AbitibiBowater Stock Up on News of Deal with Fairfax Financial

With shares rising more than 40% Monday, investors definitely seemed to like the news that AbititbiBowater Inc. (ABH) has placed $350-million of 8% convertible debt with Fairfax Financial Holdings (FFH). Citigroup Global Markets analyst Chip Dillon also thinks so.

In a research note Mr. Dillon said:

Although the amount issued was above the $200 to $300-million that the company guided to on Mar. 7, it is well within the range we had predicted, and we see the placement as a significant positive for AbitibiBowater.

He added the likelihood that AbitibiBowater's debt restructuring plan will succeed has increased, even though the company has yet to announce the two parts of the banking agreement it is seeking, including a $400 to $500-million, 364-day secured term loan, and $400-million in secured notes.

Mr. Dillon maintained his "buy" rating, and left $37 price target unchanged.