Following AbitibiBowater's December 2008 announcement of the permanent closure of its Grand Falls newsprint mill, the Government of Newfoundland and Labrador, Canada passed legislation to expropriate all of the company's timber rights, water rights, leases and hydroelectric assets in the province, whether partially or wholly owned through subsidiaries and affiliated entities. As a result of the expropriation, in the fourth quarter of 2008, the company recorded, as an extraordinary loss, a non-cash write-off of the carrying value of the expropriated assets of $256 million.
AbitibiBowater filed a Form 8-K on August 30, 2010 (SEC file no. 001-33776) to announce a formal settlement agreement with the government of Canada whereby the government has agreed to pay the company’s post-emergence Canadian operating entity CAD$130 million (approximately USD$123 million) following the emergence from the creditor protection proceedings under Chapter 11 of the U.S. Bankruptcy Code and the Companies’ Creditors Arrangement Act (Canada), as applicable. The settlement agreement is subject to approval by each of the U.S. Bankruptcy Court for the District of Delaware and the Superior Court of Quebec in Canada, and the Courts’ approval of the company’s plans of reorganization.
On February 25, 2010, the company had filed a Notice of Arbitration under the North American Free Trade Agreement asserting that the assets expropriation was arbitrary, discriminatory and illegal. As part of the settlement agreement, AbitibiBowater has agreed to waive its legal actions and claims against the government of Canada under NAFTA.
The Montreal-based company, the world's largest newsprint maker, was formed in 2007 when Abitibi-Consolidated Inc. and Bowater Inc. combined in a "merger of equals" with each becoming a subsidiary of AbitibiBowater Inc. Bowater was deemed to be the “acquirer” of Abitibi for accounting purposes and AbitibiBowater Inc. was deemed to be the successor to Bowater for purposes of U.S. securities laws and financial reporting. The Combination Agreement and Agreement and Plan of Merger was filed as Exhibit 2.1 to the Form 8-K filed January 29, 2007 (file no. 001-08712).
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