31, 2009 included elsewhere in this offering memorandum.

Pro forma

The table below reflects the scheduled maturities for our contractual obligations as of December 31, 2009 on a pro forma basis taking into account the anticipated impacts of the Plans of Reorganization and the consummation of the Transactions:

(In millions)	Total		1 Year		2-3 Years		4-5 Years		After 5 Years
Long-term debt, including current portion of long-term debt(1)	$	2,065	$	109	$	218	$	218	$	1,520
Operating lease obligations(2)		36		7		12		6		11
Purchase obligations(3)		331		35		61		57		178
Tax reserves		186		14		18		19		135
Pension and OPEB funding(4)		243		93		100		50		—
	$	2,861	$	258	$	409	$	350	$	1,844

(1) Long-term debt commitments include estimated interest payments but exclude related discounts, as these items require no cash outlay. These amounts assume the issuance of $125 million aggregate principal amount of Convertible Notes, $750 million of notes offered hereby, and $239 million pre-petition debt. Assumes ABL facility is not drawn, but the unused line fee is paid.

(2) We lease approximately 40,000 acres of timberlands, certain office premises, office equipment and transportation equipment under operating leases.

(3) Purchase obligations include, among other things, two fiber supply contracts for our Coosa Pines operations with commitments totaling $50 million through 2014, a steam supply contract for our Thorold operations with commitments totaling $22 million through 2015, a power supply contract for our Coosa Pines operations with commitments totaling $36 million through 2019, and a bridge and railroad contract for our Fort Frances operations with commitments totaling $133 million through 2044.

(4) Pension and other postretirement benefit (“OPEB”) funding is calculated based on minimum payments as required by our renegotiated agreements through 2013. After 2013, minimum payments will be adjusted using a pre-determined formula. Funding amounts after 2013 cannot be determined at this time.

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EX-99.8

Exhibit 99.8

Business

Our company

We are a leading global forest products company with a significant regional and global market presence in newsprint, coated mechanical and specialty papers, pulp and wood products. We are also one of world’s largest recyclers of newspapers and magazines. We were formed through the combination of Abitibi and Bowater.

Through our subsidiaries, we currently own or operate 18 pulp and paper manufacturing facilities located in Canada, the United States and South Korea and 24 wood products facilities located in Canada. Excluding currently idled facilities, we have annual production capacity of approximately 6.0 million metric tons of a broad range of printing and writing papers such as newsprint, coated mechanical and specialty papers, which are sold to leading publishers, commercial printers and advertisers. In addition, we sell approximately 1.0 million metric tons of market pulp to paper, tissue and toweling manufacturers. Our sawmills, engineered wood products facilities and remanufacturing locations produce products primarily for new residential construction, and we either use the wood fiber residuals from this business to produce pulp and paper or sell the residuals on the open market.

For the last twelve months ended June 30, 2010, we generated revenues and Adjusted EBITDA of $4.5 billion and $196 million, respectively, and we generated revenue and Adjusted EBITDA of $4.5 billion and $242 million, respectively, for the last twelve months ended July 31, 2010 (see “Reconciliation of non-GAAP information” for information regarding our Adjusted EBITDA).

Competitive strengths

We believe that the following are competitive strengths that provide us with a strong foundation to execute on our strategy and earn an acceptable return on capital:

Global leader in the forest products industry

We are a global leading manufacturer of newsprint, coated mechanical paper, specialty papers and market pulp, with locations in the U.S., Canada and Korea. According to RISI, we have established a global leadership position in newsprint and leading North American positions in our key segments based on annual manufacturing capacity, including: #1 in newsprint, #3 in coated paper, #1 in mechanical specialty papers and #6 in market pulp. We believe our leading positions provide us and our customers with competitive advantages, including significant economies of scale, extensive sales and marketing coverage in over 70 countries and what we believe to be best-in-class product offerings.

Highly competitive cost structure

Due to the aggressive cost reduction and mill rationalization actions we have taken since the combination, we believe we are among the lowest cost producers in our paper grades in the North American forest products industry. We believe that our mills have significant cost advantages as a result of their high efficiency levels, strong economies of scale and access to low cost sources of energy and fiber furnish. In addition, based on PPPC data, our restructuring actions have resulted in ten of our 12 newsprint mills now being in the lower half of the cost curve for all North American newsprint mills. Our Catawba mill is also consistently ranked as one of the lowest cost producers of coated mechanical paper in North America. Our restructuring

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process also has provided us with the ability to reject and repudiate a number of burdensome and disadvantageous contracts and unexpired leases, negotiate labor cost reductions and obtain funding relief in respect of the solvency deficit in our Canadian pension plans. Since the time of the combination, we have lowered our workforce by 6,800 employees or 38%. Our workforce reduction efforts in addition to improved plant efficiencies and increased scalability have enabled us to reduce our SG&A expense by approximately 50% since 2007.

Diversified product mix and end markets

We offer a diverse range of products to various end markets that help us mitigate the impact of volatility in any particular product category or end market, which we believe reduces our operating risk. For the twelve months ended June 30, 2010, our sales percentage by category was newsprint at 39%, coated paper at 9%, specialty papers at 29%, market pulp at 14% and wood products at 9%. Our international sales have grown to 31% of our revenues for the twelve month period ended June 30, 2010, including 12% and 10% sold into Latin America and Asia, respectively. Importantly, with newsprint in a long-term decline in North America, given our leading global position, we have focused our efforts on selling production into the export market and for the twelve months ended June 30, 2010, approximately 50% of our total newsprint shipments were to the export market.

