Resolute Forest Products Inc (RFP) 2007 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the AbitibiBowater fourth quarter and 2007 results conference call. I would now like to the turn the meeting over to Mr. Duane Owens, Vice President and Treasurer. Please go ahead.

Good morning. Thank you, Jenny. And welcome to our fourth quarter earnings call. With me on the call today is John Weaver, our Executive Chairman, Dave Paterson, our CEO, and Bill Harvey, our CFO. Before we begin, I need to call your attention to the cautionary forward-looking statement language that is contained in our press release and on our website. If you haven't read it, please do so. We will be discussing such forward-looking matters on the call today. And you should be aware that due to the uncertainties inherent in such statements, actual results will differ and any such statements are not guarantees of future performance. Our fourth quarter and year-end earnings release as well as additional financial and statistical information along with reconciliation of nonGAAP financial measures used on the call can be found on our website. The call is also available via live webcast and replay on our website at AbitibiBowater.com. Today's call is scheduled to last about 45 minutes. I will now turn the call over to Mr. John Weaver.

Good morning, everyone. Thank you for joining us today for our first call to discuss Abitibi and Bowater results on a combined basis. In a few minutes, Dave will take you through the details of our business and markets, then Bill will go through the numbers and provide an update on our financing plans. Before they do that, I would like to provide an overview of our performance and an update on the significant progress we made with respect to the action plan announced to you last November. As you recall, we announced the results of our strategic review and set out a two phased action plan to create a business that is operationally and financially stronger, better able to meet changing customer needs and compete more effectively. At the same time, we knew we had to respond to an increasing global demand for our products and adapt to a lower demand for news print in North America, all with the ultimate goal of delivering value to our shareholders. When we conducted our strategic review we knew that tough decisions were needed to be made and acted upon quickly to improve our financial flexibility.

In phase one of our plan we said we would focus on closing high cost capacity synergies and asset sales. I'm very pleased to say that we've made tremendous progress in all these areas and our phase one closures are now complete. In the three months since we spoke to you, we have reduced paper production capacity by approximately one million tons and closed four high cost mills which were completed in mid-February. We have made progress in realizing synergies and have raised our synergy target to $375 million from the original $250 million target. We have requested the reopening of our Canadian union contracts, a year early, and we will begin meeting with our unions next week. And we have targeted $500 million in asset sales, including noncore facilities, U.S. timberlands, and the recently announced sale of our news print mill in Snowflake, Arizona, to support our three year plan of reducing debt by $1 billion. On this point we have announced the agreement with Catalyst for the sale of Snowflake for approximately $180 million including retained working capital. The sale is expected to close early in the second quarter.

During the implementation of our Phase I action plan, we have simultaneously been working on Phase II which calls for a comprehensive review of all aspects of the business in an effort to further reduce costs, improve our manufacturing platform and better position the company in the global marketplace. We expect to announce the results and detailed action steps from the second phase during the second quarter of 2008. We are also conducting an in-depth review of our wood products business with the objective of selling noncore assets, consolidating facilities and curtailing or closing noncontributing operations. This process is underway. And as you can see from today's financial results, we continue to be -- to face a challenging environment.

That being said, we have made and continue to make the decisions we believe are essential in improving the company's financial position. We remain extremely focused on positioning the companies to deliver the synergies and improve our financial results. Everything we have learned since announcing the combination has reinforced our belief in the opportunities created by this new company, our capabilities and our confidence in our strategy. While we have recognized the challenging road that lies ahead, we remain optimistic about the future. With that, I'll turn the call over to Dave.

Thank you, John. As John has said, we are working hard to place the company in the best position to address the realities of today's rapidly-changing marketplace. In North America, one of those realities is that news print consumption continues to decline. But on the positive side, we're pleased to see that the pricing environment is improving. I would note that in order to remain a competitive and viable supplier, and provide our stakeholders with appropriate returns, it is absolutely critical that we reduce cost and increase our revenues. With that goal in mind, we announced a number of price increases, that I'll walk through in a few minutes.

