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): May 31, 2006
BOWATER INCORPORATED
(Exact name of issuer as specified in its charter)
Delaware 1-8712 62-0721803
(State or other jurisdiction (Commission file number) (I.R.S. Employer
of incorporation) Identification
No.)
55 East Camperdown Way
P.O. Box 1028
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 271-7733
(Registrant's telephone number, including area code)
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:
[ ] 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 1.01. Entry into a Material Definitive Agreement
On May 31, 2006, Bowater Incorporated ("Bowater") established a new five
year revolving credit facility, which replaces both its current revolving credit
facility and its 364-day accounts receivable securitization facility. Bowater
accomplished this by entering into (i) a Credit Agreement among Bowater as
Borrower, several lenders, and Wachovia Bank, National Association, as
Administrative Agent (the "US Credit Agreement") and (ii) a Credit Agreement,
along with its subsidiary Bowater Canadian Forest Products Inc. ("BCFPI"), among
BCFPI as Borrower, Bowater as parent Guarantor, several lenders, and The Bank of
Nova Scotia as Administrative Agent (the "Canadian Credit Agreement").
The US Credit Agreement provides for a $415 million revolving credit
facility with a scheduled maturity date of May 25, 2011. The US Credit Agreement
is guaranteed by certain of Bowater's wholly-owned subsidiaries in the United
States, and is secured by (i) liens on the inventory, accounts receivable and
deposit accounts of Bowater and the guarantors (ii) pledges of the 65% of the
stock of certain of Bowater's foreign subsidiaries, and (iii) pledges of the
stock of Bowater's United States subsidiaries that do not own mills or
converting facilities. Availability under the US Credit Agreement is limited to
90% of the net consolidated book value of Bowater's accounts receivable and
inventory, excluding BCFPI and its subsidiaries. Letters of credit may be issued
under the US Credit Agreement up to an aggregate of $100 million.
The Canadian Credit Agreement provides for a $165 million revolving credit
facility with a maturity date of May 29, 2007, subject to annual extensions. The
Canadian Credit Agreement is secured by liens on the inventory, accounts
receivable and deposit accounts of BCFPI. Availability under the Canadian Credit
Agreement is limited to 65% of the net book value of the accounts receivable and
inventory of BCFPI and its subsidiaries. Letters of credit may be issued under
the Canadian Credit Agreement up to an aggregate of $50 million.
Financial covenants under both the US Credit Agreement and Canadian Credit
Agreement are based upon Bowater's Consolidated Financial Results and consist of
the following two ratios:
o a maximum ratio of senior secured indebtedness (including all advances
and letters of credit under the US and Canadian facilities, and any
other indebtedness secured by assets of Bowater and its subsidiaries)
to EBITDA (generally defined as net income, excluding extraordinary,
non-recurring or non-cash items and gains (or losses) on asset
dispositions, plus income taxes plus depreciation plus interest
expense) of 1.25 to 1; and
o a minimum ratio of Adjusted EBITDA (defined as EBITDA, plus gains (or
minus losses) from asset dispositions) to interest expense of 2.00 to
1.
As of May 31, 2006, Bowater and BFCPI have no debt outstanding under either
the US Credit Agreement or the Canadian Credit Agreement, but do have
outstanding letters of credit totaling approximately $98.8 million. As of May
31, 2006, Bowater has $481.2 of availability under the credit agreements on a
consolidated basis.
The US Credit Agreement and the Canadian Credit Agreements each provide for
floating rate and LIBOR loans. The applicable interest rate is based on relevant
index rates, such as the prime rate, the federal funds rate or the London
interbank offered rate, plus a fixed margin (if any), as well as a variable
margin (if any) based on average utilization under the facility. The Canadian
Credit Agreement also provides for bankers acceptance loans based on the
Canadian dollar bankers acceptance discount rate. Each of the credit agreements
contains representations that we believe are customary for such a facility. The
credit agreements place various restrictions on Bowater and its subsidiaries
that we believe are customary for such a facility, including limits on incurring
additional indebtedness, granting liens, entering into sale-leaseback
transactions, making investments and acquisitions, mergers, dispositions of
assets, and dividends and distributions. Each of the credit agreements also
contains events of default that we believe are customary for such a facility,
including events of default based on non-payment, material inaccuracy of
representations and warranties, covenant breach, defaults under other
indebtedness, change in control, certain bankruptcy and insolvency events,
certain ERISA or environmental events, or unsatisfied judgments. The credit
agreements permit Bowater and its subsidiaries to incur certain categories of
permitted indebtedness that we believe are customary for such a facility,
including refinancings of existing indebtedness, trade letters of credit up to
specified amounts, and capital leases or purchase money indebtedness up to
specified amounts. Additional indebtedness that Bowater and its subsidiaries can
occur is limited by the credit agreements.
Bowater has other commercial relationships with certain parties to the US
Credit Agreement and the Canadian Credit Agreement. From time to time, several
of the lenders or their affiliates furnish general financing, banking and
investment banking services to Bowater.
Item 1.02 Termination of a Material Definitive Agreement
On May 31, 2006, in connection with the US Credit Agreement and the
Canadian Credit Agreement, Bowater's current revolving credit facility and
364-day accounts receivable securitization facility were replaced and the
following agreements were therefore terminated:
1) Credit Agreement dated as of April 22, 2004, as amended, among Bowater
and BCFPI as Borrowers, the lenders from time to time party thereto, JPMorgan
Chase Bank as Administrative Agent, and The Bank of Nova Scotia as Canadian
Administrative Agent. This Credit Agreement provided a $400 million United
States revolving credit facility and a $35 million Canadian revolving credit
facility on an unsecured basis.
2) The Amended and Restated Receivables Sale Agreement dated as of
December 1, 2005, as amended, among Bowater and Bowater America Inc. as Sellers
and Bowater Funding, Inc. as Buyer, and the Amended and Restated Loan Agreement
dated as of December 1, 2005, as amended, among Bowater Funding Inc. as
Borrower, Bowater as Servicer, the Conduit Lenders, Committed Lenders, LC
Issuers, and Agents identified therein, and SunTrust Capital Markets, Inc. as
Administrative Agent. These agreements governed the $200 million accounts
receivable securitization program of Bowater under which Bowater and Bowater
America Inc. sold their accounts receivable to Bowater Funding Inc., and Bowater
Funding Inc. obtained financing collateralized by those accounts receivable.
Bowater has other commercial relationships with certain parties to the
agreements described above. From time to time, several of the lenders or their
affiliates furnish general financing, banking and investment banking services to
Bowater.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant
The information set forth in Item 1.01, above, is incorporated herein by
reference.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
BOWATER INCORPORATED
Date: May 31, 2006 By: /s/ William G. Harvey
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William G. Harvey
Senior Vice President and
Chief Financial Officer