Capital structure flexibility

We expect to emerge from the restructuring process with a realigned capital structure and healthier balance sheet, with approximately $1.1 billion in debt. Our liquidity (cash position plus committed but undrawn lines of credit under our borrowing base for our asset-based revolving credit facility) is expected to be approximately $600 million at emergence, and our asset based revolving credit facility is not expected to have any financial maintenance covenants unless our liquidity drops below a minimum threshold level. See “Description of certain indebtedness—ABL Credit Facility.” We believe our realigned capital structure will provide us with greater financial flexibility, which will enable us to better react to changing market conditions and potential opportunities.

Experienced leadership team

We have a highly experienced management team. During our restructuring, we have streamlined our management structure and have successfully retained our key management talent. We believe this has provided us with the established leadership and functional experience necessary to help us execute our strategy, further reduce costs, enhance our competitive position and continue to help our Company improve its competitive position.

Our strategy

Key elements of our strategy to capitalize on our competitive position and enhance our returns on capital deployed are to:

Improve business mix

We plan to improve our business mix by focusing on grades that have and are expected to offer higher returns on capital. We believe we have cost effective opportunities to grow or convert newsprint capacity into coated and specialty papers and light-weight containerboard, which generally offer better demand characteristics, margins and returns compared to other, more commodity-like paper grades. In the second quarter of 2010, we converted our Coosa Pines

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newsprint mill to produce light-weight containerboard and other packaging grades. With the closure of some of our higher cost Canadian paper capacity, we were able to redistribute our specialty orderbook to sites with lower cost platforms. With the multiple fiber furnishes available at our Calhoun, Tennessee site, it provided the opportunity to produce these specialty grades on a large modern machine, as well as displace additional newsprint capacity. We are evaluating additional opportunities to convert some of our production capacity from less attractive grades to more attractive ones. By converting or closing some of our mills that were producing newsprint and other lower return grades, we believe that we can increase the capacity utilization across our mill system, improve the supply dynamics in these lower returning grades and enhance our return on capital.

Reduce our cost and increase operational flexibility

We continue to explore a variety of capital investment projects to significantly reduce our costs and increase operational flexibility similar to the recent streamlining of production at our Thunder Bay mill. At Thunder Bay, we idled paper machines for six months and restarted only the larger, more modern machine; renegotiated labor agreements; resized the workforce; rolled out a wage reduction across the woodlands operations; and renegotiated the power agreement. The combined changes resulted in a cash cost savings at the mill of over $150 per ton and we believe Thunder Bay is now one of the lowest cash cost mills in the industry. We believe additional initiatives of this nature would further improve our cost position, enhance our earnings potential and improve the cost competitiveness of our facilities. Furthermore, we expect that, following emergence and as a result of new labor agreements we have entered into during the first half of 2010 and management wage reductions, we will realize labor cost savings of approximately $95 million annually. In addition, we plan to further leverage our recycling system to provide low cost furnish to our mills system, giving us greater potential either to reduce furnish costs or offer higher margin products.

Target export markets with better newsprint demand

Although North American newsprint demand is expected to decline, RISI has projected that world newsprint demand will increase by about 1.6% per year from 2009 to 2012, with growth being strongest in Asia at 4.7%, Latin America at 4.9% and the Middle East at 5.6%. The growth in many of our international markets is primarily the result of increased urbanization trends, a rapidly growing middle class, lower Internet penetration rates per capita versus developed countries, economic growth, and rising literacy rates. Accordingly, we will continue to focus on capitalizing on the growth of these markets. The location of our Eastern Canadian mills, which are on or near deep sea ports, allows us the flexibility to serve these higher growth markets. In addition, our Mokpo, South Korea newsprint mill will continue to focus on Southeast Asian markets, where demand for the first six months of the year increased approximately 10% compared to the same period in 2009. For the six months ended June 30, 2010, approximately 50% of our total newsprint shipments were to markets outside of North America.

Explore strategic opportunities

We believe there will be continued consolidation in the paper and forest products sector as we and our competitors continue to explore ways to increase efficiencies and diversify customer offerings. We believe this consolidation has been and will continue to be a benefit to our industry and our customers. Accordingly, from time to time, we expect to explore strategic opportunities to enhance our business and provide a good return on capital for our stakeholders. Additionally, we will continue to execute on our non-core asset sales program and use the proceeds to continue to improve our balance sheet or reinvest in our business.

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Our products

We manage our business along the following key business segments—newsprint, coated paper, specialty papers, market pulp and wood products. In general, our products are globally-traded commodities and are marketed in more than 70 countries.

Newsprint

We are among the largest producers of newsprint in the world by capacity, with operating capacity of approximately 3.3 million metric tons, or 9% of total worldwide capacity as of June 30, 2010. In addition, we are the largest North American producer of newsprint and have capacity of approximately 3.1 million metric tons or approximately 37% of total North American capacity. As of June 30, 2010, we owned or operated 12 newsprint facilities in North America and South Korea. We supply leading publishers with top-quality newsprint, including eco-friendly products made with 100% recycled fiber. For the six months ended June 30, 2010, approximately 50% of our total newsprint shipments were to markets outside of North America. These markets have exhibited better demand trends than North America. For the twelve months ended June 30, 2010, our newsprint segment had revenues of approximately $1.8 billion, or approximately 39% of our total revenues for such period.

Coated papers

We produce coated papers at our Catawba, South Carolina facility. With capacity of approximately 658,000 metric tons, or 14% of total North American capacity, as of June 30, 2010, we are one of the largest producers of coated mechanical paper in North America. Our coated papers are used in magazines, catalogs, books, retail advertising, direct mail and coupons. We sell coated papers to major commercial printers, publishers, catalogers and retailers. For the twelve months ended June, 30, 2010, our coated papers segment had revenues of approximately $428 million, or approximately 9% of our total revenues for such period.