As we move forward, we will continue to focus on improving our financial flexibility through the reduce of debt which will include further asset sales and stringent control of capital spending. We have shut facilities that are not generating positive cash flows and are not expected to do so in the foreseeable future. And as John has said, we are looking carefully at improvements at our operating platform. Let me now briefly cover our key markets.

Looking first at news print, through December, total U.S. consumption was reported down 10.5% year-over-year. January statistics were just released this week. The data shows demand declined by about 6% this January versus last January, which is an improvement over the trends we saw last year. This is the smallest demand decline since May of 2006. In January, industry production was down by 10%, while total consumption was down 7%. The difference was captured by exports which increased by 30% in January versus last January. We have informed our North American customers of $120 per metric ton news print price increases over six equal monthly installments beginning January of 2008. We remain committed to being a long term, high quality, low cost supplier to the North American market. While recognizing the significance of these price increases to our customers, we have no alternative but to make this further step in returning the revenue side of our business to a more realistic level.

Excluding North America, global news print demand is up about 3% through December. In 2007, the combined company exported approximately 1.6 million tons from North America. We intend to increase our export shipments in 2008 by nearly 10%. Overall, global pricing appears to be strengthening. The price of news print in the U.K. for this year seems to be settling about 5% lower than last year. Continental Europe discussions are ongoing and are expected to be only slightly lower than last year. While the European price may be lower in local currency terms, it would still represent a substantial premium to North America and will still be among the highest prices in the world at over $700 per metric ton using today's exchange rate. In Latin America, the first quarter prices are flat to up $50 per ton, depending on the market. Prices in Asia and the Middle East are up $30 to $50 per ton during the first quarter. Pricing in the rest of the world is improving at a faster pace than North America or Europe.

Turning to commercial printing papers. Demand for coated mechanical papers in North America ended up 5% for the year. Super calendar demand increased 6% for December and 5% for the full year 2007, driven largely by strong demand in retail inserts and catalog conversions from coated mechanical. Standard uncoated mechanical demand was up 11% in December, but down 3.5% for the full year, principally as a result of declines in the bulky book and other segments. Price increases of $60 per ton were announced during the fourth quarter for our super bright products as well as for coated and SC grades.

Shifting to the global pulp market. World shipments continue to be strong. December shipments were a record 3.6 million tons, up 4.5% over December 2006. For the full year, world shipments were up about 1.3 million tons in 2007. Total inventories are in good shape at about 29 days of supply. We have implemented several price increases this fall and in the first quarter.

Shifting to the wood products business. According to the U.S. census bureau, housing starts in the U.S. for December were down 14% from November and 36% from December of 2006. Interest rates have been cut a number of times recently which will eventually translate into a pick-up in housing. We are not anticipating any meaningful recovery this year. With the decline in demand for lumber, we are minimizing lumber production where possible and continually annualizing the right strategy to supply fiber to our mills. We have announced the curtailment of approximately 1.3 billion board feet of lumber in the provinces of Quebec and British Columbia. In summary, the pulp and paper markets we are seeing strengthening prices across our product grades, we are committed to matching our customers' demand for paper and expect financial performance improvement. With that, I'll now turn it over to Bill Harvey, our CFO, who will take you through our results for the quarter and full year.

Thanks, Dave. As we reported in this morning's press release, the company's 2007 fourth quarter and year-end results included the business of both Abitibi-Consolidated and Bowater Incorporated. However, the fourth quarter reflects full quarter results for Bowater and the results for Abitibi only for the 63-day period following the completion of the combination on October 29th. The 2006 data includes only the results of Bowater. For the fourth quarter AbitibiBowater reported a net loss of $250 million or $5.09 per share on sales of $1.5 billion. These results compare with net income of $107 million or $3.58 per diluted share on sales of $860 million for the fourth quarter of 2006. For the full year 2007, we reported a net loss of $490 million or $14.11 per diluted share. This compares with a net loss of $138 million or $4.64 per diluted share for 2006. Sales in 2007 totaled $3.9 billion, up 11% from 2006 sales of $3.5 billion.

