Monday, December 8, 2008

Another Chapter 11 Filing Dings AbitibiBowater

Today’s Chapter 11 filing by Tribune Company could put a multimillion-dollar hurt on AbitibiBowater, another newsprint manufacturer, and perhaps some fellow newspaper publishers.

Tribune filed papers with a Delaware bankruptcy court indicating it owed nearly $7 million in “trade debt” to Abitibi -- $4.192 million to the Abitibi Consolidated subsidiary and $2.77 million to the Bowater subsidiary.

Also making Tribune’s list of top-30 creditors was “SP Newsprint Company c/o White Birch Paper Company” of Greenwich, CT, with $5.153 million in trade debt. SP is an Atlanta-based partnership owned by three newspaper chains (Cox, McClatchy, and Media General), while White Birch is a separate, privately owned newsprint manufacturer based in Greenwich.

White Birch was presumably a marketing agent or broker of SP paper sold to Tribune, but it's not clear which company is left holding the bag.

AbibitiBowater also has $13.3 million tied up in Quebecor World’s Chapter 11 filing from January. Put together the Quebecor and Tribune debts and you would have enough to buy 81% of AbitibiBowater stock, which closed down 10% today (and 98% from a year ago) at 43 cents per share. The heavily leveraged paper company lists assets of nearly $10 billion but has a market cap of only $25 million.

Quebecor World says it is in the process of exiting Chapter 11, but it’s not clear what kind of compensation its creditors would receive. Tribune’s various newspapers and other media properties are still operating, but the prospects are bleak for major newspaper chains with lots of debt – and for the paper companies that supply them.

Not making the Top 30 list was Catalyst Paper, the dominant newsprint supplier in the West and reportedly a major supplier to Tribune’s Los Angeles Times and other newspapers. That indicates Catalyst's exposure is less than the $1.691 million that the #30 creditor had.

The top of the list is dominated by holders of various debt instruments. The largest trade debt, $23.691 million, is owed to Warner Bros. Television, #13 on the list. Just below that Time Warner subsidiary is Mark Willes, CEO of Times Mirror until Tribune purchased it, with $11.229 million in “retirement and deferred comp”. Three other retired executives also made the list.


Anonymous said...

Just wanted to clarify. SP Newsprint is no longer a partnership owned by Media General, Cox and McClatchy. The company was sold to Peter Brant and Co., owner of White Birch during the early part of 2008.

Thus, White Birch owners (Peter Brant and Co.) are ultimately the ones "holding the bag".

D. Eadward Tree said...

Thanks, Anonymous, I should have been clearer on this point. I agree that White Birch is probably left holding the bag. But it's possible that the three newspaper chains that owned SP share some liability. They could have provided some kind of guarantees or escrow fund for the accounts receivable when they sold SP to White Birch.