Specialty papers

We produce specialty papers at nine facilities in North America. With operating capacity of approximately 1.8 million metric tons as of June 30, 2010, or 35% of total North American capacity, we are one of the largest producers of specialty papers in North America, including super-calendared, super-bright, high bright, bulky book and directory papers and kraft papers. Our specialty papers are used in books, retail advertising, direct mail, coupons and other commercial printing and packaging applications. For the twelve months ended June 30, 2010, our specialty papers segment had revenues of approximately $1.3 billion, or approximately 29% of our total revenues for such period.

Market pulp

Wood pulp is the most common material used to make paper. Pulp shipped and sold as pulp, as opposed to being processed into paper in the same facility, is commonly referred to as market pulp. As of June 30, 2010, we had capacity of approximately 1.1 million metric tons of market pulp at five facilities in North America, which represented approximately 7% of total North American capacity. Market pulp is used to make a range of consumer products including tissue, packaging, specialty paper products, diapers and other absorbent products. For the twelve months ended June 30, 2010, our market pulp segment had revenues of approximately $634 million, or approximately 14% of our total revenues for such period.

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Wood products

We operate 18 sawmills in Canada that produce construction grade lumber sold in North America. We also operate two engineered wood products facilities in Canada that produce products for specialized applications, such as wood i-joists for beam replacement, and four remanufacturing facilities in Canada that produce roofing and flooring material and other products. We sell pulpwood, saw timber and woodchips to customers located in Canada and the United States. For the twelve months ended June 30, 2010, our wood products segment had revenues of approximately $391 million, or approximately 9% of our total revenues for such period.

Pulp and paper manufacturing facilities

The following table provides a listing of the pulp and paper manufacturing facilities we owned or operated as of June 30, 2010 and production information by product line (which represents all of our reportable segments except wood products). This table excludes facilities which have been permanently closed as of June 30, 2010. Beginning in the first quarter of 2009, we implemented rotating monthly downtime at several facilities across the organization until market conditions improved. The table below represents these facilities’ actual 2009 production, which reflects the impact of the rotating downtime, and 2010 operating capacity, including production makeup.

			2010 Production makeup
	2010 Operating capacity	2009 Total production	Newsprint	Coated papers	Specialty papers	Market pulp
(In 000s of metric tons)
Canada
Alma, Quebec	380	327	—	—	100%	—
Amos, Quebec	209	115	100%	—	—	—
Baie-Comeau, Quebec	542	429	100%	—	—	—
Beaupre, Quebec(1)	—	103	—	—	—	—
Clermont, Quebec(2)	347	310	100%	—	—	—
Dolbeau, Quebec(3)	—	106	—	—	—	—
Fort Frances, Ontario(1)	340	305	—	—	58%	42%
Gatineau, Quebec(4)	—	247	—	—	—	—
Iroquois Falls, Ontario	271	206	82%	—	18%	—
Kenogami, Quebec	216	203	—	—	100%	—
Laurentide, Quebec	354	259	—	—	100%	—
Liverpool, Nova Scotia(5)	259	148	89%	—	11%	—
Thorold, Ontario(6)	208	280	100%	—	—	—
Thunder Bay, Ontario(7)	580	406	36%	—	1%	64%
United States
Alabama River, Alabama(8)	—	—	—	—	—	—
Augusta, Georgia(9)	419	368	100%	—	—	—
Calhoun, Tennessee(8)(10)	720	601	20%	—	59%	21%
Catawba, South Carolina	889	789	—	74%	—	26%
Coosa Pines, Alabama(1)	462	453	—	—	41%	59%
Grenada, Mississippi	244	148	100%	—	—	—
Usk, Washington(11)	260	234	100%	—	—	—
United Kingdom
Bridgewater, England(12)	—	207	—	—	—	—
South Korea
Mokpo, South Korea	253	235	100%	—	—	—
	6,952	6,479

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(1) In September 2009, we announced the indefinite idling of the following: our Beaupre specialty paper mill (representing 241,000 metric tons of capacity); a specialty paper machine at our Fort Frances facility (representing 70,000 metric tons of capacity) and a newsprint machine at our Coosa Pines paper mill (representing 170,000 metric tons of capacity).

(2) Donohue Malbaie Inc. (“DMI”), which owns one of Clermont’s paper machines, is owned 51% by one of our subsidiaries and 49% by NYT Capital Inc. We manage the facility and wholly own all of the other assets at the site. Manufacturing costs are transferred between us and DMI at agreed-upon transfer costs. DMI’s paper machine produced 214,000 metric tons of newsprint in 2009. The amounts in the above table represent the mill’s total capacity and production including DMI’s paper machine.

(3) On August 24, 2010, we announced the permanent closure of our Dolbeau facility which had been effectively idled since July 7, 2009 (representing 244,000 short tons of specialty papers capacity).

(4) On August 24, 2010, we announced the permanent closure of our Gatineau facility, which had been indefinitely idled since May 17, 2010 (representing 360,000 metric tons of newsprint and commercial paper capacity).

(5) The Bowater Mersey Paper Company Limited (“Mersey”) is located in Liverpool, Nova Scotia and is owned 51% by one of our subsidiaries and 49% by The Daily Herald Company, a wholly-owned subsidiary of The Washington Post. We manage the facility. The amounts in the above table represent the mill’s total capacity and production.

(6) On March 11, 2010, we announced the indefinite idling of one of our newsprint machines at our Thorold facility, effective April 12, 2010 (representing approximately 207,000 metric tons of capacity).

(7) In August 2009, we announced the indefinite idling of our two newsprint machines at our Thunder Bay facility effective August 21, 2009 (representing 392,000 metric tons of capacity), one of which was restarted in February 2010.

(8) In the fourth quarter of 2008, we announced the immediate idling, until further notice, of our Alabama River newsprint mill (representing 265,000 metric tons of capacity) and two paper machines (No. 1 and No. 2) at our Calhoun facility (representing 120,000 metric tons of newsprint capacity and 110,000 metric tons of specialty papers capacity).