Fourth quarter 2007 special items, net of tax, consisted of the following items: a $53 million gain related to foreign currency changes and asset sales, $130 million loss relating to asset closures, $27 million severance and merger-related costs, and a $31 million charge related to tax adjustments. Excluding these special items, the net loss for the quarter would have been $115 million or $2.34 per diluted share. Overall, AbitibiBowater's operating results in the fourth quarter were negatively impacted by the sharp rise in the Canadian dollar. On average, the Canadian dollar in the fourth quarter was C$1.02 compared to C$0.96 in the third quarter. AbitibiBowater's capital spending in the fourth quarter totaled $55 million. We will maintain capital spending on an annual basis at well below $200 million until the improving market conditions translate to positive cash flow.

The only major project we have under way is a $61 million boiler project at the [Fort Francis] site. We expect the EBITDA for the company to improve by over $100 million in Q1 compared to Q4. Still, a very low number, but setting the stage for even further improvements in the following quarters, driven by our significant operating leverage. For instance, the $165 per ton announced news print price increases since November equates to over $750 million of annual EBITDA improvement, although clearly the starting point is from a cash loss position. I would also like to provide an update on our financing plans. As we have previously disclosed, we have two debt issues totaling $346 million, coming due in the second quarter in our Abitibi-Consolidated subsidiary. The first principle amount of $196 million comes due on April 1st and the second of $150 million comes due on June 20th. At year end, our liquidity was $525 million in total, with $275 million in our Bowater subsidiary and $250 million in our Abitibi-Consolidated subsidiary.

Although our business as John and Dave discussed is turning very rapidly, the impact of the significant improvement in the pricing environment and better costs still takes a while to hit the results. That is, January was better than December, and February better than January, and I expect March should be better than February. Bottom line is we have momentum in improving results, but have not turned the corner to cash generation. Therefore, we have continued to use cash in the first two months of the year, and for instance our Abitibi subsidiary now has liquidity in place on round numbers of approximately $100 million, excluding cash in the banking network. It is important to note that the difference from year end does not reflect just operating results, but also the movement of the international AR securitization program to a facility with a banking backstop.

The current state of capital markets has required us to attack the refinancing issue in parallel paths. First, we have done the work necessary to implement an asset-backed loan to replace the credit facilities. An asset-backed loan would enhance flexibility but given the nature of the security supporting the in place credit facilities, it would significantly reduce liquidity. Given the complicated nature of the two separate companies and the extremely difficult capital markets, we determine that we first need to address near term liquidity and inject additional liquidity before implementing the ABL. We have also amended the Bowater credit facilities to allow specific assets to be used to secure debt financing. I believe that this will allow us to be in a position to accomplish a refinancing that can improve the liquidity across our company. However, there can be no assurance that this can be accomplished at all or in sufficient size in advance of the second quarter.

Given the current state of the financing efforts, I'm unable to provide further details at this time except that we expect to make significant progress over the next weeks and we recognize the urgency. We also in the process of amending the credit facilities within our Abitibi-Consolidated subsidiary to provide covenant relief that will extend the term of the -- to the end of the term of the facilities. We intend to replace these facilities like within ABL as I mentioned before and a secured term loan using the collateral currently provided to the Abitibi bank group. However, this will be subsequent to our current financing initiatives. With these actions in mind, we are moving ahead in parallel with other alternatives and we expect to be in a position to move forward with these over the next few days. We recognize that aggressive action is needed. However, the speed as which we have been able to execute many of our financing alternatives has been impacted by the timing of our earnings release and the expected timing of the filing of our 10K. We have also previously announced the sale of the Snowflake, Arizona, mill and expect to realize the cash proceeds of $160 million in April, which will improve the liquidity picture at that time. In summary, over the last four months since we have merged we have implemented the necessary strategic decision, aggressively turned the business in the right direction and in a highly complex situation, closed our first quarter end. However, although we have made substantial progress in initiating actions to address the liquidity pressures, significant risks still face us in our refinancing. With that being said, Operator, we'll now turn the line over for questions.

