Ahead of the Bell: AbitibiBowater closing mills

The announcement, expected before the market opens, marks AbitibiBowater's latest bid to bring its relatively high-cost capacity into line with demand and put a floor under collapsing newsprint prices, the Globe and Mail said.

Word of the announcement came hours after Standard & Poor's Ratings Services lowered the company's noninvestment-grade long-term corporate credit ratings two levels to "CCC" from "B-". The outlook is "Negative."

The downgrade reflects "a large upcoming debt maturity and Standard & Poor's uncertainty as to AbitibiBowater's ability to refinance given tight credit markets, weak liquidity, high debt level and an expected decline in newsprint demand and prices," S&P credit analyst Jatinder Mall said in a statement.

AbitibiBowater, the largest pulp and paper maker in North America and the eighth-largest in the world, owns or runs 25 pulp and paper facilities in Canada, the U.S., Britain and South Korea.

Shares of the Montreal-based company, which trade on the New York Stock Exchange, have fallen more than 97 percent year to date. On Wednesday, the stock closed down 18.3 percent at 49 cents, near the record low of 43 cents set Nov. 20.

Besides plummeting newsprint prices, the upshot of numerous failing newspapers, investors are concerned about AbitibiBowater's finances.

S&P's Mall said Wednesday he is concerned there is not "sufficient liquidity or free cash generation to pay down these maturities" as well as "weak market conditions in 2009 for the newsprint, pulp, and lumber business segments."

In response to those concerns, the company said last month that its Bowater subsidiary expects to complete a loan amendment, supported by its agent bank, that will extend the dates by which the facilities convert into asset-backed loan facilities until the spring of 2009. The amendment also waived compliance with certain covenant requirements for the third quarter of 2008.

The company was formed through the combination of Bowater Inc. and Abitibi-Consolidated in October 2007.