(9) ANC, which operates our newsprint mill in Augusta is owned 52.5% by one of our subsidiaries and 47.5% by an indirect subsidiary of Woodbridge. We manage the facility. The amounts in the above table represent the mill’s total capacity and production.

(10) Calhoun Newsprint Company (“CNC”), which owns one of Calhoun’s paper machines (No. 5), Calhoun’s recycled fiber plant and a portion of the thermomechanical pulp (“TMP”) mill, is owned 51% by one of our subsidiaries and 49% by Herald Company, Inc. We manage the facility and wholly own all of the other assets at the site, including the remaining portion of the TMP mill, a kraft pulp mill, a market pulp dryer, four other paper machines (two of which are still operating) and other support equipment. Pulp, other raw materials, labor and other manufacturing services are transferred between us and CNC at agreed-upon transfer costs. CNC’s paper machine produced 185,000 metric tons of newsprint in 2009. In addition, beginning in 2010, this mill also began producing some specialty papers, which capacity is not reflected in the table above. The amounts in the above table represent the mill’s total capacity and production including CNC’s paper machine.

(11) The Ponderay Newsprint Company is located in Usk, Washington and is an unconsolidated partnership in which we have a 40% interest and, through a wholly-owned subsidiary, we are the managing partner. The balance of the partnership is held by subsidiaries of four newspaper publishers. The amounts in the above table represent the mill’s total capacity and production.

(12) Effective as of February 2, 2010, Bridgewater Paper Company Limited filed for administration pursuant to U.K. insolvency law and substantially all of its assets have subsequently been sold by its administrators.

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Wood products facilities

The following table provides a listing of our sawmills as of December 31, 2009 and their respective capacity and lumber production. This table excludes facilities which have been permanently closed as of December 31, 2009.

(in million board feet)	2010 Total capacity	2009 Total production
Comtois, Quebec	140	30
Girardville-Normandin, Quebec	175	141
La Dore, Quebec	155	154
La Tuque, Quebec(1)	130	15
Mackenzie, British Columbia (2 facilities)(2)	—	13
Maniwaki, Quebec	125	39
Mistassini, Quebec	175	122
Oakhill, Nova Scotia(3)	151	64
Obedjiwan, Quebec(4)	30	23
Pointe-aux-Outardes, Quebec	175	12
Roberval, Quebec	100	20
Saguenay Produits Forestiers Saguenay, Quebec (2 facilities)	163	23
Saint-Felicien, Quebec	100	70
Saint-Hilarion, Quebec	35	24
Saint-Ludger-de-Milot, Quebec(5)	80	68
Saint-Thomas, Quebec	90	82
Senneterre, Quebec	85	52
Thunder Bay, Ontario	280	159
	2,189	1,111

(1) Produits Forestiers Mauricie L.P. is located in La Tuque, Quebec and is a consolidated subsidiary in which we indirectly have a 93.2% interest. The amounts in the above table represent the mill’s total capacity and production.

(2) In the fourth quarter of 2007, we announced the indefinite idling of our two Mackenzie sawmills and, in the second quarter of 2010, we sold these two sawmills and other assets located in Mackenzie.

(3) The Oakhill, Nova Scotia sawmill is owned by Mersey, which is a consolidated subsidiary in which we indirectly have a 51% interest. The amounts in the above table represent the mill’s total capacity and production.

(4) Societe en Commandite Scierie Opitciwan is located in Obedjiwan, Quebec and is an unconsolidated entity in which we indirectly have a 45% interest. The amounts in the above table represent the mill’s total capacity and production.

(5) Produits Forestiers Petit-Paris Inc. is located in Saint-Ludger-de-Milot, Quebec and is an unconsolidated entity in which we indirectly have a 50% interest. The amounts in the above table represent the mill’s total capacity and production.

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The following table provides a listing of our remanufacturing and engineered wood facilities operated as of December 31, 2009 and their respective capacity and wood production. This table excludes facilities which have been permanently closed as of December 31, 2009.

(in million board feet, except where otherwise stated)	2010 Total capacity	2009 Total production
Remanufacturing Wood Facilities
Chateau-Richer, Quebec	63	40
La Dore, Quebec	15	12
Manseau, Quebec	20	8
Saint-Prime, Quebec	28	26
Total Remanufacturing Wood Facilities	126	86
Engineered Wood Facilities
Larouche and Saint-Prime, Quebec (million linear feet)(1)	145	80

(1) Abitibi-LP Engineering Wood Inc. and Abitibi-LP Engineering Wood II Inc. are located in Larouche, Quebec and Saint-Prime, Quebec, respectively, and are unconsolidated entities in which we have a 50% indirect interest in each entity. We operate the facilities and our joint venture partners sell the products. The amounts in the above table represent the mills’ total capacity and production.

On October 12, 2006, an agreement regarding Canada’s softwood lumber exports to the U.S. became effective (the “2006 Softwood Lumber Agreement”). The 2006 Softwood Lumber Agreement provides for, among other things, softwood lumber to be subject to one of two ongoing border restrictions, depending upon the province of first manufacture with several provinces, including Nova Scotia, being exempt from these border restrictions. Volume quotas have been established for each company within the provinces of Ontario and Quebec based on historical production, and the volume quotas are not transferable between provinces. U.S. composite prices would have to rise above $355 composite per thousand board feet before the quota volume restrictions would be lifted, which had not occurred as of June 30, 2010. For additional information, reference is made to Note 22, “Commitments and Contingencies—Lumber duties,” to our consolidated financial statements included elsewhere in this offering memorandum.

Other products

We also sell pulpwood, sawtimber, wood chips and electricity to customers located in Canada and the United States. Sales of these other products are considered a recovery of the cost of manufacturing our primary products.