Thank you, sir. We'll now take questions from the telephone lines. (OPERATOR INSTRUCTIONS) There will be a brief pause while the participants register for their questions. Thanks for your patience. Our first question is from Richard Skidmore of Goldman Sachs. Please go ahead.

Good morning. Just to follow up on the news print side of the business. Can you talk about as you move to aggressively raise prices, what your customers are doing with regards to their demand from your -- from the Abitibi mills?

This is Dave Paterson. I would say our demand is as expected. We are certainly staying very close to our customers. I think the market fundamentals are improving and the demand -- the order book looks very strong.

Alright. Would you expect as you raise prices similar to what we saw a year or two ago, as prices moved up, the customers are more aggressively cut their consumption, would you anticipate that you would see that in 2008 as you aggressively raise pricing in?

Well, as we look at 2008 the public forecasts are for continued demand decline and we've sort of built that into our plan. And I would expect '08 to look similar to '07 in terms of demand.

Great. Thank you.

Yes.

Thank you. Following question is from Chip Dillon from Citi. Please go ahead.

Good morning, this is James Armstrong in for Chip, as he's traveling today. My first question involves the revolvers. Did I hear about $100 million left in the Abitibi revolver, and did the amended credit agreement allow you to use the Bowater revolver for the Abitibi side?

The $100 million I mentioned, James, includes both cash and available under the revolver. So $100 million of liquidity. The amendment we did on the Bowater, Inc., banking facility allows debt to be raised and moved, but it doesn't directly address borrowings under the bank facility to be used out of the old Bowater, Inc.

Okay. And then secondly, how much timberland do you have left and where is it located and would you -- are you considering using this as potential to raise cash?

Well, as among the asset sales, timberlands are one of the things we're focusing on. We have approximately 1.7 million acres of timberland, most of it in Canada, free hold, and we are currently investigating the sale of most of those assets.

Okay. Thank you very much.

Thank you. The following question is from Joe Stivaletti from Goldman Sachs. Please go ahead.

Yes, just to clarify on the -- your amended Bowater revolver, is it the case that you would not be allowed to draw on that to send money over to Abitibi to meet the April 1st bond maturity?

That is correct.

Yes. And can you talk about -- you talked about the liquidity at Abitibi today. Can you talk about the liquidity at Bowater today?

The liquidity at Bowater is approximately $200 million.

And that's reflective of the adjustment to the amendment and that includes cash as well?

Yes.

If you do a financing against the Catawba Mill, you would have the flexibility to use that money to repay the April 1st bond maturity?

That is correct. That's the purpose of the amendment.

Right. So, but do you -- is it fair to say that that's sort of your primary focus right now in terms of addressing the bond maturities?

I think it is a primary focus. It's not the only focus. We're working as I mentioned on parallel paths and you should assume that that is one of the paths were on, at the same point we're looking at other paths.

If you don't get something amended with your Abitibi bank by the end of March, do you expect to be in compliance under your bank covenant there?

If -- we expect to get the facilities amended by the end of March and it would be close, but with respect to the covenant compliance at the end of March, but we expect to get the amendment by the end of March.

And then on Snowflake, is there any way to monetize that payment that's due in April? Is that something that's being looked at?

Certainly are looking and we're looking at all alternatives.

Just one final question, which is on the business side. On the lumber side, can you give us any -- obviously the loss there was significant in the fourth quarter and a big swing versus even the third. Can you just give us a little bit of guidance in terms of the impact of the significant capacity closures and how we should be thinking about that line item in terms of how much progress you might be able to make in shrinking that loss, just because of those capacity closures.

