MONTREAL, Sept. 7 /PRNewswire-FirstCall/ -- In light of the current disruption of credit markets, particularly for third party asset-backed commercial paper ("ABCP"), Domtar Corporation is providing the following update.
The Company and its subsidiaries, including Domtar Inc., have no holdings of ABCP.
Domtar Corporation's Canadian pension funds have approximately CDN $420 million (of which approximately $308 million is held by Domtar Inc.'s Canadian pension funds) invested in multiple ABCP conduits that are subject to the interim arrangement of the "Montreal Proposal". These investments are primarily rated Under Review - Developing at R-1 (high) or AAA by DBRS.
Pursuant to the Montreal Proposal, banks and major investors are negotiating restructuring proposals with respect to such ABCP conduits intended to minimize potential losses for investors. These discussions are at a preliminary stage, and the outcome and the effect it would have on the value of the Company's Canadian pension fund assets have yet to be determined.
The Company does not expect liquidity issues to affect the pension funds since pension fund obligations are primarily long-term in nature. Losses in the pension fund investments, if any, would result in future increased contributions by the Company or its Canadian subsidiaries. Additional contributions to theses pension funds would be required to be paid over a 5-year period. Losses, if any, would also impact operating earnings over a longer period of time and immediately increase liabilities and reduce equity.
The Company continues to monitor the ABCP situation closely.
Domtar Corporation (NYSE/TSX: UFS) is the largest integrated producer of uncoated freesheet paper and one of the largest manufacturers of papergrade market pulp in North America. The Company designs, manufactures, markets and distributes a wide range of business, commercial printing, publication as well as technical and specialty papers with recognized brands such as First Choice(R), Domtar Microprint(R), Windsor Offset(R), Cougar(R) as well as its full line of environmentally and socially responsible papers, Domtar EarthChoice(R). Domtar owns and operates Domtar Distribution Group, an extensive network of strategically-located paper distribution facilities. Domtar also produces lumber and other specialty and industrial wood products. The Company employs nearly 14,000 people. To learn more, visit http://www.domtar.com/