Raw materials

Our operations consume substantial amounts of raw materials such as wood, recovered paper, chemicals and energy in the manufacturing of our paper, pulp and wood products. We purchase raw materials and energy sources (except internal generation) primarily on the open market.

Wood

Our sources of wood include property we own or lease, property on which we possess cutting rights, and purchases from local producers, including sawmills that supply residual wood chips. We own or lease approximately 815,000 acres of timberlands primarily in Canada, and have long-term cutting rights for 39.8 million acres in Canada which provide wood furnish to our wood products, paper and pulp mill operations. Approximately half of the wood fiber supplies used in our operations are met through land managed by us or long-term contracts. All of our managed

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forest lands are third-party certified to one or more globally recognized sustainable forest management standards. We have implemented fiber tracking systems at our mills to ensure that the wood fiber supply comes from acceptable sources such as certified forests and legal harvesting operations.

Recovered paper

We are one of the largest global recyclers of newspapers and magazines, and have a number of recycling plants that use advanced mechanical and chemical processes to manufacture high quality pulp from a mixture of old newspapers and magazines, or “recovered paper.” Using recovered paper, we produce, among other things, recycled fiber newsprint and uncoated specialty papers comparable in quality to paper produced with 100% virgin fiber pulp. The Coosa Pines, Thorold and Mokpo operations produce products containing 100% recycled fiber. In 2009, we used 1.7 million metric tons of recovered paper worldwide and the recycled fiber content in newsprint averaged 39%.

In 2009, our North American recycling division collected or purchased 1.3 million metric tons of recovered paper. Our Paper Retriever^® program collects recovered fiber through a combination of community drop-off containers and recycling programs with business and commercial offices. The recovered paper that we physically purchase is from suppliers generally within the region of our recycling plants and primarily under long-term agreements.

Energy

Steam and electrical power constitute the primary forms of energy used in pulp and paper production. Process steam is produced in boilers using a variety of fuel sources. All but two of our mills produce 100% of their own steam requirements. In 2009, our Alma, Calhoun, Catawba, Coosa Pines, Fort Frances, Gatineau, Iroquois Falls, Kenogami, Mersey and Thunder Bay operations collectively consumed approximately 26% of their electrical requirements from internal sources, notably on-site cogeneration and hydroelectric stations. The balance of our energy needs was purchased from third parties. We have seven sites that operate cogeneration facilities and six of these sites generate “green energy” from carbon-neutral biomass. In addition, we use alternative fuels such as methane from landfills, used oil, tire-derived fuel and black liquor to reduce consumption of virgin fossil fuels. Our hydroelectric assets include: Hydro Saguenay (seven installations), Fort Frances (three installations), Kenora (two installations) and Iroquois Falls (three installations), and represent an aggregate capacity of approximately 300 megawatts. Our Hydro Saguenay facilities, located in the province of Québec, are 100% owned by us; the others are located in the province of Ontario and are partly owned by us through our 75% interest in ACH LP.

The following table provides a listing of our hydroelectric facilities as of December 31, 2009 and their respective capacity and generation.

	Ownership	Installed capacity (MW)	Share of capacity (MW)	Generation (GWh)	Share of generation (GWh)	Share of generation received (GWh)
Hydro Saguenay(1)	100%	162	162	942	942	942
Fort Frances(2)(3)	75%	27	20	183	137	137
Kenora(2)(4)	75%	18	14	89	67	67
Iroquois Falls(2)(5)	75%	92	69	554	416	416
		299	265	1,768	1,562	1,562

(1) Includes a total of seven hydroelectric facilities.

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(2) The amounts in the above table represent the facility’s total installed capacity and power generation.

(3) Includes a total of three hydroelectric facilities.

(4) Includes a total of two hydroelectric facilities.

(5) Includes a total of three hydroelectric facilities.

The water rights agreements typically vary from 10 to 50 years and are generally renewable, under certain conditions, for additional terms. In certain circumstances, water rights are granted without expiration dates. In some cases, the agreements are contingent on the continued operation of the related paper mill and a minimum level of capital spending in the region.

Hydroelectric assets and water rights at the Grand Falls facility, Star Lake Hydro Partnership and Exploits River Hydro Partnership were among the assets expropriated in the fourth quarter of 2008 by the Government of Newfoundland and Labrador, Canada and have been excluded from the above table.

Competition

In general, our products are globally-traded commodities, the markets in which we compete are highly competitive and, aside from quality specifications to meet customer needs, the production of our products does not depend upon a proprietary process or formula. Pricing and the level of shipments of our products are influenced by the balance between supply and demand as affected by global economic conditions, changes in consumption and capacity, the level of customer and producer inventories and fluctuations in currency exchange rates. Any material decline in prices for our products or other adverse developments in the markets for our products could have a material adverse effect on our results of operations or financial condition. Prices for our products have been and are likely to continue to be highly volatile.

Newsprint, one of our principal products, is produced by numerous manufacturers worldwide. In 2009, the five largest North American producers represented approximately 84% of North American capacity for newsprint. The five largest global producers represented approximately 38% of global newsprint capacity. Our current operating capacity is approximately 9% of worldwide capacity. We face competition from both large global producers and numerous smaller regional producers. In recent years, a number of global producers of newsprint based in Asia, particularly China, have grown their production capacity. Price, quality, customer relationships and the ability to produce paper with recycled fiber are important competitive determinants.

We compete with eight other coated mechanical paper producers with operations in North America. In 2009, the five largest North American producers represented approximately 78% of North American capacity for coated mechanical paper. In addition, several major offshore suppliers of coated mechanical paper compete for North American business. Offshore imports represented approximately 11% of North American demand in 2009. As a major supplier to printers, end users (such as magazine publishers, catalogers and retailers) and brokers/merchants in North America, we compete with numerous worldwide suppliers of other grades of paper such as coated freesheet and supercalendered paper. We compete on the basis of price, quality and service.