Who wants to take a crack at that one?

I think the reality is, on the wood side we are focused on making supply chip store operations and making the minimum amount of lumber and this has certainly reduced the losses, the McKenzie operation which represents a significant perhaps 25% of the old Abitibi was closed in January, so it was still running in the fourth quarter. So that turnaround will see an improvement in the losses and the group in the lumber business is certainly -- that is their main focus, to reduce losses during the year.

So it's fair to say that the $53 million loss in the wood product segment in the fourth quarter should hopefully shrink a fair amount just because of all these major closures you've undertaken.

We're going to make less volume, yes.

Okay. Thank you very much. Good luck.

Thank you.

Thank you. The following question is from Christopher Chun from Deutsche Bank. Please go ahead.

Yes, thanks, good morning. In terms of your results including only about two months of Abitibi, is there any way you can give us some information on what the result would have looked like on a pro forma basis had Abitibi been included for the entire quarter.

I can give you some indication. Of course, look, on the shipment level, for instance, we would have been more on news print, more like 1.25 million metric tons, coated paper of course would not have been any difference. Specialty papers about 625,000 tons. Market pulp, a very small increase of 10,000 tons. And then on wood products, our ship -- our million board feet would have been over 500 million board feet but we are making some -- obviously some actions there to reduce our production.

Right. Okay. And following up on that, you mentioned that you curtailed -- or the press release said that you curtailed 1.3 billion board feet of capacity. Can you tell us how much is left?

About [1.7].

Okay. And can you discuss a little bit, what you think the pros and cons are of curtailment and how you decide what is the right amount of curtailment?

Are you talking about the lumber business or overall?

Well, right now I'm talking specifically about the lumber business.

Well, you look -- you essentially look at cash preservation and what the cost of purchasing wood chips in the market would be versus generating them yourself and you go for the lowest cost solution.

Right. So you -- what kind of lumber price would you assume in that type of analysis?

The current market. I mean, there's a published market price out there. You look at it and you talk to your sales team and say tell us what you think is going to happen over the next 30, 60, 90 days to lumber prices and you make a call.

Right. So you're not baking in potential turnaround in the market beyond 90-day time frame or so?

Well, I think in our statements we've said that we don't expect '08 to see any significant recovery in the lumber business, based on what's happening in the U.S. housing market.

Right. And then on the -- in terms of the 4Q results on the wood segment it was affected by an inventory write-down. Can you tell us how much that was?

That was affected -- that inventory write-down was affected both on the finished goods and on log inventories. I believe it was about $15 million, but I don't -- we will have further details in the 10K.

Okay. And then finally, on the news print side, Dave, I think you mentioned that you're expected '08 to be approximately similar in terms of demand trends to '07. Can you talk about what you're expecting for the long-term in North America there?

I think it's unclear. Clearly, we've been in a period of exceptional demand decline and I think as prudent managers of the company, we have to see some evidence of a change before we react differently.

Right. And then how do you see the opportunity to potentially increase your export volume? Do you see that as a significant opportunity or are there structural issues that might limit your ability to do that?

I think we already said that we expect to increase our export volume by approximately 10% this year. And with the focus has been tradition of both companies on Europe, South America and sort of like the Middle East and India. And we should see the increase there. There are some challenges in the marketplace today as far as logistics, but we feel like we can attain a 10% growth inside of those logistics challenges.

Okay. Thanks for your help.

Thank you.

Thank you. The following question is from Peter Ruschmeier of Lehman Brothers. Please go ahead.

Thanks. Good morning. Couple questions. Curious if you can comment on the timing of the capacity closures that have taken place in the first quarter and to the extent you can comment on the magnitude of the EBITDA burn, maybe an annualized burn rate of those facilities at the time they were closed.