We produced approximately 33% of North American uncoated mechanical paper demand in 2009, comprised mainly of supercalendered, superbright, high bright, bulky book and directory papers. We compete with numerous uncoated mechanical paper producers with operations in North America. In addition, imports from overseas represented approximately 6% of North American demand in 2009 and were primarily concentrated in the supercalendered paper market where they represent approximately 13% of North American demand. We compete on the basis of price, quality, service and breadth of product line.

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We compete with eight other major market pulp suppliers with operations in North America along with other smaller competitors. Market pulp is a globally traded commodity for which competition exists in all major markets. We produce five major grades of market pulp (northern and southern hardwood, northern and southern softwood and fluff) and compete with other producers from South America (eucalyptus hardwood and radiata pine softwood), Europe (northern hardwood and softwood) and Asia (mixed tropical hardwood). Price, quality and service are considered the main competitive determinants.

In 2008, we fulfilled our commitment to obtain third-party certification for all of our managed forest lands to globally-recognized sustainable forest management standards, such as the Sustainable Forestry Initiative and the Z809 standard of the Canadian Standards Association. In 2009, to further differentiate our products from those of the competition and to better position ourselves to meet increasing demand for products certified to the Forest Stewardship Council, we achieved third-party certification for two forests, one in Quebec and one in Ontario.

As with other global commodities, the competitive position of our products is significantly affected by the volatility of currency exchange rates. We have operations in Canada, the United States and South Korea. Several of our primary competitors are located in Canada, Sweden, Finland and certain Asian countries. Accordingly, the relative rates of exchange between those countries’ currencies and the United States dollar can have a substantial effect on our ability to compete. In addition, the degree to which we compete with foreign producers depends in part on the level of demand abroad. Shipping costs and relative pricing generally cause producers to prefer to sell in local markets when the demand is sufficient in those markets.

Trends in advertising, electronic data transmission and storage and the Internet could have further adverse effects on traditional print media, including our products and those of our customers, but neither the timing nor the extent of those trends can be predicted with certainty. Our newspaper publishing customers in North America use and compete with businesses that use other forms of media and advertising, such as direct mailings and newspaper inserts (both of which are end uses for several of our products), television and the Internet. U.S. consumption of newsprint declined in 2009 as a result of continued declines in newspaper circulation, declines in newspaper advertising volume and publishers’ conservation measures, which include increased usage of lighter basis-weight newsprint and web-width and page count reductions. Our newsprint, magazine and catalog publishing customers are also subject to the effects of competing media, including the Internet.

Tax Attributes

Following the Emergence Date, we expect to have significant tax attributes, including net operating losses and income tax credits. We believe these tax attributes may allow us to offset some of our future taxable income. The amount of these tax attributes will vary between Canada and the U.S., as described below.

Canada

We have undertaken a comprehensive plan of legal entity rationalization which will result in one primary operating company in Canada. We expect to have significant tax attributes within this entity which will generally be available to offset our future taxable income. We currently expect that the aggregate amount of Canadian tax attributes which we will have upon emergence will be between $2.5 - 3.0 billion, although such amount is subject to significant uncertainties. The portion of our future Canadian taxable income that may be offset by these attributes will depend on the level and the timing of such taxable income.

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U.S.

We expect to have significant tax attributes within the U.S. which will be limited in their annual utilization by Sections 382 and 383 of the Internal Revenue Code of 1986, as amended. We expect that the aggregate amount of U.S. tax attributes (before application of the annual limitations described above) will be between $1.00 – 1.25 billion, although such amount is subject to significant uncertainties. The portion of our future U.S. taxable income that may be offset by these limited attributes will depend on the level and timing of such taxable income.

Employees

As of June 30, 2010, we employed approximately 11,200 people, of whom approximately 8,100 were represented by bargaining units. Our unionized employees are represented predominantly by the Communications, Energy and Paper workers Union (the “CEP”) in Canada and predominantly by the United Steelworkers International in the U.S.

A significant number of our collective bargaining agreements with respect to our paper operations in Eastern Canada expired at the end of April 2009. At the beginning of March 2010, we reached an agreement in principle with the CEP and the Confederation des syndicats nationaux (the “CSN”), subject to the resolution of ongoing discussions with the governments of Quebec and Ontario regarding funding relief in respect of the material solvency deficits in pension plans sponsored by Abitibi and Bowater. Ratification of these agreements has been completed in all locations.

On April 29, 2010, a coalition of U.S. labor unions led by the United Steelworkers International ratified a new master bargaining agreement covering mills in Calhoun, Catawba, Coosa Pines, Alabama and Augusta. The individual mill collective bargaining agreements adopted in connection therewith will extend through April 27, 2014 in the case of Calhoun and Catawba and April 27, 2015 in the case of Coosa Pines and Augusta. The master bargaining agreement will become effective upon consummation of the Plans of Reorganization.

In May and June 2010, we reached agreements with sawmills and woodland workers in the Mauricie region of the province of Quebec represented by the CSN and most of the unions representing trades and office employees in our four Ontario paper mills. We are still negotiating the renewal of collective bargaining agreements with other unions also representing trades and office employees in those four Ontario mills.

In June 2010, we reached an agreement for the renewal of the collective bargaining agreements of four sawmills affiliated with the CEP. The CEP union agreement has since been serving as a model agreement for three other sawmills located in Saint-Felicien, Normandin and Comtois, Quebec. Except for the agreement related to the sawmill in Comtois, these agreements have been ratified.

As a result of these new agreements, we expect to realize labor cost savings of approximately $95 million annually.