Well, all the facilities we discussed in Phase I were closed by mid-February and ranged really from mid-January to mid-February was the time period. And I don't think we commented on the individual mill EBITDAs, but they were negative cash for us.

Okay. Is it fair to suggest that all the closures were incurring negative cash at the time of closure?

Yes.

Okay. Also on the cash flow front, how much of the cash cost foreclosures and severance and whatnot have you incurred so far and how much is remaining?

We have -- on the severance side, we have about $40 million done. There's about -- I don't have the specific breakdown between Q1 and Q2, but there's at least another $60 million going to occur in the next could two quarters, including Q1.

Okay. Would that be roughly 50/50 your or is it skewed to the first quarter?

I'm not certain.

Okay. And then lastly, on one of your business segments for coated ground wood you show your price per ton between the trough and 2Q to the fourth quarter level up about $73. Your EBIT per ton was up about $48 and your volumes were up nicely as well. I'm curious if you can comment on, is it just the cost headwinds that are preventing that from seeing a bigger improvement, or what are the factors as to why you wouldn't have a larger profit per ton improvement, given the price and volume back drop?

Well, we had -- I think you're going to continue to see that pull-through coming through. We had a lot of down time in the fourth quarter related to major maintenance outages at the Catawba facility. Having said that the mill for the full year actually saw a reduction in costs on a per ton basis, which means they offset all the inflation, plus had a real reduction in the cost structure. They're having a good start to this year. And I think to your primary question, I think that you'll see more pull-through than you saw for '07 in terms of execution pull-through.

Okay. And maybe just lastly, I don't want to beat the bush on this, but going back to the third quarter, I think, Bill, you commented at the time for an expectation for roughly a flat performance, 3Q to 4Q. I know forecasting is a dangerous game here, but if you look at your expectations back then and versus what happened, I'm curious if you can comment on some of the variances that you were surprised by. I think if anything, the Canadian dollar came down a little bit and I think pricing momentum was decent and so I'm curious on the factors that may have surprised you during the fourth quarter.

Really the Canadian dollar went up versus what the numbers we had in front of us and again, if you take out the special items, the Q4 EBITDA was negative 38 -- negative $38 million. We were surprised by the Canadian dollar. I don't think there was much surprise on the pricing side of it. But that was the biggest single thing.

And lumber was much worse than we thought. I mean, the levels of pricing to the fourth quarter were not anticipated on the lumber side.

Just a quick question, last point. $0.01 change in Cdollars, a $27 million of variance on EBIT?

Yes, annualized.

Very good. Thanks very much, guys.

Thanks.

Thank you. The following question is from of [Tarren Kamit] of JPMorgan. Please go ahead

Good morning. Just wanted to probe a little bit more on liquidity at Abitibi. You're saying $100 million of liquidity. Does that include a reduction in the credit facility or is there something else going on that we're not thinking about?

No, it does not include a reduction in the credit facility. It does include the international AR securitization being folded into the AR securitization which is supported by a bank line. There was a loss of liquidity because of that.

How much is that, roughly?

I think about $40 million.

Okay. And then in terms of the Catawba transfer, is there any sort of additional complexity that would hold that up, i.e., sort of how long would it take to execute on transferring that to another entity?

Not long. It's not finished yet and there's always uncertainties when something isn't finished. But we've been working in parallel, so it's -- most of the work is done.

So should we think about that as a few days or a few weeks or a couple months?

Not a couple months.

Good. Okay. That's all I have. Thank you.

Thank you.

Thank you. The following question is from Jeff Harlib of Lehman Brothers. Please go ahead.

Hi, good morning. The structure with the Catawba facility, could you just talk about, would that be at the [hoco] level, would it be joint AbitibiBo and what would the approximate side of the facility you're looking at? I'm just curious as to what you're talking about in terms of supplementing the liquidity.

The structure is at the [hoco] level. I don't want to get specifically into the structural aspects of it. There is a bank amendment that will be filed today that you could look at and -- but -- and it clearly outlines the structure.