We started discussions at the end of June 2010 with the CEP for the reopening and/or renewal of eight woodland unions representing 800 employees working in the Lac Saint-Jean, Quebec region.

The employees at the Mokpo facility have complied with all conditions necessary to strike, but the possibility of a strike or lockout of those employees is not clear; we served the six month notice necessary to terminate the collective bargaining agreement related to the Mokpo facility on June 19, 2009.

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We may not be able to reach satisfactory agreements with all of our employees, which could result in strikes or work stoppages by affected employees. Renewals could also result in higher wage or benefit costs.

In general, we believe that our relationship with employees is good.

Legal proceedings

We are defendants in various lawsuits and claims arising in the regular course of business. However, subject to certain exceptions, all litigation against us that arose or may arise out of pre-petition conduct or acts is subject to the automatic stay provisions of the Creditor Protection Proceedings and the orders of the Courts rendered thereunder. In addition, any recovery by the plaintiffs in those matters will be treated consistent with all other general unsecured claims in the Creditor Protection Proceedings. We believe that these matters will not have a material adverse effect on our results of operations or financial position. For a more detailed description of litigation matters, see Note 15 to our unaudited interim consolidated financial statements and Note 22 to our consolidated financial statements contained elsewhere in this offering memorandum.

For a description of matters relating to our Creditor Protection Proceedings, see the section titled “Summary—Plans of Reorganization.”

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EX-99.9

Exhibit 99.9

Description of certain indebtedness

ABL Credit Facility

General

Upon our emergence from the Creditor Protection Proceedings and pursuant to the Plans of Reorganization, we will enter into the ABL Credit Facility with Citibank, N.A., as administrative agent and collateral agent, Citigroup Global Markets, Inc., Barclays Capital and J.P. Morgan Securities LLC, as joint lead arrangers and joint bookrunners, each of our material U.S. and Canadian wholly-owned subsidiaries, as guarantors, and the lenders party thereto. Set forth below is a summary of the material terms of the ABL Credit Facility, subject to the qualifications, exclusions and exceptions to be specified in the definitive documentation therefor.

Size and tenor

Under the ABL Credit Facility, the lenders will provide a four-year, asset based, revolving credit facility in an amount of up to $600 million (up to $400 million of which will be available to certain of our Canadian subsidiaries), with a $150 million sublimit for letters of credit and a $20 million swingline sublimit. We have the option of increasing the size of ABL Credit Facility by up to an additional $100 million, subject to the satisfaction of customary conditions. The ABL Credit Facility will have separate U.S. and Canadian tranches, with a borrowing base under each tranche equal to 85% of eligible U.S. or Canadian accounts receivable, as applicable, plus the lesser of (a) 65% of eligible U.S. or Canadian inventory, as applicable, and (b) 85% of the net orderly liquidation value of the eligible inventory less reserves, minus the aggregate net exposure under certain secured hedging agreements and secured cash management agreements and certain reserves established by the administrative agent.

The proceeds of the revolving loans under the ABL Credit Facility will be used for working capital and general corporate purposes.

Interest rates and fees

The revolving loans under the ABL Credit Facility will bear interest at a floating rate per annum based on, at our option, (a) for U.S. dollar denominated loans, a base rate or LIBOR, plus, in each case, an applicable margin, and (b) for Canadian dollar denominated loans, the Canadian prime rate or the average rate applicable to Canadian dollar bankers’ acceptances (“BA Loans”), plus, in each case, an applicable margin. The applicable margin will initially be 2.0% for base rate or Canadian prime rate loans and 3% for LIBOR and BA Loans for the first two full fiscal quarters. Thereafter the applicable margin will be based on the excess availability under the ABL Credit Facility and will range between 1.75% and 2.25% for base rate or Canadian prime rate loans and between 2.75% and 3.25% for LIBOR and BA Loans.

The ABL Credit Facility will include an initial commitment fee for the first two full fiscal quarters of 0.75% per annum which will accrue on the unused portion of the commitments. Thereafter the commitment fee will be (a) 0.50% per annum if the average amount outstanding under the ABL Credit Facility for the preceding month exceeded 50% of the commitments under the facility or (b) 0.75% per annum if the average amount outstanding under the ABL Credit Facility for the preceding month was 50% or less of the commitments under the facility.

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Security and guarantees

Our obligations under the U.S. tranche of the ABL Credit Facility will be guaranteed by all of our existing and future direct and indirect material U.S. subsidiaries, subject to certain exceptions to be set forth in the definitive documentation for the ABL Credit Facility and our obligations under the Canadian tranche of the ABL Credit Facility will be guaranteed by all of our existing and future direct and indirect material Canadian subsidiaries, subject to certain exceptions to be set forth in the definitive documentation for the ABL Credit Facility.

The obligations under the ABL Credit Facility will be secured by a first priority security interest in substantially all of our and the applicable guarantors, accounts receivable, inventory and cash deposit and investment accounts. In addition, the obligations under the U.S. tranche of the ABL Credit Facility will also be secured by a second priority security interest in the Notes Priority Collateral subject, in each case, to certain exceptions to be set forth in the definitive documentation for the ABL Credit Facility.

Covenants

The ABL Credit Facility will contain customary covenants including limitations on additional indebtedness and investments, limitations on liens, limitations on asset sales, limitations on the payment of dividends and repurchases of our capital stock, limitations on prepayment or cancellation of indebtedness and limitations on transactions with affiliates. In addition, if the excess availability (based on the lesser of the amount of the commitment and the borrowing base) under the ABL Credit Facility falls below 15%, we will also be required to maintain a fixed charge coverage ratio (calculated in accordance with the facility for each 12 calendar month period during the compliance period ) of no less than 1.10 to 1.00 until excess availability exceeds such amount for 45 consecutive days.

Events of default

The ABL Credit Facility will contain customary events of default, including: nonpayment of principal, interest, fees or other amounts, violation of covenants, material inaccuracy of representations and warranties, cross-default to material indebtedness, certain events of bankruptcy and insolvency, material judgments, a change in control and the actual or asserted invalidity of liens or guarantees or any collateral document.

Convertible Notes

General

Pursuant to the Plans of Reorganization, as part of our emergence from the Creditor Protection Proceedings we may issue up to $500 million aggregate principal amount of the Convertible Notes in the Rights Offering. The maximum amount of Convertible Notes to be issued, excluding the Escrow Notes described below, is limited to the lesser of (a) $500 million and (b) the sum of (i) $325 million and (ii) $1.4 billion less the sum of our available cash and the aggregate principal amount of term indebtedness outstanding as of the Emergence Date (the “Convertible Notes Limit”), in each case calculated in accordance with the Backstop Agreement. In addition, the maximum aggregate principal amount of Convertible Notes that may be issued is subject to further reduction in the event our projected liquidity as of the Emergence Date, as determined in accordance with the Backstop Agreement, exceeds $600 million, excluding the letters of credit to be issued as of the Emergence Date under the ABL Credit Facility.

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Based on our current estimates of the cash that will be available to us on the Emergence Date, the projected borrowing base for the ABL Credit Facility, the principal amount of Notes issued in this offering and other factors, we currently expect to issue approximately $125 million aggregate principal amount of Convertible Notes in the Rights Offering, excluding the Escrow Notes. Changes in our actual cash available (including as a result of our operating results, the NAFTA settlement or as a result of asset sales completed prior to the Emergence Date), borrowing base availability under the ABL Credit Facility and the principal amount of notes sold in this offering from the amounts that we currently project and that are set forth under “Use of Proceeds” will result in a corresponding change in the principal amount of Convertible Notes issued in the Rights Offering. To the extent any such changes result in our liquidity as of the Emergence Date being higher than that currently projected, we will issue less than $125 million principal amount of Convertible Notes. Conversely, if our liquidity is less than expected, we will issue more than $125 million of Convertible Notes, up to the Convertible Notes Limit.

On the Emergence Date, we will also issue into escrow up to an additional $110 million aggregate principal amount of Convertible Notes, which we refer to as “Escrow Notes,” that may subsequently be released to holders of certain unresolved claims as of the Emergence Date if such claims are later determined to be allowable claims. Upon the release of any of the Escrow Notes, the corresponding escrowed subscription price for such Escrow Notes will also be released to us.

The Convertible Notes are expected to bear interest, payable semi-annually, at a rate of 10.0% per annum (11.0% per annum if we elect to pay a portion of the interest through the issuance of additional Convertible Notes as “payment in kind” and in such case, we would be required to pay 5% in cash and 6% as payment in kind) and will mature in 2017. The Convertible Notes will be subordinate to the notes offered hereby, borrowings under our ABL Credit Facility and up to $200 million of additional indebtedness.

We will use the cash proceeds from the issuance of the Convertible Notes in the Rights Offering to fund our cash needs in connection with the consummation of the Plans of Reorganization, including the repayment of our DIP Facilities and our pre-petition secured indebtedness, as well as certain additional allowed claims under the Creditor Protection Proceedings. See “Use of proceeds.”

Conversion rights

The Convertible Notes will be convertible into shares of our common stock at the option of the holder beginning six months after the issuance of the Convertible Notes. In addition, holders of the Convertible Notes may also elect to convert in the event we elect to redeem the Convertible Notes, as described below. The conversion price for the Convertible Notes will be equal to $1.8 billion divided by the number of shares of our common stock outstanding on a fully diluted basis as of the Emergence Date. The conversion price is subject to customary anti-dilution adjustment provisions.

Redemption

We will be required to redeem a portion of the Convertible Notes if we receive net cash proceeds of more than $100 million from one or more asset sales (as defined in the indenture that will govern the Convertible Notes) completed within six months of issuing the Convertible Notes, subject to certain limitations. In addition, if we receive more than $20 million in subscription price of Escrowed Notes during such six month period, and there have been no such asset sales,

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we will also be required to use such proceeds to redeem the Convertible Notes. The redemption price for any such mandatory redemptions will be equal to 105% of the principal amount of the Convertible Notes.

For the period beginning on the 61^st day following the issuance of the Convertible Notes and ending on the first interest payment date for the Convertible Notes, if $100 million or less aggregate principal amount of the Convertible Notes is then outstanding, we may redeem all or a portion of the remaining Convertible Notes at a redemption price equal to 105% of the principal amount of the Convertible Notes. In addition, on or after the anniversary of the issuance date for the Convertible Notes in 2013, we may redeem the Convertible Notes, in whole or in part, at a redemption price equal to the greater of (i) the market value of the Convertible Notes at the time of such redemption (determined in accordance with the terms of the indenture governing the Convertible Notes) and (ii) the following redemption prices (expressed as a percentage of the principal amount to be redeemed), if redeemed during the 12-month period beginning the anniversary of the issuance date for the Convertible Notes for the years indicated:

Year	Redemption price
2013	110.0%
2014	112.0%
2015	115.0%
2016 and thereafter	100.0%

Fundamental change

Upon a “fundamental change,” holders of the Convertible Notes will have the right to require us to repurchase all or a portion of their Convertible Notes at a price equal to the accreted value of the principal amount of the Convertible Notes, plus accrued and unpaid interest thereon. The definition of a fundamental change in the indenture governing the Convertible Notes will be substantially identical to the definition of a “change of control” with respect to the notes offered hereby. See “Description of notes—Repurchase at the option of holders—Change of control.”

Guarantees

The Convertible Notes will be guaranteed by our wholly-owned U.S. subsidiaries.

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