Okay. And the size, we'll wait for that 8K?

Yes.

Okay. And just can you say where you are on a kind of -- if you were to look at your latest month and annualize that, what kind of EBITDA run rate you're on given all the significant changes over the last several months?

What we can tell you is that January is better than December and we just by looking at the business in February is better than January. So we do see a month by month progression. I don't really want to get into specific months EBITDA. They are volatile month to month but the actual improvement, if you look at both price and cost, is being felt through the company.

Okay. And then just near term on proceeds from timberlands, you outlined last call what you had been expecting. Where do you see noncore asset sale proceeds, other than mills and Snowflake?

We had talked about $80 million for the -- $80 million. He with had the $500 million program we announced last year and that included Snowflake. It includes other things we're doing. The timberland component of it was, we talked in the U.S. south was approximately $80 million and that's going on as we speak. It will be spread over a few quarters, though.

And I think just to add, as we said earlier, there's significant free hold timberlands in Canada and we can expect $500 million between mill and timberland sales seems to be a realistic number.

Okay. Thank you.

Operator, we have time for one more question, please.

Certainly. The following question is from Bill Hoffman of UBS Securities. Please go ahead.

Hey, guys. Good morning.

Good morning.

I wonder if you could talk a little bit more about the cost impact of taking out a million tons of capacity, even if it's a percentage improvement or ton improvement across the whole system. Just I guess what we're all trying to get a better handle on is now that you've gotten all these facilities closed, how much are we taking out of cost, and we can all do the math so we can get somber thoughts about EBITDA progression here.

Yes. I think you're going to see quarter by quarter improvement on cost. Clearly, there's a lot of momentum there. If you look at some areas like specialty papers it's going to be pretty significant even in the first quarter compared to the fourth. News print is trending down. And as well, you look at some of the actions in the coated paper side, again, as we mentioned earlier, in the fourth quarter there was an outage. So I think as you remove the high cost capacity and at the same point you implement the synergies, you should be expecting the cost by cost -- the costs to come down quarter by quarter, and on the transaction front side of course with what's been announced you can put your own estimates in there, but we see it month to month moving up pretty significantly.

Can we say it's sort of a 10% to 15% cost reduction by doing all these closures?

That's hard to say because it's across the whole network, but they were negative EBITDA mills and they were our high cost mills.

Okay. And then I guess maybe just to try again, structurally, you talked about the -- structurally you talked about this fixed asset secured financing part of your availability. Can you give us a little bit of idea of where structurally that goes and sort of how the cash might move.

It would move to where the cash is required. The -- that's one of the paths we're on. And from the point of view of the cash coming into the company, clearly we -- it's been done in a way the cash can move to where it's required anywhere. We're totally flexible about that to some degree. The bank amendment does specify, but I think when you look at it you'll see the financing needs of the company are addressed in it.

Okay. And then the other thing is you've got one of the bank facilities that expires I think in April.

The -- there is one year line in Bowater in the Bowater facility that expires in May. It's $165 million. It's supported by all the inventory in Canada, so it's very -- it's overcollateralized, and we would expect to ask for a renewal for that again in April.

Okay. But theoretically that stays in place?

It should. Of course, we will -- the banking environment isn't today what it was six months ago, but with the collateral there, we believe that we should be able to put something in place that makes sense.

Okay. And then just final question. The bank waiver for Abitibi, could you -- what is the waiver for? Is it covenant waiver, or is it ability to move money waiver?

Covenant. I didn't hear the last part, Bill, but covenant waiver.

It's for financial covenants?

Yes, financial covenants to extend through year end and provide access to the facility to the end of the term.

Okay. Thank you.

Thank you all for joining us today.

Thank you, gentlemen. Please note a replay of today's call will be available until March 7th, 2007. The dial in number is 416-695-5800, with pass code 3249395. Thank you. This concludes today's conference call. Please disconnect your lines, and thank you for your participation.